Category Archives: Joint Employer

NLRB Whiplash- Previous Joint Employer Standard Back on the Table


In an unfortunate move (though likely temporary), the NLRB elected to vacate its own ruling in the recent Hy-Brand joint employer case due to a conflict of interest involving one of the board members.  According to a report by the inspector general, one of the board members had previously represented an employer before the board on the same issue of joint employer status and should not have participated in the Hy-Brand case.

What the Courts Decision Means for Employers

Hy-Brand had overruled the infamous Browning-Ferris case that set forth a test for determining joint employer status that was nearly impossible for employers to pass. Now with Hy-Brand vacated, Browning-Ferris is back along with its pro-employee interpretation of joint employer status.

According to Browning- Ferris, a business qualifies as a joint employer if it exhibits indirect control or the ability to exert such control over employees. Thus, a franchisor that reserves the authority to control the terms and conditions of employment can be liable as a “joint employer. “

Takeaway

With the old standard back in play, employers, particularly franchisors, should exercise caution in the terms of franchisor agreements to ensure all employment decisions and control over the franchisee’s employees come from the franchisee, or run the risk of becoming liable for the franchisees mistakes.

Stay tuned for more developments that are sure to come soon.

Good News for Franchisors – DOL’s Joint Employer Guidance Has Been Withdrawn

In January of 2016, the Department of Labor issued informal guidance materials (Administrator’s Interpretation No. 2016-1) relating to joint employment. In these materials, the DOL advocated for a broad standard for finding a joint employment relationship.

While the franchisor/franchisee relationship was not directly mentioned in these materials, the accompanying question and answer sheet indicated that a franchisor and its franchisee could be deemed the joint employer of a franchisee’s workers depending on the situation. This guidance was concerning to franchisors because it meant that, if found to be a joint employer of its franchisee’s employees, the franchisor could be liable for any minimum wage or overtime violations by its franchisees.

As of June 7, 2017, franchisors can breathe a collective sigh of relief. On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the Department of Labor (DOL) is withdrawing Administrator’s Interpretation No. 2016-1. The DOL’s press release announcing the change is available here.

Warning

While the DOL has withdrawn Administrator’s Interpretation No. 2016-1, the NLRB’s attempts to expand the joint-employment standard may continue. In 2015, the NLRB (in Browning-Ferris Industries of California, Inc.) restated the standard for finding joint employment by holding that indirect control or the reserved right to control, even if unexercised, may be sufficient to find a joint-employer relationship. This case is currently on appeal to the D.C. Circuit Court of Appeals and it remains to be seen how the NLRB will view the joint employer issue in the future.

New Georgia Law Limits Joint Employer Exposure for Franchisors

In the wake of the recent NLRB decisions finding that franchisors are the joint employers of their franchise employees (best known, the NLRB’s July 2014 finding that McDonalds was a joint employer of its franchise employees), the Georgia legislature has passed the Protecting Georgia Small Businesses Act (Senate Bill 277), which amends the Georgia’s Labor and Industrial Relations Code.

This amendment clarifies the relationship between a franchisor and its franchisee employees and provides that neither a franchisee nor a franchisee’s employee is considered an employee of a franchisor for “any purpose.”

In passing this new law, Georgia has joined several other states (Texas, Louisiana, Tennessee, Wisconsin, Michigan, Indiana, and Utah) in passing legislation that prohibits a franchisor from being considered an employer or co-employer of franchisee employees.

This new Georgia law goes into effect on January 1, 2017 and, most notably, does not apply to Georgia Workers’ Compensation Code.

OSHA Releases Guidance Documents Relating to Temporary Workers

In recent months, the Occupational Safety and Health Administration (“OSHA”) has been focusing on temporary workers and how they are treated in the workplace. In OSHA’s view,

Host employers need to treat temporary workers as they treat existing employees. Temporary staffing agencies and host employers share control over the employee and are therefore jointly responsible for [a] temp employee’s safety and health. It is essential that both employers comply with all relevant OSHA requirements.

~Dr. David Michaels, the Administrator of the Occupational Safety and Health Administration)

To help employers (i.e. staffing agencies and the host employer) understand their responsibility towards their temporary workforce, OSHA has released guidance materials relating to safety and health training and hazard communication to temporary workers — Temporary Worker Initiative (TWI) Bulletin No. 4 – Safety and Health Training and Temporary Worker Initiative (TWI) Bulletin No. 5 – Hazard Communication.

In the safety and health training guidance, OSHA makes it clear that both the staffing agency and the host employer are responsible for providing proper training to the temporary workforce.

Similarly, under the hazard communications guidance, OSHA affirms that both the staffing agency and the host employer are responsible for ensuring temporary workers are informed and trained regarding exposure to hazardous chemicals

The entity responsible for providing the training depends on the type of training to be provided. The division of training responsibility is as follows:

  • The host employer is responsible for
    • Providing site-specific training and hazard communications. This training should be identical or equivalent to the training given to the host employer’s own employees.
  • The staffing agency is responsible for
    • Providing generic safety and health training (including hazard communications training) and
    • Ensuring that the host employer is providing its temporary employees with proper site-specific training,

Recommendations for Employers

Staffing agencies and host employers must recognize that OSHA will treat both entities as being jointly responsible for temporary workers’ safety and health. While the host employer generally has primary responsibility for training and communication regarding site specific hazards, the staffing agency must “touch base” with the host employer and verify that the host employer is meeting these requirements. It is recommended that the staffing agency and the host employer clearly set forth the division of training responsibilities in their contract.

New Michigan law Limits Joint employer Exposure for franchisors

In the wake of the recent NLRB decisions finding that franchisors are the joint employers of their franchise employees (best known, the NLRB’s July 2014 finding that McDonalds was a joint employer of its franchise employees), the Michigan legislature has amended the Michigan Franchise Investment Law (“MFIL”). This amendment clarifies that the franchisee is the sole employer of its employees unless the franchise agreement provides otherwise.

In addition to the amendment to the MFIL, the term “employer” has been redefined in the Michigan Employment Security Act, the Workforce Opportunity Wage Act, the Michigan Occupational Safety & Health Act, and the Payment of Wages and Fringe Benefits Act. The new definition makes it clear that the franchisor is not considered a joint employer of the franchise employees under Michigan law. Under the new definition, “the franchisee is considered the sole employer of workers for whom the franchisee provides a benefit plan or pays wages” except as “specifically provided in the franchise agreement.”

Finally, the Michigan Worker’s Disability Compensation Act was amended to exclude joint employer status unless “the franchisee and franchisor share in the determination of or codetermine the matters governing the essential terms and conditions of the employee’s employment” and “ both directly and immediately control matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.”

Recommended action for Franchisors with operations in Michigan

In light of these amendments, it is recommended that franchisors review their franchise agreements with Michigan franchisees and consider amending their franchise agreements to clearly provide that the franchisee is the sole employer of the Michigan workers.

Is Your Organization a Joint Employer Under the New Department of Labor Guidance?

In mid-January 2016, the Wage and Hour Division of the US Department of Labor (“DOL”) issued a new “Administrator’s Interpretation No. 2016-1” that set forth the standards for determining whether a company was a “joint employer” with another company and, as such, could be held jointly liable for violating the pay and labor provisions of the Fair Labor Standard Act (“FLSA”).

What is a joint employment?

“Joint employment” is the sharing of control and supervision of an employee’s activity among two or more business entities.

It is a longstanding principle under the FLSA that an employee can have two or more employers for the work that he or she is performing. When two or more employers jointly employ an employee, the employee’s hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due. Additionally, when joint employment exists, all of the joint employers are jointly and severally liable for compliance with the FLSA.

The question that has been somewhat unclear is how does one determine when a joint employment relationship exists? This is the topic addressed in the “Administrator’s Interpretation No. 2016-1”.

Administrator’s Interpretation No. 2016-1

In these guidance materials, two joint employment scenarios are explored – horizontal joint employment and vertical joint employment – and standards for determining when the joint employment relationship exists are set forth.

Horizontal vs. Vertical Joint Employment

Horizontal joint employment occurs when two or more related businesses share an employee. For example, a housekeeper who works during a single week for three hotels owned by the same parent company is jointly employed by the three hotels. This means if she works cumulatively more than 40 hours for the three hotels, she would be entitled to overtime from all three, which would be jointly and severally liable for such pay under the FLSA.

Vertical joint employment occurs in situations in which the employee has an employment relationship with one employer, referred to as an “intermediary employer” and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work, referred to as the potential joint employer. For example, if the housekeeper in the above example is employed directly by a staffing agency that the parent corporation engages to provide housekeepers to hotels, then the parent corporation might be deemed to be jointly and severally liable for violating the FLSA, along with the staffing agency and the three hotels, if the economic realities proved an employer-employee relationship between the hotel and the worker.

Factors For Horizontal Joint Employment

According to the guidance materials, the focus of the analysis for determining whether a horizontal joint employment exists is on the relationship between two (or more) employers to each other. Specifically, one must consider the following factors (among others) when determining the degree of association between, and sharing of control by, potential horizontal joint employers:

  1. Who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners);
  2. Do the potential joint employers have any overlapping officers, directors, executives, or managers;
  3. Do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
  4. Are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for);
  5. Does one potential joint employer supervise the work of the other;
  6. Do the potential joint employers share supervisory authority for the employee;
  7. Do the potential joint employers treat the employees as a pool of employees available to both of them;
  8. Do the potential joint employers share clients or customers; and
  9. Are there any agreements between the potential joint employers?

Factors For Vertical Joint Employment

According to the guidance materials, the analysis for determining whether a vertical joint employment exists is a two-pronged analysis.

First, one must determine if the intermediary employer is an employee of the potential joint employer. If that is the case, then any employee of the intermediary employer is an employee of the potential joint employer.

However, if the intermediary employer is not an employee of the potential joint employer, then further analysis must occur. The purpose of this analysis is to determine whether an employee of the intermediary employer is also an employee of the potential joint employer. This analysis focuses on the economic realities of the working relationship between the employee and the potential joint employer and takes into consideration the following economic realities factors:

  1. Directing, controlling, or supervising the work performed.
  2. Controlling employment conditions.
  3. Permanency and duration of relationship.
  4. Repetitive and rote nature of work.
  5. Integral to business.
  6. Work performed on premises.
  7. Performing administrative functions commonly performed by employers

Impact of Joint Employment

Knowing whether or not your organization is in a joint employment relationship with another organization is extremely important. Being considered a joint employer with another organization can potentially expose your organization to unexpected liability under the FLSA. There are two reasons for this unexpected liability.

The first relates to the calculation of overtime. When a joint employment relationship exists, the hours that an employee works in a week for all of his/her joint employers are considered hours worked for one employer. Therefore, if during the same week an employee works 20 hours for one joint employer and 25 for another, that employee has worked a total of 45 hours during the work week and is entitled to 5 hours of overtime pay under the FLSA.

The second relates to liability for unpaid wages. Each joint employer is “jointly and severally” liable for unpaid overtime and full compliance with the FLSA by all joint employers. This means that if one joint employer fails to pay overtime, fails to pay minimum wage, or otherwise violates the FLSA, any of the other joint employers can be held responsible for the violations and any penalties associated therewith.

What should employers do?

One important thing to remember is that Administrator’s Interpretation No. 2016-1 is not (technically) binding in any court and, at this point in time, it is unknown whether federal courts will adopt this guidance for determining whether a joint employer relationship exists. While that is true, it is extremely likely that the DOL will use these standards when it is analyzing potential joint employer relationships in the context of a DOL audit. In addition, it is highly probable that plaintiffs’ attorneys will attempt to use these standards to bolster their argument that a joint employment relationship exists. In light of these facts, it is advisable that employers use the standards to analyze their potential joint employment relationships and take steps to make sure that all organizations involved in a potential joint employment relationship are engaging in practices that are in compliance with federal (and state) laws.

Can a Drug and Alcohol Testing Policy Result in a Joint Employer Relationship?

In a recent NLRB decision (Browning-Ferris of California, Inc., decided on August 27, 2015), the NLRB found that Browning Ferris Industries’ (“BFI”) instructions to its staffing firm (Leadpoint Business Services) regarding pre-employment drug testing was a factor in its determination that BFI and Leadpoint were joint employers of the Leadpoint employees who were working in the BFI facility. Specifically with respect to pre-employment drug testing, the NRLB found that while BFI did not participate in Leadpoint’s day-to-day hiring process, it still had a significant amount of control over who Leadpoint can hire to work at the BFI facility because of the instructions given to BFI.

So what were the instructions BFI gave to Leadpoint? BFI told Leadpoint that Leadpoint could only refer workers who had passed a pre-employment drug test to work at the BFI facility. In addition, BFI further instructed Leadpoint that it was responsible for making sure that the employees it referred to the BFI facility remained free from the effects of alcohol and drug use while those employees performed work at the BFI facility.

The take home lesson for companies, when working with a staffing agency, be careful about the hiring requirements you impose. Too stringent of hiring requirements may result in the company being found to be in a joint employment relationship with the staffing agency.