Department of Labor withdraws joint employer guidance

published in McAfee & Taft EmployerLINC | June 23, 2017

By Kristin Simpsen

A joint employer relationship can arise in circumstances where an individual performs work for two entities that share control over how that individual performs his/her work. Although joint employment relationships are most commonly found with companies that use temporary employees, staffing agencies or independent contractors, it can also apply to franchisor-franchisee and contractor-subcontractor relationships. When determining whether a company is a joint employer, agencies and courts will consider factors such as the supervision of day-to-day activities, control of assignments and hours of work, hiring and firing authority, and the provision of benefits and administrative services, such as payroll and withholding. If an entity is found to be a joint employer, there can be substantial liability under a variety of employment laws.

Under the Obama administration, the U.S. Department of Labor issued informal guidance specifically addressing this issue. In 2015, it released an Administrator Interpretation (“AI”) regarding misclassification of independent contractors. In 2016, it issued an AI regarding joint employment, specifically of migrant and seasonal agricultural workers. The 2016 AI broadened the definition of “joint employment” and noted that the ““[t]he concept of joint employment, like employment generally, should be defined expansively under the FLSA and MSPA.” The 2015 AI stated that “most workers are employees under the FLSA’s broad definitions.” These AIs were intended to provide notice that the Department of Labor would define the term “employee” broadly, which more than likely would increase the number of joint employment relationships it would find.

On June 7, 2017, new Labor Secretary Alexander Acosta issued a short, three-sentence press release announcing the withdrawal of both the 2015 and 2016 AI. The rescission of this guidance shows the Trump Administration’s desire to return to the more traditional and conservative view of employment relationships – one that focuses on the actual exercise of direct and immediate control of employees. Many employers view the withdrawal of the AIs as a victory for employers.

While the DOL’s recent announcement is noteworthy, it does not affect actions taken by other agencies. For example, the National Labor Relations Board has taken the position that franchisors could be held liable for labor violations of franchisees under a joint employment theory. That case is currently on appeal.

Takeaways for employers

It is important for employers to note that there remain conflicting standards and interpretations under state and federal laws with respect to both independent contractor and joint employer status, and that the withdrawal of the 2015 and 2016 DOL guidance does not change the legal responsibilities of employers with regard to these types of employment relationships. The Department of Labor “will continue to fully and fairly enforce all laws within its jurisdiction including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.” Employers are encouraged to review any independent contractor or contingent worker relationships to ensure those workers are sufficiently independent and/or controlled by another entity so as to decrease the chance of a joint employment finding.