In a case handled by Sherman & Howard’s Labor and Employment Department, the National Labor Relations Board (“NLRB”) returned to its traditional independent contractor test, reversing the Obama Board’s 2014 decision in FedEx Home Delivery, 361 NLRB 610, and finding the Dallas/Ft. Worth SuperShuttle franchisees to be independent contractors. The Board explained that the FedEx decision improperly minimized the consideration of whether alleged independent contractors had significant “entrepreneurial opportunity” for gain and loss. In addition, the Board clarified that regulatory requirements imposed on the SuperShuttle franchisees could not be considered “control” asserted by the alleged employer. The Board concluded that in light of the franchisees’ ownership and control over their vans, their near complete freedom to independently control their schedules and accept or reject work, the absence of supervision, and the franchisees’ significant entrepreneurial opportunity, they could not be considered employees covered by the National Labor Relations Act. In a strongly-worded dissent, Member McFerran quipped “calling the SuperShuttle drivers ‘entrepreneurs’ or ‘small business owners’ doesn’t make them any less employees.” We respectfully disagree with the dissent.
On December 28, 2018, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision partially granting enforcement to the National Labor Relations Board’s controversial decision in Browning-Ferris Industries (316 NLRB No. 186 (2015), “BFI”) which radically altered the test for when separate companies can be declared “joint employers” under the National Labor Relations Act. In a 2-1 decision, the court affirmed the NLRB’s use of elements of “indirect control” over a contractor to find joint employment, but remanded the case to have the NLRB distinguish those elements from aspects of the business relationship intrinsic to company-to-company contracting. In other words, the court failed to resolve the main problem with the BFI decision—that such routine contracting provisions put all contractors at risk of being declared a joint employer with their business partners. In a searing dissent, Senior Judge Randolph pointed out that the court should not even render a decision while the NLRB is in the process of issuing a formal rule on the definition of “joint employer”. Judge Randolph argued that the majority’s opinion effectively short-circuits the NLRB’s rulemaking process, as the majority held the Agency is entitled to no particular deference on the issue of which companies may be declared joint employers. Judge Randolph pointed out that by failing to distinguish between normal business contract provisions and evidence of so-called “indirect control”, the court was creating more confusion and assuring that any eventual NLRB decision would return to the court on appeal. The more immediate question for employers, however, is whether the NLRB will now be able to return to a more rational definition of joint employment that requires evidence that two employers directly codetermine employees’ essential terms and conditions of employment. Perhaps we will have that answer by 2020.
By Bernie Siebert
Yesterday the newly constituted Trump Board overruled the Obama-era joint employer test that has caused confusion and legal uncertainty for many employers. Hy-Brand Industrial Contractors, Ltd. The Board’s test in the much criticized Browning-Ferris Industries case was that “direct and immediate” control was not necessary to establish that two employers were “joint employers.” Rather, so long as there was the mere existence of reserved joint control, joint employer status could be found. This test caused problems for franchise relationships, determining which employer had a bargaining obligation, and whether a secondary boycott existed. The Trump Board overruled Browning-Ferris and returned to the direct and immediate control test. Return to the old test should again provide employers with the clarity necessary to determine their legal standing and obligations.
Wednesday the DOL announced that it was withdrawing two critical pieces of “guidance” issued under the Obama administration. The first piece addressed the DOL’s rather narrow view of who is an independent contractor (S&H Blog Post: DOL Says Employers Are Morons). The second piece established an extremely broad view of joint employment (S&H Blog Post: Joint Employment Wage/Hour). Taken together, the guidance pieces made it much harder for employers to navigate through the gig economy. The withdrawal of these guidance pieces obviously helps employers who use contractors or have potentially joint employer relationships. But the DOL did not suggest what enforcement strategy it may follow in the absence of these guidances, so the impact in real-world terms remains to be seen. Nonetheless, this provides some indication that our new Secretary of Labor is moving forward, at least in some respects, to reverse some of the prior administration’s approaches.
By Bill Wright
The Fifth Circuit Court of Appeals expanded on the EEOC’s guidance on a staffing company’s liability for its client’s discriminatory decisions. According to the court, a staffing company may be liable when a client asks the staffing company to remove a particular assigned employee, if the staffing company knew or should have known that the client’s decision was discriminatory. Nicholson v. Securitas Security Servs. USA, Inc., No. 15-10582 (5th Cir. July 18, 2016). In this case, the client asked the staffing company to remove an 83-year-old receptionist, saying that the receptionist could not perform new technology-related tasks. There was no evidence that the staffing company knew the client’s decision was based on discriminatory animus, but there was evidence the staffing company should have known: the staffing company did not verify the client’s story. The staffing company simply took the client’s word for it that the receptionist couldn’t do the job, even though the staffing company “generally” asked for the employee’s side of the story and “normally” addressed job performance with counseling rather than immediate termination.
We’re now used to the idea that a staffing company and its client will be joint employers for some purposes. Expect to discuss the reasons for joint employment decisions.
By Andy Volin
The Department of Labor’s Wage and Hour Division (“WHD”) has issued new guidance on joint employer status. The guidance re-emphasizes that companies that share workers with associated companies, or that subcontract work to other companies, may have compliance responsibility for wage and hour laws. In other words, using a staffing agency or professional employer organization (“PEO”) to provide workers may not protect a company from wage hour liability. Administrator’s Interpretation No. 2016-1, SUBJECT: Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act.
The guidance discusses in depth the concept of joint employment under the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). These statutes use a broad “economic realities” test to determine employment status. For example, in a “horizontal joint employment” situation, two or more associated companies each have an employment relationship with a worker. A common scenario is a cook who works at two restaurants that have a common owner. In this situation, the cook’s work hours at each restaurant must be combined for purposes of determining overtime, and both restaurants have liability for the proper payment of wages. In contrast, in a “vertical joint employment” scenario, a worker is employed directly by a contractor but provides services to another company. An example of this situation is a maid service that contracts to clean a hotel. In this context, the economic reality is that the maid is dependent on the hotel for her work, and so, the hotel is a joint employer with the maid service for purposes of compliance with the FLSA.
Employers must examine the nature of their relationships with other companies, such as affiliated businesses that share employees, or staffing agencies. Will the WHD find the companies to be related? Alternatively, are your contracted workers actually dependent on you maintaining the relationship with their direct employer? If so, you should see that they are properly paid, because you may be deemed responsible if they are not.
By Bill Wright
In EEOC v. Global Horizons, Inc. et al., No. CV-11-3045-EFS (E.D. Wash.), the court determined that the EEOC had conducted a shoddy administrative investigation and lacked a factual basis to pursue its theory of joint-employer liability against the defendants. The court invited the defendants to petition for attorney fees. They requested over $1,200,000. The court hasn’t yet finished the math. (It asked for more information about reasonable attorney rates in certain parts of the country.) But it looks fairly certain that the EEOC will have to pay over $1,000,000. I hear taxpayers all over the U.S. yelling, “Ouch!”
For its part, the EEOC argued that such a large award of attorney fees will discourage it from pursuing Title VII cases in the future. The court responded that its aim was “to discourage the filing of groundless and frivolous Title VII lawsuits – lawsuits which place a significant burden on the employer, both of time and expense, to defend against the serious Title VII charges.” That’s a lesson the EEOC could take to heart. But will it?
In a widely dreaded reversal of more than 30 years of precedent, a majority of the NLRB found that an alleged joint employer does not have to actively “codetermine” or control terms and conditions of employment in order to be considered the “employer” of its contractor’s employees. Under the standard announced yesterday, the NLRB will require only that a joint employer “possess the authority to control” a term or condition of employment. It simply will not be necessary for a union to present any evidence of the exercise of that authority. Accordingly, the NLRB acknowledged that even commercial agreements could be utilized to prove that, for example, a franchisor is the “joint employer” of a franchisee’s employees (watch out McDonalds!)
By Bill Wright
This FMLA case gives the wrong impression. Cuellar v. Keppel Amfels, LLC, No. 12-40165 (5th Cir. September 9, 2013). In this case, the company “leased” workers from a staffing agency. When one worker went out on maternity leave, the company replaced her. (The staffing agency was the primary employer and provided the leave.) When she was done with her leave, the company failed to call the staffing agency to ask for her back. Consequently, she was not reinstated to her old position. In her inevitable lawsuit, the worker claimed the company and the staffing agency had a standard practice: the staffing agency did not send any workers out if the company didn’t ask for them. The worker argued through this practice, the company interfered with the staffing agency reinstating her at the company. The court disagreed. FMLA regulations limit the possible claims against a “secondary employer” that obtains workers from a “primary employer,” such as a staffing agency. The secondary employer does not have the responsibility to pursue reinstatement for the employee.
This case makes the company’s FMLA duties seem easy, BUT the case on appeal did not question whether the company and the staffing agency were joint employers or whether the company was the secondary employer and the staffing agency the primary employer. The case also did not include the staffing company as a defendant. All the issues that will embroil you in litigation were left on the cutting-room floor when the worker developed her appeal. When you lease your workers, watch that lease agreement, as well as your pattern of dealing with the staffing agency.