HR Management & Compliance

New joint-employer guidance puts employers ‘on notice’

The U.S. Department of Labor’s (DOL) new guidance on joint employment means employers must think ahead when they find themselves in relationships that may fit the definition of “joint employment.”  DOL_logo

In a January 20 post on his blog, David Weil, administrator of the DOL’s Wage and Hour Division (WHD), announced new guidance related to joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act. Weil said the laws share the same definition of “employment,” which was written “to have as broad an application as possible.”

“Under these laws, it is possible for a worker to be jointly employed by two or more employers [that] are both responsible, simultaneously, for compliance,” Weil wrote.

Brent Siler, an attorney with Butler Snow LLP in Memphis, Tennessee, said the new guidance is significant because the DOL “is attempting to clarify the rules and how they will apply in a changing economy where employers are finding new business models and employment arrangements.”

Siler said that just like the National Labor Relations Board (NLRB) did last year, the DOL “is putting employers on notice that [it] will be seeking to hold employers liable for any perceived violations, regardless of whether the potential employer may be a legally separate entity.”

Siler said the guidance makes it clear that the test for determining whether a business will be considered a joint employer is going to be “somewhat of a moving target, giving the DOL discretion in enforcement.” Therefore, it will be “difficult to preclude joint-employer liability by simply disclaiming liability in a contract.”

“Thus, if you are in a situation where you know or are concerned that your business may be a joint employer with another business, the most important thing to do is to try to address the issue on the front end before you have labor or wage and hour problems,” Siler said. “Don’t wait until you are hit with a wage and hour collective action to start talking with your potential joint employer about things like insurance coverage [and] whether [it has] appropriate policies to potentially help defend you if you do end up in litigation.”

As for how the DOL’s guidance meshes with the NLRB’s recent action on joint employment, Siler said they are more alike than different. “The NLRB’s test focuses on the potential joint employer’s control over the true employer’s employees’ terms and conditions of employment,” he said. “While the DOL’s guidance makes clear that you cannot focus only on control and . . . provides multiple other factors for both of its tests, [it does] give significant weight to the level of control over the terms and conditions of employment exerted by the potential joint employer.”

Siler said the NLRB expanded the definition of “control” to include indirect control, and the DOL’s tests consider indirect control as well. “Thus, while you are going to have to look beyond control more so with the DOL than the NLRB, it is going to be a central issue either way, and the control at issue can be indirect,” he said.

Tom Posey, an attorney with Faegre Baker Daniels LLP in Chicago, also said the new guidance shows that the WHD is taking an even more expansive view than the NLRB. While the DOL’s language talks about factors other than control, the first two of the seven factors address control, he said.

Posey said he expects the new guidance to lead to more litigation. The DOL’s guidance points out that different courts have taken different views, so the definition of joint employment is likely to be “shaped through administrative decisions and court rulings,” he said.

Posey also said the new guidance means it will be even more difficult for employers in potential joint employer relationships to argue that they shouldn’t be considered joint employers. “It’s going to be a stretch,” he said, to argue that there’s not a strong economic connection between an employer and employees doing work for the employer even if they work for another employer.

In his blog post, Weil said economic forces and technological advancements have changed the nature of work and made joint employment more common and the “need to address it more pressing.” He said more businesses “are changing their organizational and staffing models by, for instance, sharing employees or using third-party management companies, independent contractors, staffing agencies, or other labor providers.”

Weil said the new kinds of arrangements are often seen in the construction, agricultural, janitorial, distribution and logistics, staffing, and hospitality industries.

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