Check the New Definition of Joint Employer: The Upside and the Down

14 Aug Check the New Definition of Joint Employer: The Upside and the Down

Posted at 07:30h in Human Resources by

Being a joint employer means that you and another employer share, both “individually and jointly,” the responsibility of complying with labor laws and regulations. So if this classification applies to your business, it’s critical that you pay close attention to how your fellow joint employer deals with the employees you share.

Most employers take pains to avoid joint employer status for that reason, but it doesn’t always work out that way. Three years ago, the National Labor Relations Board (NLRB) took a hard line position on this status in a case involving Brown Ferris Industries (BFI).

Union Representation Case

A group of workers employed by Leadpoint (a staffing services company) who performed services for BFI were seeking union representation. The union (Teamsters Local 350) wanted BFI to be ruled a joint employer, with the expectation that BFI could afford to offer a more generous contract than would be possible with Leadpoint. The conflicting opinions were taken to the NLRB for resolution.

BFI argued, in effect, that it wasn’t a joint employer because it only had “indirect” control over those employees, and that although it might in theory be able to exercise some level of control over the employees, it hasn’t done so. But the majority of NLRB members disagreed, ruling that even with only unexercised and indirect control, BFI should be considered a joint employer. BFI appealed the ruling to the federal court system and the case hasn’t yet been decided. However, in light of recent changes at the NLRB, the company may be in a much more favorable position.

After the election of Donald Trump, the composition of the NLRB was modified, resulting in a more business-friendly majority which takes a dim view of the Board’s 2015 ruling in the BFI case. It expressed that opinion in a new case involving an employment services company and a construction company. The majority opinion stated that the “indirect control” standard applied in the BFI case represented a “distortion of common law,” and that it would prevent the NLRB from “fostering the stability of labor-management relations.”

Joint Employment Scenarios

So returning to square one, here are the relevant criteria you can use to assess whether you could be pulled into joint employer status, as described by the Department of Labor (DOL) Wage and Hour Division. The most common joint employment situations are the following:

1. Where the employee has two (or more) technically separated or associated employers, or

2. Where one employer provides labor to another employer and the workers are economically dependent on both employers.

Here are some examples of a possible joint employer relationship under the first scenario offered by the DOL:

    • The employers have an arrangement to share the employee’s services,
    • One employer acts in the interest of the other in relation to the employee, or
    • The employers share control of the employee because one employer controls, is controlled by, or is under common control with the other employer.

 
Degree of Association

The joint employer status determination will “focus on the degree of association between the two employers,” according to the DOL. Questions that will lead to a determination include:

    • Who owns or operates the possible joint employers?
    • Do the employers have any overlapping officers, directors, executives or managers?
    • Do the employers share control over operations?
    • Are the operations of the employers intermingled?
    • Does one employer supervise the work of the other?
    • Do the employers share supervisory authority over the employee?
    • Do the employers treat the employees as a pool of workers available to both of them?
    • Do they share clients or customers?
    • Are there any agreements between the employers?

 
Under the second scenario (that is, where one employer provides labor to another employer and the workers are economically dependent on both employers) joint employer status would be evaluated with questions including:

    • Does the other employer direct, control or supervise the work?
    • Does the other employer have the power to hire or fire the employee, change employment conditions, or determine the rate and method of pay?
    • How permanent or lengthy is the relationship between the employee and the other employer?
    • Is the work performed on the other employer’s premises?
    • Does the other employer perform functions for the employee typically performed by employers, such as handling payroll or providing tools, equipment or Workers’ Compensation insurance, or, in the case of agriculture, providing housing or transportation?

 
There is, inevitably, some subjectivity in joint employer status determination. The DOL says the ultimate focus is on what it calls the “economic realities of the relationship.” But, thanks to the NLRB’s rejection of the broader “indirect control” standard, fewer companies are likely to be deemed as joint employers. When in doubt, however, consult with a qualified employment law attorney.

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