What does the NLRB’s Proposed New ‘Joint Employment’ Rule Mean for Businesses?

360 degrees joint employment NLRB new rule

True story. Late 1980s. Early days of fantasy baseball. One of my high school buddies — we’ll call him The Beast — finishes last but decides he’s ready to turn things around. The Beast stands up at the next year’s draft and announces his new team name, intending to show us that he’s about to reverse last year’s standings: 360 degrees.

No one had the guts to say it. Only later did someone tell him he probably meant 180 degrees. He finishes last again. The Beast no longer plays fantasy baseball but lives a comfortable life as a tax lawyer in Florida.

A complete turnaround may now be in the works when it comes to defining “joint employment.” Recent actions by the National Labor Relations Board signal an upcoming 180-degree shift.

Click here to read the rest of the story, recently published in Westlaw’s Journal Employment and Practitioner Insights.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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New Definition of Joint Employment Still Appears Likely, Despite Efforts to Smack NLRB Chair in Face with an Octopus

octopus kayaker seal joint employment NLRB nature-3262715_1920

When this kayaker was slapped in the face by an octopus wielded by a seal, he just laughed it off. It didn’t seem to hurt, and I guess that’s just a thing that seals sometimes do.

Q. Now, Lebowitz, how are you going to work that intro back into something related to joint employment?

A. Watch this!

Similarly, it didn’t take long after the NLRB proposed a new regulation that would redefine joint employment (see this post) for two prominent Democrats to try to octo-seal-slap the NLRB’s Chair into backing off. Not gonna happen. The Board will not abandon its kayak.

Last week, Senator Patty Murray and Representative Bobby Scott sent a letter to Board Chair John Ring, arguing that there is “scant research or analysis” to support the Board’s call for a new joint employment standard. Um, so everything in the joint employment world has been peaches and cream? Heck, there’s so much uncertainty in the joint employment world right now that someone could devote a whole blog just to that topic!

In an effort to stall the rulemaking process, Murray and Scott asked the Board to extend the comment period on the proposed new rule by another 60 days (because no one saw this coming?) and demanded that the Board produce of all sorts of records relating to joint employment cases filed over the past several years. They also tried to re-raise concerns that there might be a conflict of interest affecting two of the three Republican Board members. The letter demanded the production of 21 categories of documents within 12 days, including asking for the name and case number of every joint employment case during the past six years fitting into various categories.

Let’s be realistic. This letter is basically outreach by Sen. Murray and Rep. Scott to labor unions, showing that they’ve got their back on the joint employment issue (to the detriment of businesses). I expect the letter will have no real effect on the process for rulemaking or on the timetable for adoption.

While few people may read that letter, the Go-Pro video of the seal smacking the kayaker in the face with an octopus has received a boatload of hits. I highly recommend watching. It is far more entertaining than this blog.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Extra Pepperoni! Domino’s Fends Off Joint Employment Claims

Pizza Food Slice Cheese Mushroom Veggies V

Domino’s Pizza in Russia recently had to cancel a promotion offering free pizza for life to anyone who got a tattoo of the Domino’s logo after too many people tatted up. The Russian franchisee that offered the promotion was overwhelmed by the response. It canceled the scheduled two-month promotion after just four days.

Franchise owners have to adhere to brand standards, but they have flexibility on other things, such as how vigorously to encourage their customers to ink. It can be confusing to the public, however, which decisions are made by franchisors and which decisions are made by franchisees. Not surprisingly, this confusion extends to employment situations, where claims of joint employment are frequently asserted against franchisors, even though individual employment decisions are made by franchisees.

In a delicious decision for franchisors, a New York federal court has ruled that Domino’s Pizza’s corporate entities are not joint employers of the employees who work at individually owned Domino’s franchises – at least under federal and New York State wage and hour law. (Click here for Five Things You Should Know About Joint Employment.)

Joint employment claims are a constant threat in the franchise space. Major restaurant and fast food franchisors are frequently alleged to be joint employers when plaintiffs bring employment lawsuits against individual franchisees. The franchisors (like Domino’s) are viewed as the deep pockets and, by targeting the franchisor’s corporate office, plaintiffs can try to build class actions that include groups of employees across multiple franchises. Or, by tagging a franchisee as a joint employer, plaintiffs can feel more confident that enough dollars will be available to pay any judgment.

The court’s ruling, which granted summary judgment to Domino’s corporate entities, evaluated the plaintiffs’ joint employment claims under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) using a two-part Economic Realities Test.

Following guidance from the Second Circuit Court of Appeals, the court looked at two sets of factors: one set to assess formal control exercised by the franchisor, and the second set to assess functional control by the franchisor. (That’s not the test used everywhere.)

As is typical in franchisor-franchisee relationships, the franchisee (store owner) signed a franchise agreement, agreeing that it – not the franchisor – “shall be solely responsible for recruiting, hiring, training, scheduling for work, supervising and paying the persons who work in the Store and those persons shall be [franchisee’s] employees, and not [franchisor’s] agents or employees.”  The agreement required the franchisee to adhere to brand standards to ensure consistency in product, but individual employment decisions were to be made at the store level, not by the franchisor.

Based on this framework, the court analyzed the facts using the formal control factors and the functional control factors.

The formal control factors included whether the franchisor:

  1. had the power to hire and fire the employees,
  2. supervised and controlled employee work schedules or conditions of employment,
  3. determined the rate and method of payment, and
  4. maintained employment records.

The functional control factors for determining joint employment, some of which do not even make sense in the context of a franchise relationship, are:

  1. whether the alleged employers’ premises and equipment were used for the plaintiffs’ work;
  2. whether the subcontractors had a business that could or did shift as a unit from one putative joint employer to another;
  3. the extent to which [the] plaintiffs performed a discrete line job that was integral to the alleged employers’ process of production;
  4. whether responsibility under the contracts could pass from one subcontractor to another without material changes;
  5. the degree to which the alleged employers or their agents supervised [the] plaintiffs’ work; and
  6. whether [the] plaintiffs worked exclusively or predominantly for the alleged employers.

After evaluating the facts using these factors, the court ruled that the Domino’s corporate franchisor entities were not joint employers. The franchisor entities were therefore dismissed from the lawsuit, but the court allowed the case to continue against the individual franchise owners.

The decision is refreshing for franchisors, but not too refreshing.  As noted here, other Courts of Appeal – mainly the Fourth Circuit – apply different tests for determining whether a company is a joint employer under the FLSA, even though the FLSA is a federal law that you would think would be interpreted the same way all across the country.

The test for joint employment under the National Labor Relations Act is different too – and is likely to change again.  It is possible for a company to be a joint employer under one law or test but not under other laws or tests. There is no uniformity or consistency.

For now, franchisors should rejoice in this small victory, but the fight to protect franchisors against joint employment claims is far from over — unlike the Russian tattoo promotion, which is entirely kaput.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Five Things You Should Know About Joint Employment

Everyone knows that two’s company but three’s a crowd. Except, of course, for Three’s Company with Jack, Janet, and Chrissy (or Cindy or Terri). But how many of you recall that one is the loneliest number that you’ll ever do? Two can be as bad as one. It’s the loneliest number since the number one. I know this because of Three Dog Night.

For musical tastes, the number four can mean Tops, Seasons, or Non Blondes.

But today’s number is FIVE.  Here are Five Things You Should Know About Joint Employment.  (click here to download the PDF.)

Five things You Should Know About Joint employment - page 1 screenshot

Five things You Should Know About Joint employment - page 1 screenshot

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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What is the Test for Joint Employment? It Depends.

Joint employment together

There are lots of ways to be together. Some are good, some less good.

Let’s compare:

  • By the end of the movie Grease, the graduates of Rydell High have decided that they “go together like rama lama lama ka dinga da dinga dong.” That, I think, is supposed to mean good.
  • In The Fox and Hound 2, a direct-to-video DisneyToon generally rated as “not terrible,” our four-legged heroes sing that they “go together like wet dog and smelly peanut butter jelly fleas on my belly.” That sounds less good.

In employment law, being together can be good or bad, depending on your perspective.

When a company retains someone else’s employees to perform work, it sometimes becomes necessary to decide whether the first company is a “joint employer” of the second company’s employees. Being a joint employer is not illegal, but it means that if the primary employer violates employment laws, a “joint employer” is liable too — even if it wasn’t primarily responisble for the unlawful act.

The test for joint employment varies depending on which law was violated and depending on the state you’re in. (Here’s a map that illustrates the madness.) For example…

In this post we discussed how you determine if someone is a joint employer under federal wage and hour law (the Fair Labor Standards Act) (FLSA).

In these posts, we discussed how you currently determine whether someone is a joint employer under federal labor law (the National Labor Relations Act) (NLRA). In this post, we discuss how and when that test is likely to change.

In today’s post, we’ll examine how you determine whether someone is a joint employer under federal employment discrimination and breach of contract law. For these laws, the test for joint employment looks to the common law of agency.

A recent decision by the federal Court of Appeals for the 11th Circuit reminds us that different tests apply to different laws. Applying the joint employment test for FLSA claims, the trial court had ruled that a citrus grower was the joint employer of migrant workers after the primary employer who hired them did not properly pay them.  (The farm-labor contractor who hired them allegedly demanded kickbacks from the migrant workers’ wages under threat of deportation. Today’s Tip: Don’t do that.)

The migrant workers had another claim too. They alleged breach of contract under federal law (the contract was part of the federal visa process), and it tried to sue both the farm-labor contractor who was demanding the kickbacks and the citrus grower at whose fields they picked delicious fruit.

For the breach of contract claim, the Court of Appeals ruled that the proper way to determine whether someone is a joint employer is to use a Right to Control Test.

There are different versions of Right to Control Tests, but they all try to determine whether a hiring party retains the right to control how the work is performed. If the answer is “yes they do,” then the hiring party is a joint employer under that law. If the answer is “no they don’t, they care about the achieving the result but not how the work is performed,” then the hiring party is not a joint employer.

This Court of Appeals decided that there are 7 factors that should be used to determine whether someone is a joint employer under federal breach of contract law. (The same test would generally apply to federal employment discrimination claims.) State laws may differ. Here are the 7 factors that this court used to determine whether someone is a joint employer under federal breach of contract law:

1. Does the alleged joint employer have the right to control how the work is performed?
2. Does the alleged joint employer provides the tools?
3. Is the work being performed at the worksite of the alleged joint employer?
4. Does the alleged joint employer provide employee benefits?
5. Does the alleged joint employer have the right to assign additional work?
6. Does the alleged joint employer have discretion over when and how long the workers work?
7. Is the work being performed a part of the alleged joint employer’s regular business?

In this case, applying the 7 factors, the Court of Appeals ruled that the citrus grower did not exert much control and therefore was not a joint employer for the breach of contract claim — even though it was a joint employer for the FLSA claim. (The FLSA uses an Economic Realities Test, not a Right to Control Test, to determine whether someone is an employer.) That’s right — different tests, different results.

The citrus grower did not want to be a joint employer because it was not part of the alleged kickback scheme and did not want to be held jointly responsible. Nonetheless, it was found to be a joint employer under the FLSA but not under the breach of contract claim. Confusing stuff.

When making music, being together seems so much simpler, although much more prone to nonsense words. Just ask the Turtles, who in 1969 were “so happy together Ba-ba-ba-ba ba-ba-ba-ba ba-ba-ba ba-ba-ba-ba.”

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Dept of Labor May Redefine Joint Employment with New Rule, Hints Labor Sec’y

DOL may issue new rule for joint employment

Rules are important for avoiding chaos, as I am reminded daily by one of my favorite twitter accounts, @CrimeADay. That’s where I learned that it’s a federal crime to operate a manned (or unmanned) submersible in national park waters without a permit, thereby ruining my weekend plans. (18 USC 1865 & 36 CFR 3.19). I also learned it is a federal crime to bring a child to a cockfight before his or her 16th birthday, thereby ruining my winter plans for father-daughter bonding activities. (7 USC §2156(a)(2)(B) & 18 USC §49(c).)

The Department of Labor (DOL) thinks rules are important too. Taking a page from the NLRB, which last week issued a Notice of Proposed Rulemaking to redefine “joint employment” under federal labor law, the DOL may be about to follow suit.

In a speech to members of the American Hotel & Lodging Association and the Asian American Hotel Owners Association, Labor Secretary Alex Acosta disclosed that the DOL is working on a proposal to redefine joint employment, presumably under the Fair Labor Standards Act (FLSA), which requires the payment of overtime and a minimum wage.

Joint employment is a hot button issue in the hospitality business, where outsourcing functions like housekeeping is commonplace, and where joint employment can mean the hotel operator is liable for for wage and hour violations by other entities who are supplying labor.

As we have discussed in previous posts, the tests for joint employment are different depending on which law is being applied. That means that even if the NLRB revises the definition of joint employment, that new test would not apply to the FLSA. The DOL would need to write a separate rule that would define joint employment under the FLSA.

According to Acosta, that new rule may soon be on the way.

Until then, remember that it is illegal to take a fishing boat into the danger zone of the Potomac near the Naval Surface Warfare Center while they’re firing guns, aerial bombing, using directed energy, or other hazardous operations, unless the patrol boats let you in. (33 USC §3 & 33 CFR §334.230(a)(2).)

Thanks, @CrimeADay!

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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NLRB Proposes New Definition of Joint Employer; 60-Day Comment Period Starts Now

NLRB logoWhen seeking musical inspiration for a post on the NLRB’s joint employment standard, look no further than the Barenaked Ladies’ 1994 album, Maybe You Should Drive. Like an on-again, off-again relationship, the Board keeps changing its joint employment standard. Between 2015 and today, the test has been, at various times:

  • Direct control (pre-Browning-Ferris, 1984-2015),
  • Indirect control (Browning-Ferris, 2015-Dec. 2017),
  • Direct control (Hy-Brand overrules Browning-Ferris, Dec. 2017-Feb. 2018), and
  • Indirect control (Board vacates Hy-Brand, restoring Browning-Ferris, Feb 2018-present).

But with this newest change coming in the form of a proposed regulation, the proposed change can be expected, once it’s enacted, to remain in effect long term.

Cue the Barenaked Ladies, in “Everything Old Is New Again” (1994):

Everything old is new again, everything under the sun.

Now that I’m back with you again,

We hug and we kiss, we sit and make lists,

We drink and I bandage your wrists.

The proposed new standard would make it much more difficult to establish that a business is a joint employer.

The new test will help franchisors, who need to protect their brand and marks, but do not exercise day-to-day control over hiring and scheduling of a franchise owner’s employees. The new test will help businesses that subcontract labor and that want to ensure certain tasks are performed but do not exercise day-to-day control over how the work is performed or over how subcontractor hires, schedules, and supervises its employees.

In a Notice of Proposed Rulemaking released late last week, the NLRB proposes a new regulation to interpret the National Labor Relations Act. New 29 CFR §103.40,which would define joint employer.

Under the proposed regulation, an employer may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.

There’s a lot packed into that definition:

  • The proposed joint employer must share or codetermine the workers’ terms and conditions of  employment;
  • These terms have to be essential terms of employment, such as hiring, firing, discipline, supervision, and direction;
  • It is not enough to have the right to control these terms; the proposed joint employer must actually exercise this control;
  • The control must be direct, substantial, and immediate; and
  • It is not sufficient to exert control that is limited and routine.

“Limited and routine” control means directing another business’s employees as to what work to perform, or where and when to perform it. Under the new rule, that will not be enough to show joint employment. Control that is not “limited and routine” would include providing direction on how to do the work — in other words, supervision.

For those of you asking, “So what? Who cares?” (my parents, for example), here’s why the change matters.

Under the new rule, a business that retains another company to perform work but has no control over that company’s hiring, compensation, scheduling, or supervision:

  • Will no longer be obligated to collectively bargain with that other company’s unionized workers;
  • Will no longer be held jointly liable for that other company’s unfair labor practices; and
  • Will no longer be drawn into collective bargaining or unfair labor practice disputes with that other company’s employees.

It’s a big deal. Unions won’t like it since the new rule will reduce their influence, but the new rule is a common sense, pro-business proposal that will add predictability and certainty to economic and legal relationships.

So what’s next?

There is a now a 60-day period for comment. The Board will then have the opportunity to consider the comments and revise or reject the proposed rule.  The soonest the rule can be implemented is late 2018 but more likely early 2019.

Then, assuming the rule is implemented, we go back to the standard that existed before Browning-Ferris, but with a lot more clarity and permanence. Everything old is new again. But this time, the change should be long-term since it will be memorialized in a  federal regulation.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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