Geez, I go away for Spring Break and the Department of Labor (DOL) starts going crazy! More on the DOL’s intepretation of “regular rate” released this past Friday, March 28 later, but on Monday, April 1, the Department added its proposed rule on joint employer status to the separate proposal by the National Labor Relations Board (NLRB). Both agencies are proceeding on parallel paths under their own statutes, and amid the analysis out there on the DOL’s newest rule, I thought it would be worthwhile for readers if I summarized where both the Department and Board stand and what their respective proposals are. If you want the TL;DR summary, just read the bold parts below and the takeaways at the end. You won’t hurt my feelings.
Why Should I Care about Joint Employer Status?
You did come to this blog, right? In all seriousness, unless you have no employees and never work together with other companies, joint employer status may be relevant to you. A joint employer is, both individually and jointly, liable with the “primary” employer for, among other things:
- all wages due to an employee under the FLSA
- compliance with and any violations of worker protection laws under the NLRA
- compliance with and any violations of worker safety laws under OSHA
In short, it can be a big deal if your not-so-scrupulous partner/subcontractor/staffing agency isn’t following the law and, through operation of joint employer laws, drags you into their mess.
National Labor Relations Board NPRM
First, let’s talk about the Board. The NLRB, which continues to operate with fewer than its full complement of Members, is moving forward on its own joint employer status rule under the National Labor Relations Act (NLRA). In December, the D.C. Circuit Court put the joint employment debate back in the hands of the NLRB, approving, in part, the Board’s Obama-era Browning-Ferris decision. In a 2-1 opinion, the appeals court held that it was permissible for the Board to create a standard that considered both the putative employer’s reserved right to control and its indirect control over employee’s terms and conditions of employment as factors for determining whether businesses should be considered joint employers. However, it also held that the Board didn’t apply that standard properly in the case because it failed to articulate the scope of what it considers to be “indirect” control and remanded the case back to the Board for further reconsideration.
The Board took an extended period of comments from the public on its new rule through January.
Under the Board’s proposed rule, the Board would only find joint employer status only where two entities actually share or codetermine employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. If implemented, the rule would reinstate the traditional joint-employer standard the Board abandoned in its Browning-Ferris decision, 362 NLRB No. 186 (2015).
The Board is sifting through 29,000+ comments it received on the topic, but Congress continues to lean on it. On March 14, two Democratic members of Congress sent a letter regarding concerns over a report that the NLRB intended to outsource review of public comments received in response to the joint employer NPRM. A little more than a week later, Board Chairman John Ring responded. He stated that he, too, would be concerned if a private contractor were performing substantive review of the comments, but he said that Congress was “misinformed … [as] [t]he Board has not outsourced, and will not outsource, the substantive review of the joint-employer rulemaking comments.” Instead, the Board had engaged temporary support on a limited, short-term basis to perform the initial sorting and coding of the nearly 29,000 comments it received. Once that sorting is done, the initial substantive review will be done the Agency’s labor law professionals to aid the Board in its exercise of its deliberative functions.
Department of Labor NPRM
On April 1, 2019, the DOL announced a proposed rule to revise the joint employer regulations under the Fair Labor Standards Act (FLSA), and it wasn’t an April Fools joke. If implemented, this would be the first meaningful revision to the applicable regulations in more than 60 years.
Under the current regulations, several entities may be the joint employers of a single employee as long as they are “not completely disassociated” with respect to the employment of the employee. These joint employers are then jointly and severally liable for the employee’s wages. The current joint employer rule contemplates two different joint employment scenarios: (1) where an employee’s hours work for one employer simultaneously benefits another employers; and (2) where the employee works separate sets of hours for different employers in the same workweek.
In 2016, the Obama DOL issued an Administrator Interpretation (AI) in which it adopted an expansive “economics realities” test to assess joint employer status. This test heavily favored the finding of joint employment status. The Trump DOL withdrew the AI in June 2017, and stated it would revise the joint employer rule in a future rulemaking.
The DOL proposes a clear, four-factor test – based on well-established precedent – that would consider whether the potential joint employer actually exercises the power to:
1. Hire or fire the employee;
2. Supervise and control the employee’s work schedules or conditions of employment;
3. Determine the employee’s rate and method of payment; and
4. Maintain the employee’s employment records.
The NPRM makes clear that “[o]nly actions taken with respect to the employee’s terms and conditions of employment, rather than the theoretical ability to do so under a contract, are relevant to joint employer status under the Act.” (my emphasis.) The proposal also expressly states that certain business models (franchising), agreements (vendor codes of conduct), or practices (allowing an outside employer to operate on your premises) will not make a joint employer status finding more or less likely, and provides some illustrative examples.
As with all NPRMs, the DOL will provide the public with a 60-day comment period following publication of the proposed rule in the Federal Register. Comments can be submitted electronically. Once the comment period has closed, the DOL will take some time to consider the comments and then issue the final rule.
Upshot for Employers
- Both the NLRB’s and DOL’s proposals are just that. You can expect legal challenges, Congressional action, the 2020 elections (perhaps), and various twists and turns before we get to final rules.
- Take all of this action by the NLRB and DOL with a grain of salt. Even if both agencies propound regulations that disfavor finding joint employer status (something that would be a good bet), many states and federal appellate courts have established their own variety of joint employer standards. For example, the Fourth Circuit in January 2015 announced a new and expansive joint employment status test in Salinas v. Commercial Interiors, Inc.
- The joint employer standards will continue to differ under various federal laws. Not only with the DOL and NLRB have slightly different defintions, but so will the EEOC under anti-discrimination laws.
- Don’t forget the states! California and New Jersey, to name two, have recently established new standards that make it easier to find joint employment. Other states already have such standards in effect.
- A President Buttigieg or President Harris could (and likely would) undo all of this. Sadly, much of administrative law has become a partisan pendulum: swinging wildly to one side when a Republican administration takes office, only to swing back the other way when a Democrat is in the White House. Congress’s continued, substantial abdication of legislative responsibility to the executive branch ensures that this whipsawing will continue unabated. Sorry, employers and employees. This is unproductive for everyone, but it is the political climate we live in.
Stay tuned for more developments on these fronts!