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JOINTLY LIABLE? DEPARTMENT OF LABOR PROPOSES NEW ‘JOINT EMPLOYER’ TEST

QUESTION: I am a manager at a business that regularly hires workers through a staffing agency to work on projects, alongside our direct employees. One of the staffing agency workers recently sued the staffing agency – and our company – for violating overtime laws. While we supervise the staffing agency workers, set the schedule, and can fire any slackers, they are hired by and paid by the staffing agency. It is the staffing agency’s responsibility to make sure they get any overtime pay. How come we are being sued for something that is the staffing agency’s responsibility?

ANSWER: Under federal law, two employers can be viewed as joint employers – both responsible for upholding an array of laws that include federal wage and hour laws, and discrimination laws.

The problem, recently, has been that the test for determining whether employers are joint employers has been changing. In a 2015 decision, Browning-Ferris v NLRB, the National Labor Relations Board had held that a joint employment relationship could exist even where one employer exercised only “indirect control” over the way in which work was performed. The case involved a recycling company that hired a staffing agency to provide workers to sort through recyclables, prevent jams, and clean up around the sorting areas. Although the workers were hired and paid by the staffing agency, which also provided their benefits, paid unemployment, tracked their hours, and generally supervised workers on site, the recycling facility had to right to “reject or discontinue the use” of any staffing agency workers, and determine, generally, whether any overtime would be required and had a role in determining the rate of pay (the staffing agency workers could not earn more than the recycling center’s direct hires). The NLRB ruled a joint employment relationship existed.

The NLRB reversed that decision in 2017, but that reversal was thrown out because one of the NLRB commissioners – a Trump appointee – had a conflict of interest. In late December last year, the D.C. Circuit Court of Appeals overruled the Browning-Ferris  decision in favor of a standard that requires more direct control. Early this month, the Department Labor attempted to clarify the status a bit more. It issued a Proposed Rulemaking¸ which is likely to go into effect in May or June.

The proposed test has four factors to be examined in determining whether a supposed joint employer actually exercises the power to do the following:

• hire and fire the employee;
• supervise and control the employees’ work schedules or conditions of employment;
• determine the employees’ rate and method of payment;
• maintain the employees’ employment records.

The question remains how to balance each of these factors. The Department of Labor, in its announcement of the proposed rule, provided several examples to help employers determine their relationship to the people who work for them.

Unfortunately, not one of the examples provided closely mirrors the situation you describe. The examples that are most akin to yours involve situations in which contract employees or staffing agency employees are supervised by the company to which they are assigned, and the company to which they are assigned by the agency or contractor also determines the employees’ hours and the conditions of employment.

It is thus likely – but still not clear! — that you and the staffing agency are joint employers, and both liable for ensuring that employees are paid for the hours worked.

Until the law on what constitutes a joint employment relationship is clarified further, employers who believe they might be joint employers, would do well to assure that their joint “partner” is following the law.

The lawyers at GWINN LEGAL PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinnlegal.com.

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ASK THE LAWYER
By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
GWINN LEGAL PLLC
901 Wilshire Drive, Suite 550
Troy, MI 48084
(248) 247-3300
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[email protected]
www.gwinnlegal.com