Holacracy and Employment Law: Part 2

I shared my previous article on Holacracy with the folks at HolacracyOne, which describes itself as “the company spearheading the development of the Holacracy method.”  They were quick to engage in a substantive dialogue.   I also received feedback from others who had some further thoughts.

Based on all of those conversations (and based on my own reflection), I’ve created this Q&A.  It should go without saying that it would not be fair to ascribe anything I say here to HolacracyOne or its employees — it is just my take. And it should go without saying that folks interested in Holacracy should not rely on my outsider’s account of it.

Q.   It initially looks as though a circle would have a hard time managing an ADA-based request for a reasonable accommodation.  While there is a lead link, there are a much increased number of influencers whose views have to be considered — and the expanded number of decision makers and job-influencers, confidential health information is at risk of being widely shared and there is an increased risk of retaliation (or allegations about retaliation).

A. There is usually one role, filled by one person, which has a certain accountability.  A role can also have a domain, such as access to information, that nobody else sees.  That role, and no one else, may be charged with making decisions.

My analysis:   So, in ADA terms, confidential information about a disability can be known by the appropriate role-holder who can, within their sphere, exercise decisional authority.  There is a much wider group of influencers, but ultimately, there is a final decision-maker.  So long as there is relative stability about who holds the role/domain, I think this account works.

The risk, which can be ameliorated by training, is that there are more discussants involved in how roles should evolve and be assigned, even if there is an ultimate authority.  More discussants equals a higher chance of retaliation, or at least, a higher chance of more charges and more deponents.  Again, this is a matter for training.

Q. Isn’t the lack of job descriptions a problem?

A.  Holacracy-based organizations have very clear and extremely accurate job descriptions.   In fact, unlike traditional job descriptions, they evolve and continue to evolve.  The advantage is a highly accurate description that maintains its accuracy over time.

My analysis:  The role of job descriptions is important in traditional ADA litigation because it serves as evidence of the essential functions of a position.  The ADA says that an employer may not “discriminate against a qualified individual with a disability.” 42 U.S.C. § 12112(a). A “qualified” individual includes “an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of” the relevant “employment position.” § 12111(8) (emphasis added). An essential function is a job function that is definitionally a key part of the job without which the job, as the employer understands it, would not be adequately performed.  According to the EEOC (and the regulations and most courts), factors to consider in determining if a function is essential include:

• whether the reason the position exists is to perform that function,
• the number of other employees available to perform the function or among whom the performance of the function can be distributed, and
• the degree of expertise or skill required to perform the function.

If a role of a job description is to memorialize which functions are essential, then an organization that has evolving job descriptions has two additional burdens:

First, the functions of a job, essential and secondary, should be memorialized contemporaneously and accurately.   That is matter of training, technology and process, which is not a big deal.

Second, and more of a big deal, there will need to be a fluid understanding (and oversight) of what job functions are essential.

Based on my understanding of Holacracy, I believe the essential function of a job is any role that must be assigned to each member of a circle, and for which no restructuring or reallocation of roles within that circle can avoid the role being assigned to each member of the circle.  Once we have that definition, we can see how the lead role in a circle can assign roles that can – or, ultimately, cannot – accommodate an employee’s disabilities.   Put differently, if there exists a member of a circle who (with or without an otherwise reasonable accommodation) cannot perform a role that each member of the circle must perform, then it might be said that such a circle member is unable to perform the essential functions of the job and may accordingly lawfully suffer an adverse employment action. Put more positively, where there exists a role that can be reasonably assigned to another member of the circle, then it must be so reassigned.  I will not opine here about nested circles and the like, although I suspect that would become relevant in future litigation.  I will also not opine here about how circles determine what roles must be performed.

The second burden relies heavily on the first for its management: to avoid retaliation claims and to ensure that evolving roles are indeed necessary to be performed by each circle member, careful recording and review of the reasons behind the assignment of a role is more essential than ever.

These burdens can be met; the price of meeting these burdens may be offset by the cost of litigating essential function cases with outdated job descriptions. I think you mean it’s cheaper to do this than go to court.

Q:  Employees in a holacracy…

A: …perhaps it would be more accurate to describe role-holders in a holacracy as partners rather than employees.

My analysis: My instinct is to resist the partnership characterization and stick with the employer-employee language — not because “partnership” doesn’t accurately describe how the system looks and feels when it is working — but when viewed from outside of the organization, say, when a court or administrative agency looks at it, it just isn’t a partnership under the anti-discrimination laws (See this interesting case on point in which partners were deemed employees for purpose of the age discrimination law).

More than just a quibble over words, the law doesn’t yet understand the concept of the kind of relationship between individuals and the organization that Holacracy is built upon.  While there is some lack of clarity about the definition of an employee, consider this holding from an ERISA case:

In determining whether a hired party is an employee…we consider the hiring party’s right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-324 ( 1992) citing Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) (internal citations omitted). 

While Holacarcy clearly shifts the “manner and means” analysis somewhat, it is hard to imagine that a court or administrative agency would not be able to make the compelling case that most role holders were employees under this common law formulation.

Rather than resist, the better practice is, I think, to recognize that external reality, work to change the law but also ensure that there is some old-school compliance work going on!

As I’ve suggested, I believe a compliance function can be mapped right onto the Holacracy model.

Q: Workable?

A: Yes.

My analysis:  If Holacracy is an operating system and roles are an app, then the legal environment is a key part of the system’s hardware.  It needs proper interface and management — but talented programmers can always get that job done.