Joint-Employer Definitions: Are You Responsible for Other Businesses’ Decisions?

Joint-Employer Definitions: Are You Responsible for Other Businesses’ Decisions?

The Federal government is pushing ahead with efforts to hold more businesses accountable for worker welfare, even if they do not directly control or supervise those workers.  That means businesses need to pay closer attention to who is considered an “employee” and how those employees are being treated. TECHPol has been following the Administration’s recent joint-employer decisions and regulatory activity that seeks to protect workers (See blogs:  2016 Small Business Forecast: A Flurry of Federal Regulations and Big Changes to Joint-Employer Status:  Are Business Relationships Threatened?).  Last week, the Department of Labor (DoL) issued new guidance on who is considered a joint employer and what that means in terms of who is responsible for employees. 

Why is there a need for new guidance?

The Department of Labor explains that there is a growing trend of businesses outsourcing work and using different staffing models by “sharing employees or using third-party management companies, independent contractors, staffing agencies, or labor providers.”  Specifically, it points to examples of such employment relationships in “the construction, agricultural, janitorial, warehouse and logistics, staffing, and hospitality industries.”   The DoL believes that workers in these scenarios have more than one employer — or joint employers — and that those employers have obligations (e.g., minimum wage and overtime) under Federal statutes that they need to understand and better comply with.  Thus, the clarification is necessary.

How can businesses determine if they are joint employers?

The Department of Labor says there is no change in policy — that this guidance is just an attempt to aid compliance. However, some business groups feel this is a change.  If you read the guidance, it provides examples or tests of what constitute joint employers.  For example, there are “horizontal” employer relationships where two businesses that separately employ a worker may have an association or be related in a way that makes them joint employers.  There are also “vertical” relationships where an employer might hire another business or subcontractor to do work and those employees are considered employed by both even if there is not control or supervision by one employer, because a degree of economic dependence exists.

How is the guidance related to the NLRB’s change in the joint-employer definition?

The NLRB is generally responsible for policies that affect workers’ rights to organize.  The Board expanded the definition of joint employer to capture not only those with direct control over employees, but also some that have indirect or un-exercised control or supervision. The DoL oversees the enforcement of other labor laws, like minimum wage and overtime, and their guidance applies a broader interpretation of employment that relies on “economic realities” rather than control of workers.

Why is it important to consider the DoL’s guidance?

This action on the part of DoL, in the wake of NLRB’s decision as well as some activity on joint-employer status at the Occupational Safety and Health Administration (OSHA), signals that the Administration, is focused on and, frankly, wary of the trend toward more outsourced work and the motives of employers in seeking outside companies to fulfill some of their needs.  It is anticipated that there will be an uptick in investigations by the DoL and that there will be more employers held accountable for more workers.