Friday, February 6, 2015

Are You a Joint Employer? Are You Sure?

Yesterday, the House Education, Labor and Pensions Committee held a hearing about the National Labor Relations Board’s position on joint employment.  It was a fairly friendly hearing, but it’s clear that there are differing views about when two (or more) entities are joint employers.

A variety of circumstances could result in joint employment.  As we saw in late December in the McDonald's complaints, the General Counsel of the NLRB argues that the franchisee-franchisor relationship can result in joint employment of franchise employees.  Staffing agencies, consulting agencies, and subcontractor relationships may all suggest joint employment as well, and unfortunately, entities can become joint employers without realizing they are doing so.

Liability for joint employment is anticipated in a number of state and federal laws.  The EEOC defines joint employers as “two or more employers that are unrelated or that are not sufficiently related to qualify as an integrated enterprise, but that each exercise sufficient control of an individual to qualify as his/her employer.”  Under the Fair Labor Standards Act, some courts use the economic realities test” to determine joint employment, while others have crafted different standards that can vary widely from court to court. To determine whether joint employment exists and, therefore, whether joint liability may exist, a complicated legal analysis is often required.

Organizations should be alert to situations in which they might be joint employers. In general, they should consider the following factors:

1.         Control.  Control over the work is usually the single largest factor used to determine joint employment.  Who gives the worker direction?  Is it Company A, Company B, or a mixture?  If control and direction come from more than one source, which entity is giving direction on the actual work of the individual?

2.         Decision-making.  Which entity makes the most important decisions related to the worker? Which entity hires, fires, and evaluates performance? Because these decisions directly and significantly impact the employment status of the worker, they will be important to the determination of joint employer status.  

3.         Method of Payment & Administration.   Administrative activities and recordkeeping, such as payroll and scheduling, provide evidence relevant to joint employer status.  If the maintenance of employment records, scheduling, and payroll rest with a staffing agency, for example, the staffing agency and the company the agency provides workers to may be joint employers and may both be liable to a worker if violations of employment laws occur.

As workers become more scarce and contract agencies help fill the gaps, the relationships between employers and contract agencies may well face greater scrutiny by agencies like the NLRB, EEOC, and Department of Labor.  While employers may be able to craft contracts with their staffing agencies, subcontractors, and affiliates that state clear divisions of responsibility for control, decision making, and administrative tasks, they should never assume that a good contract is all they need to avoid unwanted joint employer status. As in other areas of employment law, labels and stated intentions alone don’t determine employee status.   Federal and state agencies, as well as courts asked to interpret and apply the law, will want to know what happened in real life.

Posted by: Judy Langevin and Kate Bischoff