When to Embrace Joint Employment, and When to Run Like Hell (Pink Floyd, 1979)

Joint employment risks dangers choices joint employer IMG_1101Life is full of serious questions. For example, Should I stay or should I go? (The Clash, 1982). Or, Will you love me forever? (practically every song ever, but for now, we’ll go with Meatloaf in Paradise by the Dashboard Lights, 1977).

When engaging non-employee workers, businesses must also confront a serious question: Embrace joint employment, or try to avoid it? (Frank Zappa confronted a different kind of serious question in Why Does It Hurt When I Pee?, 1979, but that’s beyond the scope of this blog.)

Many of my posts have been geared toward strategies for trying to avoid joint employment. There is another way, though. Sometimes, it may be better to embrace joint employment. But know the pros and cons.

Here are some things to consider:

Pros:

So, you’re thinking of embracing joint employment? That’s certainly an option. If you go in this direction, you can exert all the control you want over your non-employee workers. Tell them how to do the work, supervise them, discipline them, make them follow all your rules. Let them have a company email address and fancy name badge. If the workers are going to be joint employees anyway, there’s no reason to hold back.

You still have the benefit of having another company handling the administrative burdens like payroll and onboarding. You avoid adding to employee headcount, and you probably maintain some extra flexibility in setting staffing levels if your business is experiencing ebbs and flows.

Cons:

The biggest downside to joint employment is the risk of joint liability for errors you didn’t make. Did the staffing agency underpay overtime? Or miscalculate hours worked? Or fail to pay for time worked off the clock? Or hire illegal aliens? Or fail to file proper tax forms?

You get the picture. If you are a joint employer, your business is equally responsible for the consequences of any of these errors, even though you had nothing to do with them.

Yes, you can include an indemnity provision in your contract, but that should provide only limited comfort. Is the staffing agency adequately insured? Will they stand behind their promise? Do you want the hassle of defending an audit or lawsuit, then trying to rely on a contract to recover your losses? (Read more on the dangers of joint employment here.)

Joint employment can still be full of nasty little surprises, even when you go into it with your eyes open to the risks.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Consultants Can Take Steps to Avoid Joint Employer Liability

Joint employer ;liability management companiy consultant IMG_1097Companies in distress sometimes retain management consultants to try to turn them around. Sometimes the plan works, sometimes not. When the turnaround effort fails and the company shuts down, can the management company be held liable as a joint employer?

This issue arose recently in a WARN Act case. The federal WARN Act requires an employer, before ordering a plant shutdown or mass layoff, to provide 60 days’ notice and pay to its employees.

Here’s what happened. A nursing home with multiple Medicare and Medicaid violations retained a consulting firm to try to solve its many problems. The consulting firm resolved most of the issues, but one sticky wicket remained, and the nursing home abruptly decided to shut down. The home did not provide the 60 days of notice required under the WARN Act, and its employees filed suit, seeking 60 days of pay.

Because the nursing home was bankrupt, however, the employee also sued the management company, arguing that it was a joint employer and therefore shared responsibility under the WARN Act to ensure that employees received 60 days’ notice and pay before the shutdown.

Can a management company be liable when its client orders a plant shutdown without providing sufficient WARN Act notice? In theory, yes. In this case, no.

The answer in this case turned on an analysis of five factors, which seek to determine whether two companies are either a single common employer or joint employers. Either conclusion would have made the management company jointly liable for the WARN Act violation.

The five factors that would suggest joint liability are:

  • common ownership
  • common directors and/or officers
  • de facto exercise of control
  • unity of personnel policies emanating from a common source
  • the dependency of operation

Other factors may be considered too, and the test is a balancing test. There is no set number of factors that must be satisfied. These factors are listed in the WARN Act regulations. Notably, these are different factors than those used in joint employment tests under various other statutes.

The court ruled that the management company was not jointly liable because (a) it was sufficiently distinct from the nursing home, and (b) it did not exercise enough control over the nursing home’s employees and policies. The court also noted that the management company did not “order” the closing of the nursing home and, under the language of the WARN Act, that was another factor weighing against joint liability.

The lesson here for management companies or consultants is to remember the potential for joint employment liability.

Tip: Management companies wishing to limit their exposure to joint employment claims should try to avoid exercising direct control over its clients’ employees and policies. Instead, make recommendations and have the client/employer adopt and implement those recommendations.

Contract language can also be used to protect the management company. A contract can clarify that the management company can only make recommendations relating to the client’s policies, practices, and employees; but ultimately, all decisions are to be made by the client/employer.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Appeals Court Slams NLRB Joint Employer Finding in Landmark CNN Case, But Ruling May Prove Hollow

NLRB CNN joint employment Browning-Ferris overrule Second Circuit Court of Appeals IMG_1094A federal Court of Appeals has ruled that the NLRB cannot abruptly change its definition of joint employment without sufficient explanation. This decision (the CNN case) rebukes the NLRB for its initial attempt, in 2014, to expand the definition of joint employment.

This decision does not, however, address the Browning-Ferris case that followed in 2015, in which the Board similarly expanded the definition of joint employment but, that time, with an expansive explanation and justification for doing so. Browning-Ferris in on appeal too.

Here’s what happened.

Back in the good old days, when TV was pure and the world had not yet been exposed to Janet Jackson’s halftime nipple, CNN used to contract with an outside company who supplied technicians for its TV production. CNN’s camera operators, sound technicians, and broadcast engineers were employees of a third party, and they were represented by a union.

In late 2003, just a few months before that fateful Super Bowl wardrobe malfunction, CNN decided to bring that work in house. It set up a hiring and interview process and then directly hired its own technicians, severing its ties with the third party.

That made the union mad.

The union claimed the decision was motivated by anti-union animus and filed an unfair labor practice charge. The NLRB ultimately agreed with the union, determined that CNN was a joint employer of the third party technicians, and therefore had to respect the union status of the technicians. CNN could not hit the reset button without bargaining.

There was more to the decision too, with findings of anti-union statements by supervisors and a question about whether CNN was a successor employer (which is not the same thing as being a joint employer), but for our purposes, let’s focus on the joint employment piece.

Before the Board’s CNN decision, the legal standard for joint employment under the NLRB (remember, different laws have different standards) required “direct and immediate control.” In the CNN decision, the Board inexplicably abandoned that standard and ruled that two separate entities are joint employers of a single workforce if they “share or codetermine those matters governing the essential terms and conditions of employment.”

“Share or codetermine” is much looser than “direct and immediate control.” Think of your teenage children. You may try to “share and codetermine” whether they have a party at your house when you are out of town on business, but you have no “direct and immediate control” over the matter. At least not while it happens. (Purely hypothetical. My kids didn’t do this. Kids, if you are reading, DON’T do this!)

This case has been crawling through the courts for years, but finally last week, the Second Circuit Court of Appeals ruled that the NLRB could not simply switch the test without explaining itself. On that basis alone, the Court rejected the conclusion that CNN was a joint employer of the third party technicians.

So what does this mean for Browning-Ferris and the vastly expanded definition of joint employment that the Board instituted in that case?  Unfortunately, nothing.

In contrast to the CNN case, the Board’s Browning-Ferris decision included a lengthy and expansive discussion of the joint employer standard and why the Board — like in Sympathy for the Devil, “saw it was a time for a change.”

The Browning-Ferris case is also on appeal in the Second Circuit Court of Appeals (the same appellate court that just issued this decision) but will be heard by a different panel of three judges. A decision in that case is expected in the next several months.

For now, the Browning-Ferris standard — that indirect control is enough to demonstrate joint employment — remains the standard used by the NLRB.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Joint Employment Legislation Needs to Be Expansive — If It’s to Be Effective

IMG_1093On Monday, we wrote about the Save Local Business Act — proposed legislation that, if passed, would create a new definition for joint employment under the NLRA and FLSA. But would that law go far enough?

No. Not at all.

On the bright side for businesses, the law would provide some predictability in that staffing agency workers would most likely be excluded from bargaining units. It would also remedy the current unfairness that results when a staffing agency makes payroll and overtime miscalculations but the company using the workers is held responsible as a joint employer.

But much more needs to be done to provide real clarity and predictability for business owners.

First, the law fails to address who is a joint employer under other federal employment laws, including the Family and Medical Leave Act, Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Occupational Health and Safety Act. Vast uncertainty in these areas would remain.

Second, the law does nothing to address the patchwork of standards under state and local laws. Businesses are subject to those laws too, and it’s fairly common that state and local standards for determining joint employment differ from state-to-state and law-to-law.

Businesses that operate in multiple locations would still be subject to different standards under different laws in different locations. The HR Policy Association has recommended that any legislation intended to clear up the messy patchwork of joint employment standards should include federal preemption or a safe harbor provision — something to ensure that businesses can rely on one set of rules to know whether they are a joint employer or not. That would make much more sense.

The newly proposed legislation has a long way to go. It might never even get to a vote. Let’s hope, however, that the introduction of this bill is just a first step, and that through the amendment process or through a Senate bill, its shortfalls will be addressed.

Business deserve the certainty that would come from a more comprehensive piece of legislation.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Congress May Rewrite “Joint Employment” Definition

IMG_1092Congress may finally provide some clarity in determining who is a joint employer. In legislation introduced last week, the House proposed a bill that would rewrite the definition of “joint employer” under federal labor law (National Labor Relations Act) and federal wage and hour law (Fair Labor Standards Act).

The Save Local Business Act — despite lacking a fun-to-say acronym — would create a new standard for determining who is a joint employer under these two laws. The proposed new standard would allow a finding of joint employment “only if such person [business] directly, actually, and immediately, and not in a routine and limited manner, exercises significant control over the essential terms and conditions of employment….”

The definition provides examples of what are “essential terms and conditions,” including:

  • Hiring employees;
  • Discharging employees;
  • Determining individual employee rates of pay and benefits;
  • Day-to-day supervision of employees;
  • Assigning individual work schedules, positions, and tasks; and
  • Administering employee discipline.

No longer would a business be deemed a joint employer for exercising indirect or potential control, as permitted by the NLRB in its 2015 Browning-Ferris decision, which is currently on appeal. (Read more about that here.)

The bill would also overrule a recent decision by the Fourth Circuit Court of Appeals that vastly expanded the scope of joint employment under the FLSA, but only for a handful of Mid-Atlantic states.  Read more on that dreadful decision here.)

As illustrated in this colorful map, the current standard for who is a joint employer varies by which law is being applied and by where you live. The bill, if passed, would provide much-needed clarity in the law — or, at least in some of the laws. The bill would not affect the FMLA, federal anti-discrimination law, or any state or local standards. (In other words, loyal reader, you’ll still need this blog. Ha!)

The bill was introduced by Rep. Bradley Byrne (R-Ala.), but already shares some bipartisan support, with co-sponsors including Virginia Foxx (R-N.C.), Tim Walberg (R-Mich.), Henry Cuellar (D-Texas) and Luis Correa (D-Calif.).

Here’s the current bill.  It’s short, so don’t be afraid to click.

No one knows whether this proposed law will take effect or will even reach a vote (except perhaps Carnac the Magnificent!).  But we can expect significant support from the business community, which may create some momentum toward consiuderation and passage. The National Association of Home Builders has already issued a press release praising the proposed legislation.

If Congress wants to make a positive impact on businesses large and small, this bill could do it. So now let’s all sit back and watch how they screw it up.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Map Shows Joint Employment Tests Are a Mess!

IMG_8284The tests for determining whether a business is a joint employer vary, depending on which law applies. That means there are different tests under federal labor law, wage and hour law, and employee benefits law, to name a few. There are also different tests under different states’ laws.

Further complicating the analysis, there are even different tests when applying the same law — depending on where you live.

Yes, you read that right. Even though the Fair Labor Standards Act (FLSA) is a federal wage and hour law that applies across the country, federal courts in different states use different methods for determining whether a business is a joint employer under that single law.

Same for Title VII. Although this federal anti-discrimination law applies to businesses coast-to-coast, a business can be deemed a joint employer under Title VII on the West Coast and not on the East Coast. Or vice versa. Or yes in Virginia, but no in Pennsylvania. Huh?

We’ve discussed this complication in other posts — such as here and here — but not in graphic form.  Thanks to Richard Heiser, who is in the Legal Department at FedEx Ground, we now have this beauty!

(Heiser testified recently before a Congressional committee on the need for legislation to clear up the confusion.)

The map shows that, depending on where in the U.S. you live, the test for determining whether you are a joint employer varies under the FLSA (color) and under Title VII (pattern).

The map illustrates quite nicely how difficult it is for multi-state employers to determine whether they have responsibilities as a joint employer or not. Editor’s Note: Alaska and Hawaii are not to scale. All U.S. maps are required to say that under federal law. Or not, depending on where you live.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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NLRB Nominees Hate Puppies & Rainbows, Dems Claim

dog nlrb independent contractor -1674115_1920

Ok, not really, but it seemed that way.

Last week, NLRB nominees William Emanuel and Marvin Kaplan were alternatively tossed softballs and stink bombs in “questions” from Senators on the Health Education Labor and Pensions Committee (known in Congressional circles as the HELP Me Rhonda, HELP HELP Me Rhonda Committee).

I use the word “questions” in quotes because, as both Americans who have ever watched C-SPAN would know, these events are typically staged to allow Senators who have already made up their minds to hear themselves talk, rather than ask questions. Here’s an example:

Question by Sen. Elizabeth Warren:  “Your entire career has been to discourage union membership and I just don’t understand how we can rely on you to defend workers after a long career of making it harder for them to join unions.  But let me push to another point… [changing the topic].”

Or this:

Question by Sen. Warren: “You have made it clear that you have pre-judged. … I think the American people deserve better.”

I don’t think she has pre-judged the nominees though. Just sayin’.

Or this:

Question by Sen. Al Franken (whose recent book I liked, by the way): “It seems likely that big business will probably push you to change the NLRB’s modernized election rule. If you’re concerned, I just wanted to point that out. … What I’m saying is that the unions should be able to vote sooner than 35 days. [then on to another subject]”

Sen. Patty Murray accused the nominees of “anti-worker, anti-union, even anti-NLRB measures” and characterized them as having “careers of fighting against workers’ rights.”  At least she did not dress up her remarks as a question, though. These were in a pre-published statement.

Sen. Maggie Hassan, a former corporate lawyer, was one of the few Senators to ask questions relating to independent contractor misclassification and joint employment. I should note too that her questions were legitimate questions, both topically and in the sense that they included actual question marks at the end.

Sen. Hassan asked Mr. Emanuel, “If you are confirmed, what steps will you take as a Board member to curb this epidemic of misclassification?”

Ok, “epidemic” is a bit loaded, but the bar is low here. Think pre-school obstacle course low.

Anyway, Mr. Emanuel did not take the bait. He responded, “I’m not sure I would agree with the characterization that it’s an epidemic. It does occur. … It’s like any other issue that comes before the NLRB. I would consider the facts of the case.” Jab, uppercut, duck, jab.

She then asked Mr. Kaplan if he thought the recent Browning-Ferris joint employment case was wrongly decided.  In keeping with the great tradition of non-answer answers (the perfect counterpart to non-question questions!), he declined to answer, instead acknowledging that it is up to the Board to determine the proper standard for joint employment under the NLRA.

And that’s about as exciting as it got, folks!

For those without C-SPAN access, StubHub may still have seats available to future hearings.  The secondary market for labor committee hearing tickets is white hot this time of year, especially with all the tourists in D.C.  The committees overcharge for popcorn, though.  Or so I’m told.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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