By David Warner,
Last week, the National Labor Relations Board (NLRB) published its final rule setting out the standards for determining when two entities might both be considered an employer of an individual for purposes of coverage under the federal National Labor Relations Act (NLRA). Under the NLRB’s promulgated rule, entities will be considered joint employers only if “the two share or codetermine the employees’ essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction.”
Joint employment status is an important concept insofar as it exposes both employing entities to obligations under federal law. For example, for purposes of the NLRA if an employee is employed by two entities, both might be subject to union organizing and bargaining activity on that individual’s behalf. Similarly, for purposes of anti-discrimination statues, an employee of two entities would have the right to pursue claims under Title VII, the Americans with Disabilities Act (ADA) and other authorities against both employers. The concept is particularly important to government contractors who often augment their own workforces with that of subcontractors and staffing firms.
The NLRB’s new rule comes on the heels of similar rule making out of the U.S. Department of Labor’s Wage-Hour Division (WHD), which on January 12, 2020 announced its own joint employer standard, which is scheduled to take effect on March 16, 2020. In addition to providing several examples applying the guidance in various factual settings, the WHD’s rule:
- specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee;
- provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee;
- clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA; and
- specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely.
The referenced four-factor test is taken from an earlier decision of the U.S. Court of Appeals for the Ninth Circuit, which examine whether a given entity: (1) hires or fires the employee; (2) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records. No single factor is dispositive in determining joint employer status; however, the WHD’s rule does state that “maintenance of employment records factor alone does not demonstrate joint employer status.”
Not to be left behind, late last year the Equal Employment Opportunity Commission (EEOC) publicly indicated its intent to engage in rule making on the question of joint employment under the various anti-discrimination statutes which the agency enforces. Although the initial rule tracking data suggested that a notice of proposed rulemaking would issue in December, to date EEOC has not yet formally engaged that process.
While it would of course be easier for contractors and all employers to have a single federal standard to determine joint employer status, the varying standards are necessary because of the varying definitions of who is an “employer” under the varying federal statutes at issue. Thus, an “employer” for purposes of the NLRA may not be an employer for purposes of the FLSA, Title VII, ADA, etc.
That said, it does appear that the varying efforts are geared toward more narrowly defining the scope of joint employment, which is a boon to contractors who often utilize resources other than their own employees in performing government work. Proof of the “pro-employer” aspect of the recent rule-making is perhaps best reflected in a recent lawsuit filed in the U.S. District Court for the Southern District of New York filed by seventeen (17) Democratic attorney generals of sixteen states and the District of Columbia asserting that the WHD’s final rule concerning joint employment is arbitrary and capricious under the federal Administrative Procedure Act.
About the Author:
David Warner is a seasoned legal counselor with extensive experience in the resolution and litigation of complex employment and business disputes. His practice is focused on the government contractor, nonprofit, and hospitality industries. David leads Centre’s audit, investigation, and litigation practices.
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