Benjamin Means and Joseph Seiner, both of University of South Carolina School of Law, have an interesting article out entitled Navigating the Uber Economy. Work is changing quickly, and the employment/independent contractor line is becoming more difficult to draw. The abstract is reproduced below and the article is available here. Last July, Anne Tucker authored a blog post related to this issue, available here. 

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In litigation against ride-sharing companies Uber and Lyft, former drivers have alleged that they were misclassified as independent contractors and denied employment benefits. The companies have countered that they do not employ drivers and merely license access to a platform that matches those who need rides with nearby available drivers. At stake are the prospects, not only for Uber and Lyft, but for a nascent, multi-billion dollar “on-demand” economy.

Unfortunately, existing laws fail to provide adequate guidance regarding the distinction between independent contractors and employees, especially when applied to the hybrid working arrangements characteristic of a modern economy. Under the Fair Labor Standards Act and analogous state laws, courts consider several factors to assess the “economic reality” of a worker’s alleged employment status; yet, there is no objective basis for prioritizing those factors.

This Essay argues that the classification of workers as independent contractors or employees should be shaped by an overarching inquiry: how much flexibility does the individual have in the working relationship? Those who can choose the time, place and manner of the work they perform are more independent than those who must accommodate themselves to a business owner’s schedule. Our approach is novel and would provide an objective basis for adjudicating classification disputes, especially those that arise in the context of the on-demand economy. By reducing legal uncertainty, we would ensure both that workers receive appropriate protections under existing law and that businesses are able to innovate without fear of unknown liabilities.

Business and Human Rights Scholars Conference

University of Washington School of Law, Seattle, Washington

September 16-17, 2016 

The University of Washington School of Law, the NYU Stern Center for Business and Human Rights, the Rutgers Business School, the Rutgers Center for Corporate Law and Governance, and the Business and Human Rights Journal announce the second Business and Human Rights Scholars Conference, to be held September 16-17, 2016 at the University of Washington School of Law in Seattle.  Conference participants will present and discuss scholarship at the intersection of business and human rights issues. 

Upon request, participants’ papers may be considered for publication in the Business and Human Rights Journal (BHRJ), published by Cambridge University Press. The Conference is interdisciplinary; scholars from all global regions and all disciplines are invited to apply, including law, business, business ethics, human rights, and global affairs. 

To apply, please submit an abstract of no more than 250 words to BHRConference@kinoy.rutgers.edu with the subject line Business & Human Rights Conference Proposal.  Papers must be unpublished at the time of presentation. Please include your name, affiliation, contact information, and curriculum vitae. 

The deadline for submission is May 15, 2016.  Scholars whose submissions are selected for the Conference will be notified no later than June 15, 2016. We encourage early submissions, as selections will be made on a rolling basis.

 About the BHRJ

The BHRJ provides an authoritative platform for scholarly debate on all issues concerning the intersection of business and human rights in an open, critical and interdisciplinary manner. It seeks to advance the academic discussion on business and human rights as well as promote concern for human rights in business practice.

BHRJ strives for the broadest possible scope, authorship and readership. Its scope encompasses interface of any type of business enterprise with human rights, environmental rights, labor rights and the collective rights of vulnerable groups. The Editors welcome theoretical, empirical and policy/reform-oriented perspectives and encourage submissions from academics and practitioners in all global regions and all relevant disciplines.

A dialogue beyond academia is fostered as peer-reviewed articles are published alongside shorter ‘Developments in the Field’ items that include policy, legal and regulatory developments, as well as case studies and insight pieces.

 

 

2016 Financial Stability Conference – Innovation, Market Structure, and Financial Stability

CALL FOR PAPERS
2016 Financial Stability Conference

“Innovation, Market Structure, and Financial Stability”

The Federal Reserve Bank of Cleveland and the Office of Financial Research invite the submission of research and policy-oriented papers for the 2016 Financial Stability Conference to be held December 1-2, 2016, in Washington, D.C. The objectives of this conference are to highlight research and advance the dialogue on financial market dynamics that affect financial stability, and to disseminate recent advances in systemic risk measurement and forecasting tools that assist in macroprudential policy development and implementation.

PAPER SUBMISSION PROCEDURE

The deadline for submissions is July 31, 2016. Please send completed papers to:financial.stability.conference@clev.frb.org Notification of acceptance will be provided by September 30, 2016. Travel and accommodation expenses will be covered for one presenter for each accepted paper.

A pdf version of this call for papers is available here

 

 

Some readers may be interested in the position listed below. Georgia Institute of Technology, Scheller College of Business has a strong faculty and is a recognized leader in the sustainability area.

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Managing Director, Ray C. Anderson Center for Sustainable Business

(Professor of the Practice or Academic Professional)

The Scheller College of Business at the Georgia Institute of Technology in Atlanta, Georgia seeks applications or nominations for an academic appointment as the Managing Director, Ray C. Anderson Center for Sustainable Business (ACSB). The Center is part of the Scheller College of Business, which was ranked #1 in the US and #8 globally in the 2015 Corporate Knights Better World MBA Rankings. The College is a dynamic environment with a commitment to sustainability embedded in its strategic plan and faculty members across many disciplines who have sustainable business interests. The Managing Director will have the opportunity to shape and steer the growth of the Center’s activities and impact, as the Center recently received a long-term gift doubling its operational budget from the Ray C. Anderson Foundation. The Managing Director will also have the opportunity to partner with the Georgia Tech Center for Serve-Learn-Sustain (CSLS), an institute-wide undergraduate education initiative that is developing learning and co-curricular opportunities designed to help our students combine their academic and career interests with their desire to create sustainable communities.

More information follows after the break.

Continue Reading Managing Director, Ray C. Anderson Center for Sustainable Business at Georgia Tech

The Rock Center for Corporate Governance at Stanford University seeks to hire a resident academic fellow to begin in September or October 2016 for a 12-month or one-academic-year term, with the possibility of renewal for a second year. The fellow will pursue his or her own independent research, as well as work closely with Stanford Law School faculty on a range of projects related to corporate governance, securities regulation, vehicles for public and private investment, and financial market reform. The ideal candidate has excellent academic credentials and experience in relevant fields of practice. The position is particularly well suited to a practicing attorney, with either a litigation or transactional background, seeking a transition to academia, or a post-doctoral economics or finance student with interests in corporate governance. More information can be found at https://stanfordcareers.stanford.edu/job-search?jobId=70496. 

Wyoming has added two new sections to its Code Section 17-29-304, which is related to veil piercing of a Wyoming LLC.  The additions are a response of a court decision from last year, Green Hunter Energy, Inc. v. Western Ecosystems Technology, Inc., No. S-14-0036, 2014 WL 5794332 (Wyoming Nov. 7, 2014), which is summarized nicely here. The first added section provides:
(c) for purposes of imposing liability on any member or manager of a limited liability company for the debts, obligations or other liabilities of the company, a court shall consider only the following factors no one (1) of which, except fraud, is sufficient to impose liability:
 
(i)         Fraud;
(ii)        Inadequate capitalization;
(iii)       Failure to observe company formalities as required by law; and
(iv)       Intermingling of assets, business operations and finances of the company and the members to such an extent that there is no distinction between them. 
Although some might view this as a significant change to the veil piercing of a Wyoming LLC, this largely confirms and clarifies the law prior to GreenHunter.  The rule from that case was set forth as follows: 

The veil of a limited liability company may be pierced under exceptional circumstances when: (1) the limited liability company is not only owned, influenced and governed by its members, but the required separateness has ceased to exist due to misuse of the limited liability company; and (2) the facts are such that an adherence to the fiction of its separate existence would, under the particular circumstances, lead to injustice, fundamental unfairness, or inequity.
GreenHunter Energy, Inc. v. W. Ecosystems Tech., Inc., 2014 WY 144, ¶ 27, 337 P.3d 454, 462 (Wyo. 2014).
 
The GreenHunter court provided the above rule, then stated that several factors could be considered in assessing whether both prongs of the test were met.  These factors included fraud, inadequate capitalization, and intermingling of assets.  “No single category, except fraud, alone justifies a decision to disregard the veil of limited liability; rather, there must be some combination of them, and of course an injustice or unfairness must always be proven.” GreenHunter Energy, 2014 WY 144, ¶ 34, 337 P.3d at 464.  
 
This amendment, in fact, adds another factor courts can consider in LLC veil piercing: “Failure to observe company formalities as required by law.” As such, this law clarifies the state LLC law, which is an improvement over the prior iteration, in my view. I do have a concern that some courts might miss that the need for “company formalities” as a potential factor for veil piercing is limited only to the formalities that are “required by law,” which also means very few such formalities. “Company formalities” are not “corporate formalities,” and I hope courts remember this. 
 
In addition, the Wyoming legislature added:   
(d)  In any analysis conducted under subsection (c) of this section, a court shall not consider factors intrinsic to the character and operation of a limited liability company, whether a single or multiple member limited liability company.  Factors intrinsic to the character and operation of a limited liability company include but are not limited to:
 
(i)         The ability to elect treatment as a disregarded or pass-through entity for tax purposes; 
(ii)        Flexible operation or organization including the failure to observe any particular formality relating to the exercise of the company’s powers or management of its activities;
(iii)       The exercise of ownership, influence and governance by a member or manager;
(iv)       The protection of members’ and managers’ personal assets from the obligations and acts of the limited liability company.
This section is, to me, spot on.  GreenHunter did not disabuse the notion of using tax classification as a factor in veil piercing analysis, and that was wrong.  Tax status is irrelevant to limited liability (a general partnership is a pass-through entity) and using any factors of an LLC acting like an LLC is inherently flawed. 
 
Overall, if the state is going to allow veil piercing of LLCs, then I support a more clear statute. This is an improvement over the original statute, which did not include veil piercing, but Wyoming courts allowed it anyway. Still, the better read on GreenHunter, is not really veil piercing, it would have been some version of enterprise liability, though I know some people think it has to be veil piercing when the entities in questions are vertically related, and reserve enterprise liability for horizontal relationships.  I don’t agree, but that’s for another post. 
 
[H/T: Kentucky Business Entity Law] 

There’s been a lot of bad press lately about contract lawyers.  Between legal actions for overtime pay and articles in bar publications and elsewhere, it’s easy to conclude that all of these warriors in the legal workforce are overworked and underpaid in this post-financial-crisis world.

Yet, I just had a corporate general counsel in my Advanced Business Associations class last week who regularly uses contract counsel and, based on his description, those he works with seem to be a relatively contented lot.  He has gone ahead and hired a few of them (although he notes that some prefer independent contractor status for its flexibility).  So, I wonder whether many of us make the same mistake with the press on contract lawyers that we do with the press on law schools: generalizing a description and drawing conclusions from limited, nonscientific data (i.e., one-sided or narrowly drawn press reports). For one thing, most of what I read focuses on contract lawyers performing e-discovery reviews or rote due diligence.  I know that there are more varied assignments out there (even if those two areas represent most of the territory).

I do know former students who, for a variety of reasons, have worked as contract lawyers after graduation or during a career interruption.  In most cases, this has been intended as and has been in fact a temporary position.  But (although I do not stay in touch with everyone after graduation) I am sure that some have ended up staying in contract lawyering longer than they had planned . . . or wanted.  Still, I have not heard about any abusive behavior or unusually long hours.  I have heard complaints about the routine and unstimulating nature of much of the work.

What information do you have about contract lawyers?  Are they a uniformly mistreated lot because employers–especially maybe Big Law and other large firms–take advantage of them and view them only as low-cost, low-quality providers of legal services?  How often do those who use contract lawyer services hire the lawyers in as employees?  How many contract lawyers continue in that role for more than two years?  Let me know what you know.

Lately I’ve been thinking about CLE programs.  I no longer am required to take them (thank goodness) but they were a regular feature in my life when I was practicing.  I’m only familiar with New York’s requirement, but I assume other states’ programs are not terribly dissimilar.  I’m sorry to say that I generally found CLE requirements to be a thundering waste of my time – not to mention the fees for classes that functioned as a waste of my firm’s money.  I realize there’s been a decades-long debate about this issue, but I’ll throw my hat in and speculate whether there’s anything that could be done to improve them. 

My first problem with CLE – and this I gather has always been the complaint – is that the classes were generally of no use to me in my practice.  I was a specialist; almost all of my time was spent on securities litigation, with the occasional sprinkling of corporate.  That meant I lived the latest case law and proposed legislation/rulemaking on a day to day basis.  The majority of CLE programs in the area were simply pitched at a level that was far too introductory for me – if I actually needed, say, an hourlong course on the latest Supreme Court decisions in the field, that would have been a flashing red light that I was committing malpractice on a day to day basis.

Aware of this, I sometimes selected CLE programs that were outside my field: electronic privacy, IP, employment, antitrust.  And these were interesting, and new to me – but they were also entirely irrelevant to my work.

My other problem with CLE – and this is perhaps a new complaint – was, frankly, the political bias.  I was a plaintiff-side litigator in a highly politicized area of law.  I found that, at least in my area,  CLE programs tended to consist mostly, if not entirely, of defense-side speakers (sometimes with a smattering of government).  As a result, I found most of the discussions to be heavily slanted in the defense’s favor, both in terms of their interpretation of existing law, and their recommendations and commentary.  This wasn’t always true, of course, but it was true enough on a regular basis to be frustrating.  The occasional panel with one plaintiff-side attorney was rarely enough to counter what was an overwhelmingly defense-side spin.  I used to fear that to the extent some lawyers found these programs novel, they were receiving a very distorted picture of the law – one that they would then carry through to their own practice.

I imagine there are a lot of entrenched interests in maintaining the current system, but I wonder if there might be some ways to make the CLE requirement more meaningful.

First, I’d propose a some option of self-certification, whereby attorneys with a certain number of years of experience, who attest that they specialize in a particular field, are able to fulfill the requirement by certifying that they have read/studied a specified amount recent legal developments in their area of practice – caselaw, new regulations, new publications and updates, etc. 

Second, I’d propose a balance requirement.  At least for fields where attorneys tend to specialize on one side of the “v,” any program featuring more than one speaker would be required to devote 50/50 time, or 60/40 time, or even 70/30 time, to each side.

I imagine that there are a zillion reasons why these proposals are impractical and unlikely to be adopted, and I know these issues have been discussed in various fora before, but it seems to me they can’t render the requirement any less useful than it is now. 

I’d be curious to know how others experience CLE.  Am I too harsh in my assessment?  Do others get more out of it than I did?

 

I feel badly for Chipotle. When I have taught Business Associations, I have used the chain’s Form 10-K to explain some basic governance and securities law principles. The students can relate to Chipotle and Shake Shack (another example I use) and they therefore remain engaged as we go through the filings. Chipotle has recently been embroiled in a public relations nightmare after a spate of food poisonings occurred last fall and winter, a risk it pointed out in its February 2015 10-K filings. The stock price has fluctuated from $750 a share in October to as low as $400 in January and then back to the mid $500 range. After some disappointing earnings news the stock is now trading at around $471.

Clean Yield Group, concerned that the company will focus only on bringing its stock back to “pre-crisis levels,” filed a shareholder proposal March 17th asking the company to link executive compensation with sustainability efforts. The proposal claims that the CEO was overpaid by $40 million in 2014 and states in part:

A number of studies demonstrate a firm link between superior corporate sustainability performance and financial outperformance relative to peers. Firms with superior sustainability performance were more likely to tie top executive incentives to sustainability metrics.

Leading companies are increasingly taking up this practice. A 2013 study conducted by the Investor Responsibility Research Institute and the Sustainable Investments Institute found that 43.4% of the S&P 500 had linked executive pay to environmental, social and/or ethical issues. These companies traverse industry sectors and include Pepsi, Alcoa, Walmart, Unilever, National Grid, Intel and many others…

Investor groups focusing on sustainable governance such as Ceres, the UN Global Compact, and the UN Principles for Responsible Investment (which represents investors with a collective $59 trillion AUM) have endorsed the establishment of linkages between executive compensation and sustainability performance.

Even with the adjustments to executive pay incentives announced this week in reaction to Chipotle’s ongoing food-borne illness crisis, Chipotle shareholders have consistently approved excessively large pay packages to our company’s co-chief executives that dangerously elide accountability for sustainability-related risks. This proposal provides the opportunity to rectify this situation.

If shareholders approve the compensation package on our company’s 2016 proxy ballot, by year-end, Mr. Ells and Mr. Moran will have pocketed nearly $211 million for their services since 2011. Shareholders have not insisted upon direct oversight of sustainability matters as a condition of employment or compensation, and the present crisis illustrates the probable error in that thinking.

This week, the Compensation Committee of the Board announced that it would withhold 2015 bonuses for executive officers. It has also announced that executive officers’ 2016 performance bonuses will be solely tied to bringing CMG stock back, over a three-year period, to its pre-crisis level.

This is a shortsighted approach that skirts the underlying issues that may have contributed to the E. coli and norovirus outbreaks that have left hundreds of people sickened, injured sales, led to ongoing investigations by health authorities and the federal government, damaged our company’s reputation, and will likely lead to expensive litigation. For years, Chipotle has resisted calls by shareholders to implement robust and transparent management and reporting systems to handle a range of environmental, social and governance issues that present both risks to operations as well as opportunities. While no one can know for certain whether a more rigorous management approach to food safety might have averted the current crisis, moving forward, shareholders can insist upon a proactive approach to the management of sustainability issues by altering top executives’ compensation packages to incentivize it.

The last sentence of the paragraph above stuck out to me. The shareholder does not know whether more rigorous sustainability practices would have prevented the food poisonings but believes that compensation changes incentivizing more transparency is vital. I’m not sure that there is a connection between the two, although there is some evidence that requiring more disclosure on environmental, social, and governance factors can lead to companies uncovering operational issues that they may not have noticed before. Corporate people are fond of saying that “what gets measured gets treasured.” Let’s see what Chipotle’s shareholders treasure at the next annual meeting.