The legal landscape facing employers seems as difficult to navigate as it has ever been. Keeping track of the ever-changing patchwork of federal, state and local laws governing the workplace may often seem like a full-time job whether you are a human resources professional, in-house attorney or business owner. Change appears to be the one constant. As we enter Year 3 of President Biden’s Administration, employers will continue to closely track the changes taking place at the NLRB, the DOL and the EEOC. At the same time, a number of states will continue introducing new laws and regulations governing workplaces across the country, making it more important than ever for employers to pay attention to the bills pending in the legislatures of the states where they operate.
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On September 8, 2020, a New York federal judge struck down most of a U.S. Department of Labor (“DOL”) rule that had narrowed the definition of “joint employer” by limiting when multiple businesses would be liable to the same worker under federal wage and hour law. The lawsuit was filed by the attorneys general of 17 states and Washington, DC, who argued that the narrowing of the standard would eliminate important labor protections for workers and would make it more difficult to hold companies liable for violations by franchisees and contractors of minimum wage and overtime laws.
Brief History of the Joint Employer Rule
Although the Fair Labor Standards Act (“FLSA”) does not explicitly reference joint employment, the DOL has long recognized that workers may have multiple employers when employment by one employer is “not completely disassociated” from employment by the other employer. The DOL has periodically updated this definition via informal guidance, most recently in 2014 and 2016, when it issued bulletin memorandums directing agency investigators to look past employers’ control over workers to the “economic realities” of their relationship.
The DOL rescinded those memorandums soon after President Trump took office in 2017 and proposed the first update to its formal joint employment regulations in decades, which was finalized in January 2020. January’s final rule emphasized a company’s control over its workers, saying joint employment hinges on the division of powers to (1) hire and fire; (2) supervise and schedule; (3) set pay; and (4) maintain employment records.
The DOL’s attempt at narrowing the joint employer standard was seen as business-friendly and anti-labor, as labor advocates argued that employers who have franchise relationships or rely on subcontractors benefited from the new standard. As a result, in February 2020, New York and 17 other states sued to block the rule, accusing the DOL of exposing workers to wage theft by narrowing its definition of joint employment further than the FLSA allows.
New York Federal Court Ruling
On September 8, 2020, Judge Gregory Woods of the U.S. District Court for the Southern District of New York issued a ruling striking down the majority of the new rule and agreeing with New York and the other 17 states who had challenged the rule.
According to Judge Woods, the new rule was “arbitrary and capricious” because the DOL failed to justify its departure from its prior interpretations of the joint employer rule or account for its costs to workers, which the states estimated at more than $1 billion annually. Judge Woods also ruled that the Trump administration’s changes to the joint employer doctrine were too narrow since they required a company to actually exercise control in the workplace instead of simply having the right to exercise control, and the DOL did not adequately explain why it disregarded evidence that narrowing its joint employment test would expose workers to wage theft. Additionally, Judge Woods found that the new rule conflicted with the plain language of the FLSA because it ignored the statute’s broad definitions.
As a result, Judge Woods vacated the portion of the rule applying to “vertical” employment relationships, in which workers for a staffing company or other intermediary are contracted to another entity. However, he let stand the portion applying to “horizontal” relationships, in which a worker is employed by two “sufficiently associated” businesses.
Impact to Employers
It is likely that the DOL will appeal this ruling to the U.S. Court of Appeals for the Second Circuit, so this will not be the last time that a court opines on this issue. In the meantime, however, there is no disputing that this ruling (especially if upheld on appeal) is a blow for the business community, which had urged the Trump administration to narrow the federal joint employment doctrine that had been expanded under the Obama administration.
Due to this court ruling, employers now have less certainty about their relationship with one another in the joint employment context. Thus, if any employers have revised their contracts with staffing agencies, subcontractors, or other intermediary employers since January, they should review those contracts to make sure they do not violate the joint employment standard that was in place prior to January. And, until an appeal is ruled on or further guidance from the courts is issued, employers should adhere to the more expansive definition of joint employment when drafting contracts with staffing agencies or other subcontractors going forward.
As always, we will keep you apprised of future developments in this ever-changing area of the law.
On February 26, 2020, the National Labor Relations Board (“NLRB”) published its final joint employer rule in the Federal Register, which tightens the test used to analyze whether workers are jointly employed by affiliated businesses. The final rule is intended to roll-back the stricter Obama-era standard that business interests have longed to overturn.
History of Joint Employer Rule
Under longstanding NLRB precedent, two employers could be joint employers if they shared or codetermined matters governing the employees’ essential terms and conditions of employment. Until 2015, to be a joint employer, a business had to exercise “direct and immediate” control over these employment matters
Then, the Obama-era NLRB overruled the old standard in its decision in Browning-Ferris, and substantially relaxed the standards for proving joint Continue reading →
On Tuesday July 11, 2017, Conn Maciel Carey Labor & Employment attorneys Jordan B. Schwartz and Lindsay A. DiSalvo and OSHA attorney Eric J. Conn will be presenting a free webinar discussing issues relating to Joint and Multi-Employer, Independent Contractor, and Temporary Workers from both and Employment Law and OSHA perspective.
Employers’ perceptions about whether a legal employment relationship has been formed is not always shared by the Dept. of Labor. Although an employer may classify workers as independent contractors or engage them as temp workers through a staffing agency, that does not mean the DOL agrees. At the tail end of the Obama Administration, the DOL was vocal about its belief that most workers should be treated as employees, so employers will be accountable for the specific obligations of an employer-employee relationship. Additionally, employers may have certain HR or OSHA obligations and potential liabilities depending on their role at multi-employer worksites or in joint employer situations. The DOL has been cracking down on employee misclassification and division of responsibility among multiple employers.
Now, under the new Trump Administration, the DOL’s and OSHA’s views of the employment relationship are shifting. It is essential for employers to stay abreast of these issues, and carefully evaluate their employment relationships and functions at multi-employer workplaces.
During this webinar, participants will learn:
Current criteria used to evaluate the employer-employee relationship
Employers’ responsibilities on multi-employer worksites
How to clearly establish an independent contractor relationship
How to lawfully and effectively manage temporary workers
President-elect Donald Trump has chosen Andrew Puzder as his Secretary of Labor, according to Trump’s transition team. Puzder is the CEO of CKE Holdings, the parent company of Carl’s Jr. and Hardee’s, and has been a vocal critic of the Obama Labor Department’s overtime regulations and efforts to increase the federal minimum wage. As labor secretary, Puzder will oversee the federal apparatus that investigates violations of minimum wage, overtime and workplace safety laws and regulations.
An increase in the federal minimum wage and an expansion in overtime eligibility have been priorities for the outgoing Secretary of Labor Thomas Perez. On Perez’s watch, the DOL has issued new overtime regulations increasing the minimum salary threshold level in order to qualify an employee as exempt from overtime. Puzder has denounced this new overtime rule, the status of which is presently uncertain after a Texas federal court temporarily blocked the rule from taking effect. The U.S. Court of Appeals for the Fifth Circuit has just granted the DOL’s request to expedite its appeal from the preliminary injunction order. The appeal is unlikely to be decided before Donald Trump is inaugurated as the next president on January 20, 2017.
Accordingly, under Puzder’s leadership, the DOL could very well withdraw the pending appeal before a decision is issued by the Fifth Circuit and otherwise not support the new overtime rule. Even if the overtime rule eventually takes effect, Puzder’s arsenal will include the authority to engage in rulemaking to roll back or modify the overtime rule, consistent with the notice and comment process under the federal Administrative Procedures Act. In an op-ed piece earlier this year in Forbes, Puzder said that the overtime regulation will “add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere.” He expressed the opinion that this cost cutting would result in reduced opportunities, bonuses, benefits and promotions.
Other immediate measures that Puzder could take to shift or reverse the direction of the DOL would be to modify interpretive guidance issued under the Obama Administration. For instance, Puzder will likely modify an administrative interpretation by the DOL’s Wage and Hour Division regarding the joint employer doctrine. Under Obama, the DOL has cracked down on employee misclassification and been vocal about its belief that most workers should be treated as employees, insinuating that in a majority of cases, it would hold employers accountable for the specific obligations of an employer-employee relationship. The Wage and Hour Division has offered an administrative interpretation under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act that broadened the definition of joint employment. Under that doctrine, two employers may be responsible for the violations of each other because of how they jointly use the same employees or because of the control an employer exercises over the employees of an intermediary employer such as a contractor or staffing agency.
Puzder’s authority to impact regulatory and enforcement actions will extend to the DOL’s administration of guest worker programs, allowing foreign nationals to immigrate to the United States and work on a temporary basis, as well as the DOL’s coordination with the Department of Homeland Security over the enforcement of immigration laws in the workplace. It is uncertain what will happen under a Labor Secretary Puzder, whose past immigration stance is at odds with the President Elect’s. In an op-ed piece Puzder authored in The Wall Street Journal last year, he counseled Republican presidential candidates to come up with a vision of how to deal with immigration, including the 11 million undocumented workers already in the country. He supported a “path to legal status” that would be “short of citizenship” so long as the undocumented pass a background check, pay a fine and learn English, among other measures.
Ultimately, employers may benefit most from Puzder’s authority to reallocate agency resources away from agency enforcement actions for labor law violations. Under Obama, the Wage and Hour Division has been very active in enforcing labor laws and investigating industries and workplaces with a history of labor law violations. Puzder could slow down enforcement and conduct fewer investigations. The first few months of a Puzder Labor Department may be telling as we continue to read the tea leaves to assess how employers will be affected by the change in administration.
Employers’ perceptionsabout their legal responsibilities for certain workers is not always reality. Although an employer may classify a worker as a temporary worker or independent contractor, that does not mean the Department of Labor (“DOL”) takes the same view. Recently, the DOL has been vocal about its belief that most workers should be treated as employees, insinuating that in a majority of cases, it would hold employers accountable for the specific obligations of an employer-employee relationship. Additionally, employers may have certain employment law and OSHA related obligations and potential liability depending on their role at multi-employer worksites or in joint employer situations.
Overall, the DOL has been cracking down on employee misclassification and division of responsibility among multiple employers; thus, it is essential for employers to carefully evaluate the employment relationship and their own individual function at in the multi-employer context.
Participants in this webinar will learn the following:
Criteria used to evaluate the employer-employee relationship
Employers roles on a multi-employer worksite and the specific obligations associated with each role
Guidance on how to clearly establish an independent contractor relationship
How to lawfully and effectively manage temporary workers at your workplace.
We look forward to presenting these important issues to you.
On July 11, 2016, the National Labor Relations Board (“Board”) reversed decade old precedent requiring consent from the host employer and a staffing agency before a union election that includes temporary employees could take place. Through its 3-1 decision in the Miller & Anderson, Inc. case, the Board revoked its 2004 Oakwood Care Center holding and reinstated its 2000 decision in M.B. Sturgis by finding that bargaining units covering both regular employees and temporary employees do not require employer approval. Indeed, the Board explained that based on the broad definition of employee in the National Labor Relations Act (“the Act”) and Congress’s “statutory charge” to the Board, it interprets the term “employer unit” in Section 9(b) be made up of both employees solely employed by the host employer and joint employees employed by both the host employer and the staffing agency, when those employees share a community of interest. In a statement released regarding its decision, the Board made clear that host employers would be expected to bargain as usual with their regular employees, and “will only be obligated to bargain over the jointly-employed workers’ terms and conditions which it possesses the authority to control.”
The main argument against reversal of the Oakwood Care Center decision and the problem that arises in permitting such a bargaining unit, as explained in Board Member Philip Miscimarra’s dissent, is that Continue reading →