Earlier today, U.S. Secretary of Labor Alexander Acosta announced the withdrawal of the U.S. Department of Labor’s informal guidance on joint employment and independent contractors issued during the Obama administration. The announcement states that the withdrawal does not “change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act” and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” We will keep you updated on any additional word from the DOL on these issues, but it appears that by withdrawing these guidelines, the new administration is taking a first step away from attempts of the Obama administration and the NLRB to expand concepts of joint employment.
Category Archives: Joint Employers
The U.S. Department of Labor (DOL) has issued guidelines for when companies will be considered joint employers for purposes of the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). This guidance was issued in the wake of the National Labor Relations Board’s crucial Browning-Ferris ruling this past summer, drastically expanding who may be considered a joint employer under the National Labor Relations Act (NLRA).
The DOL guidelines discuss in detail a wide variety of employment relationships, including shared employees, subcontracted employees, staffing agencies, third-party management companies, and others. According to the DOL, the “possibility of joint employment should be regularly considered in FLSA and MSPA cases, particularly where (1) the employee works for two employers who are associated or related in some way with respect to the employee [i.e. horizontal joint-employment]; or (2) the employee’s employer is an intermediary or otherwise provides labor to another employer [i.e. vertical joint employment].” Although not new, the guidelines set forth in detail various factors to be used in determining joint employer status.
As with the Browning-Ferris decision, the DOL guidance is particularly important for companies that work with subcontractors or staffing firms, or are themselves contractors or staffing firms. These companies, as well as others in similar relationships, should carefully review the guidelines, weigh the benefits of control against the risk of being deemed to be a joint employer, and reflect their desired balance in their contracts, practices and procedures.
In Browning-Ferris, the company (“BFI”) had contracted with a labor services company – Leadpoint – to provide workers for BFI’s recycling plant. The Leadpoint employees were hired and supervised by Leadpoint supervisors. Their schedules were set by Leadpoint schedulers. Any discipline was determined by Leadpoint managers. However, under its contract with Leadpoint, BFI set requirements for candidates and retained the right to refuse or discontinue use of any employee. Also, because of how the facility worked, BFI set the hours for the various shifts (though Leadpoint determined which workers would work each shift).
The Teamsters decided to organize the Leadpoint workers at the BFI facility. However, instead of filing their petition for representation solely with regard to Leadpoint, the Teamsters filed their petition also naming BFI as the employees’ employer, on the theory that Leadpoint and BFI were joint employers and, as a result, that BFI could be required to negotiate the union.
The Board agreed with the Teamsters, holding that BFI was a “joint employer” of the Leadpoint employees. As a result, the union was permitted to move forward with its petition.
In its decision, the NLRB rejected the prior test for joint employment – which required that an entity not only possess the authority to control employees’ terms and conditions of employment but also exercise that authority in a meaningful manner – and set a new rule: that indirect or reserved authority, even if not exercised, can be sufficient to establish a joint employment relationship.
This ruling is particularly important for companies that work with subcontractors or staffing firms, or are themselves contractors or staffing firms. Contracts governing staffing and subcontractor relationships regularly include provisions setting minimum standards for the individuals performing the services, the right to refuse workers or discontinue their use, and other requirements relating to the individuals who are performing the services. There are strong business reasons to include these provisions, but, in light of the Board’s ruling in Browning-Ferris, companies need to be aware that the provisions which keep control over these aspects of the relationship also open the possibility that the company receiving the services will be deemed a joint employer under the NLRA. Companies entering into these relationships should carefully weigh the benefits of control against the risk of being deemed to be a joint employer and reflect their desired balance in their contract, practice and procedures.