Joint employment the DOL way: ‘as broad as possible’
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Friday, January 22, 2016

Joint employment the DOL way: ‘as broad as possible’

By Joy P. Waltemath, J.D. Broader than the common law test, broader than the recently announced test under the NLRA, broader than the OSHA test—the test for joint employment under the Fair Labor Standards Act (and the Migrant and Seasonal Agricultural Worker Protection Act) uses the same expansive “suffer or permit” language as does the FLSA’s definition of employment, stresses the DOL Wage and Hour Division’s Administrator’s Interpretation No. 2016-1 on joint employment. Issued January 20, the 15-page guidance, released together with a Q&A on joint employment, a revised fact sheet on joint employment under the FLSA and MSPA, plus a new fact sheet on primary and secondary employers under the FMLA, “ensures that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible.” Protections in the “fissured workplace.” In the January 20 DOL blog, Wage and Hour Administrator Dr. David Weil, who issued the Administrator’s Interpretation (AI), reiterated the labor department’s focus on protecting employees in what it calls the “fissured workplace—where there is increasingly the possibility that more than one employer is benefiting from their work.” He cited the changing nature of work due to economic forces and technological advancements, which have resulted in different organizational and staffing models that use third-party management companies, independent contractors, staffing agencies, or other labor providers to “share employees.” This is another effort by the current administration to address the fissured workplace—“to put it back together, which is something of a challenge,” Alfred B. Robinson, Jr., Shareholder in Ogletree Deakins Washington, D.C., office and former acting Administrator of the Wage and Hour Division, told Employment Law Daily. He characterized the WHD’s effort as an attempt to “patch together employment relationships that formerly existed but that no longer do” because of those very economic forces and technological developments the DOL cited. Not a policy change. In the accompanying Joint Employment AI Questions and Answers, the DOL was careful to point out that “this AI reflects existing WHD policy” and that its guidance was consistent with FLSA and MSPA regulations on joint employment “promulgated decades ago.” It is also consistent, the DOL says, with “previous guidance, including fact sheets, Opinion Letters, and AI 2014-2 on joint employment of home care workers in consumer-directed, Medicaid-funded programs by public entities under the FLSA.” Although Robinson noted that the sub-regulatory guidance does cite previous opinion letters and existing regulations, he said it also develops the concepts of horizontal and vertical joint employment relationships “to new ends.” In particular, the guidance’s reliance on MSPA regulations highlights what he called the WHD’s “tacit understanding” that the FLSA regulations on joint employment at 29 C.F.R. 791 “are not sufficient,” and although clearly the agency’s joint employment standard has always been broad, the “guidance seems to conflate the MSPA and FLSA regs.” Which industries are targeted? While employers in all industries would be wise to take note, the WHD called out the following industries in particular: home health care agencies; construction; agriculture; janitorial; warehouse and logistics; staffing; and hospitality. But the AI is not intended to target the franchise industry, the Q&As stress. There is “a wide range of industries where a business relies on others to supply the labor that performs the business’ work,” and the “form of business organization, such as a franchise, does not necessarily indicate whether joint employment is present” or create joint employment. Joint employer definition “as broad as possible.” Although the AI suggests that not every subcontractor or other labor provider relationship is going to result in joint employment, it also clearly stresses that the FLSA’s expansive definition of “employ” as including “to suffer or permit to work” (which also applies to the MSPA) rejected the common-law right of control standard and ensures that the scope of employment relationships and joint employment under the statutes is “as broad as possible.” How to analyze employment relationships. The bulk of the AI discusses two types of joint employment relationships—horizontal and vertical—and provides factors or elements and examples for each. Horizontal joint employment. According to the AI, horizontal joint employment may exist when two (or more) employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee. Citing FLSA regulations at 29 C.F.R. 791.2, the AI notes there is typically an established or admitted employment relationship between the employee and each of the employers, and often the employee performs separate work, or works separate hours for each employer. Thus, the focus of a horizontal joint employment analysis is the relationship between the two (or more) employers. The following factors from the AI potentially are relevant when analyzing the degree of association between, and sharing of control by, potential horizontal joint employers:
  • 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);
  • do the potential joint employers have any overlapping officers, directors, executives, or managers;
  • do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
  • are the potential joint employers’ operations intermingled (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);
  • does one potential joint employer supervise the work of the other;
  • do the potential joint employers share supervisory authority for the employees;
  • do the potential joint employers treat the employees as a pool of employees available to both of them;
  • do the potential joint employers share clients or customers; and
  • are there any agreements between the potential joint employers.
Vertical joint employment. According to the guidance, the vertical joint employment question focuses on whether the employee of the intermediary employer is also employed by another employer (the potential joint employer). In vertical joint employment situations, the other employer typically has contracted or arranged with the intermediary employer to provide it with labor and/or perform for it some employer functions, like hiring and payroll. While there is typically an established or admitted employment relationship between the employee and the intermediary employer, the employee’s work typically also is for the benefit of the other employer. Instead of the focus being on the relationship between the employers, “the focus in vertical joint employment cases is the employee’s relationship with the potential joint employer.” Notably, here the WHD relied on MSPA regulations at 29 C.F.R. 500.20(h)(5)(iv) describing seven economic realities factors (in the context of a farm labor contractor acting as an intermediary employer for a grower) as useful guidance to analyze any vertical joint employment case. These factors are used “because they are indicators of economic dependence” and should be viewed “qualitatively to assess the evidence of economic dependence.” The seven factors are:
  • directing, controlling, or supervising the work performed;
  • controlling employment conditions;
  • permanency and duration of the relationship;
  • repetitive and rote nature of the work;
  • integral to business;
  • work performed on premises; and
  • performing administrative functions commonly performed by employers.
And if there is joint employment to be found? Here’s what employers can expect 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.
  • All of the joint employers are jointly and severally liable for compliance with the FLSA and MSPA. This means that each joint employer is individually responsible, for example, for the entire amount of wages due. If one employer cannot pay, then the other employer must pay the entire amount; the law does not assign a proportional amount to each employer.
  • Where one joint employer is larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance, “WHD may consider joint employment to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations.”
Expert conclusions. According to Ann-Margaret Pointer, Partner in Fisher & Phillips, LLP’s Atlanta office and member of the Employment Law Daily Advisory Board, the AI focuses on what “employ” means under not only the FLSA and the MSPA but, as a practical matter, the FMLA, “all of which use the FLSA definition of ‘employ’ that DOL admits is broader, more encompassing, than the same word under the common law.” She stressed that “all businesses that depend on the work of other employers’ employees are vulnerable to findings that they, along with the nominal employers, may be found liable for violations of these laws, particularly if the work is conducted on the premises of the business that needs the services the workers perform, the relationships of the contractors and staffing companies with the user businesses are long-standing, and the contractors and staffing companies are economically dependent on loans from or revenues received from the user businesses in order to meet their payrolls or operate their businesses.” Under the labor department’s “even more aggressive stance,” Pointer said that the DOL will look to “aggregate employees of all alleged joint employers for purposes of coverage, with rights under FMLA particularly affected.” She went on to note that “at least theoretically, businesses may be ‘joint employers’ under these laws without meeting the common-law definition of ‘employers’ of their service providers’ employees under ERISA, OSHA, the NLRA, the ACA and other laws that do not adopt that very liberal, all-inclusive concept of employment that is rooted in the FLSA definition of ‘employ.’” Finally, Robinson commented that while the WHD’s sub-regulatory guidance does “shine the light” on the issues, the agency should have devoted its efforts to “revisiting the FLSA’s Part 791 regs,” and the fact that it did not engage in notice and comment rulemaking will result in the courts giving the Administrative Interpretation “a lower level of deference” than if it had gone through the notice and comment process. Nonetheless, he stressed that it was always a good thing for employers to reevaluate their operations and revisit the factors the agency will consider for joint employment status.

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