For the past several years, attempts at the federal and state level to clarify rules on joint employment situations have caused considerable heartburn and anxiety for employers. While several states and the Obama administration attempted to broaden the situations in which companies could be held liable for joint employers, other states and the Trump administration have pushed back and sought to protect many types of companies from being held accountable as joint employers.
New Rules For Joint Employer Under Trump
Now, the Department of Labor under Trump has issued a new rule regarding the legal interpretation of joint employer status. The rule seeks to overturn a similar rule from the Obama administration that endorsed the legal interpretation put forward by the National Labor Relations Board in the seminal Browning-Ferris case. Technically, the Department of Labor rule – either the proposed new one or the old one – are not legally binding. However, they offer guidance to companies as to how the Department of Labor will interpret situations when addressing potential labor violations.
The New Test For Joint Employer
The new Department of Labor test establishes a four-part balancing test in examining potential joint employer relationships.
The new test looks at whether the potential joint employer:
- · Has a role in hiring or firing employees
- · Supervises and controls the employee’s work schedule or conditions of employment
- · Determines the employee’s rate and method of payment; and/or
- · Maintains the employee’s employment records.
Analysis Still Underway
Legal fact finders will have to analyze business relationships in light of these factors and weigh whether joint employment exists in light of them. Employees will not have to prove all four factors to support a finding of joint employment.
Comparing To The Rules That Were Already In Place
Under Browning-Ferris and the old rule, joint employer status was determined based on the level of control the putative employer had over the employee and their working conditions. The rule had marked a significant departure from previous legal interpretations by stating that even indirect control could be sufficient to uphold a finding of employer status. Business associations, especially franchisors, had raised concerns about the vagueness of the standards and the significant increase in litigation that resulted from the Obama era rule change.
Still Room For Change
More importantly, after several false starts due to ethical issues, the National Labor Relations Board is finally set to issue its own rule which would formally overturn Browning-Ferris. Such a rule could be forthcoming in the next few weeks. However, it is likely that these rule changes will spark continuing and ongoing litigation that could be tied up in the court system for the next few years.
Next Steps for Employers
For now, employers are advised to carefully review their employment contracts and their relationships with contractors to ensure they have limited the potential for being found a joint employer and liable for labor violations.
Employers should review the final rule and determine whether they are in joint employment relationships based on the updated standard. Employers in these relationships should also determine whether the other joint employers in the relationship are in compliance with labor and employment laws.