From JDSupra, John Polson discusses a bill (HR 3441) which would change the definition of “joint employment” to reduce the number of parties liable for wage and hour and labor law lawsuits. This is particularly interesting for the question of classification of a worker as an employee or independent contractor because companies are concerned about labor law claims when engaging with firms using independent contractors. John helps explain the bill:
As currently written, HR 3441 would have an impact on two critical federal workplace laws: the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). It would cause a radical shift in the way courts and regulatory agencies view “joint employment” when assessing situations arising under these federal laws. Here are the basics regarding the bill as currently introduced.
In A Nutshell, What Would The Law Do?
If passed, the law would establish that joint employment could only be found if an entity “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment” of a worker.
How Would That Change Things?
This would be a welcome narrowing of the joint employment theory, which has ranged to near-absurd proportions in recent years. The U.S. Department of Labor (USDOL), which enforces the FLSA, issued a 2016 interpretation calling for a very broad standard when assessing the issue of joint employment. Although the Trump administration recently rescinded this interpretation, many employers worry that courts and investigators will continue to apply an expansive view of the law.
Meanwhile, the National Labor Relations Board (NLRB) released the controversial Browning-Ferris decision in 2015 that casts a very wide net when determining whether joint employment exists for collective bargaining purposes. This decision says that joint employment is present even where one company only has the right to exert “indirect or potential control” over the terms and conditions of another company’s employees.
As evidence that courts are applying these principles in a broad manner, earlier this year a federal appeals court created a brand new standard that goes even further than any previous interpretation created by the judicial branch. The 4th Circuit Court of Appeals issued a ruling making it far easier for employers to be caught up as defendants in wage and hour claims, and there is significant danger this standard could spread to other jurisdictions. These regulatory actions and court cases threaten to alter the landscape of joint employment across the country.
What Would The New Standard Examine?
To determine whether a person, firm, corporation, or other association or organization is sufficiently exercising significant control over the essential terms and conditions of employment to be considered a joint employer under the bill’s proposed standard, courts and regulators would look to at least five factors. Joint employment could only be found after an examination of whether the entity directly, actually, and immediately controls such aspects of an individual’s employment as:
- Hiring and firing;
- Determining individual employee pay rates and benefits;
- Day-to-day supervision of employees;
- Assigning work schedules, positions, and tasks; and
- Administering employee discipline.
This list is not exhaustive, however. Employers could always point to other terms and conditions of employment in an effort to disprove joint employment.
What Would Most Likely Be Deemed Irrelevant?
Given that the bill goes out of its way to indicate that “limited and routine” control over an individual does not create joint employment, one would assume that a variety of common actions and activities would no longer be considered when examining whether joint employment exists. If the bill passes, employers could legitimately contend that courts or regulatory agencies should not be allowed to rely upon the following to arrive at a joint employment determination:
- franchisor or distributor control over the manner in which services are provided to the end customer;
- control over supplies and equipment used to provide services to customers; and
- the provision of human resource support services related to payroll, workers’ compensation insurance, and benefits.