Shifting Joint-Employer Regulations
Joint employment is of particular concern for staffing firms as well as their clients. As defined by SIA, joint employment is when two or more employers exercise significant and simultaneous control over the same employee, and may be liable for payment of taxes, workplace safety, etc. Joint employment comes into play in the enforcement of a variety of employment laws, and agencies and courts use different tests to determine status. Recent developments have been underway from the National Labor Relations Board as well as the US Department of Labor regarding their stances on joint employment.
The National Labor Relations Board released its final rule covering joint-employer status in February, reversing the 2015 Browning-Ferris ruling by the Obama-era NLRB. The new rule will go into effect on April 27.
The NLRB rule only applies to issues involving the National Labor Relations Act. Other laws (such as the Health Insurance Portability and Accountability Act or the Fair Labor Standards Act) and agencies (such as the Occupational Safety and Health Administration and the Equal Employment Opportunity Commission) also use joint-employment concepts, however designated. However, George Reardon, an attorney who works with staffing firms, says the NLRB rule may set a staffing-favorable pattern for refinement of their rules.
Reardon says the rule generally helps contingent staffing firms and their clients avoid joint-employer status for purposes of the National Labor Relations Act.
“The new NLRB rule on joint employment mostly affects its union oversight mission,” Reardon says, noting it should “stop the NLRB’s flip-flopping on whether clients’ union bargaining units may combine directly employed and assigned employees.”
Under the new rule, “a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees,” in order to be a joint employer.
If two companies are joint employers, both must bargain with union representatives for jointly employed workers and both are potentially liable for unfair labor practices committed by the other and subject to picketing, according to the NLRB.
“The reality is that most temporary staffing companies already are joint employers with clients. Unless the client is a union shop, the likelihood of it affecting their staffing partners will also be limited,” says Diane Geller, partner at law firm Fox Rothschild LLP.
Some client companies may seek to renegotiate the terms of agreements to lessen their involvement in the day-to-day practices in order to try to avoid being a “joint employer” of the temporary workers retained for purposes of incurring legal liability, Geller says. “In reality, such renegotiation will usually not affect their joint employment relationship with their staffing providers. It will, however, provide some protections to franchisors from being joint employers by removing the ‘indirect control’ language.”
In January, the US Department of Labor updated its regulations interpreting joint employer status under the Fair Labor Standards Act, or FLSA, in its own final rule that became effective March 16. The final rule includes a four-factor test for determining FLSA joint-employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual. Those factors are whether the potential joint employer:
- Hires or fires the employee;
- Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Determines the employee’s rate and method of payment; and
- Maintains the employee’s employment records.
The final rule also clarifies when additional factors may be relevant to a determination of FLSA joint-employer status and identifies certain business models, contractual agreements with the employer, and business practices that do not make joint-employer status more or less likely.
On Feb 26, attorneys general representing 17 states and the District of Columbia asked a federal judge to block the regulation, saying the rule is arbitrary and capricious under the Administrative Procedure Act. The case was filed in the Southern District of New York.