In the past few years, under the Obama Administration we saw the definitions of “joint employment” and “employee” expand. In its Administrative Interpretation 2016-01 issued in January 2016, the DOL took the position that “[t]he concept of joint employment, like employment generally, should be defined expansively under the FLSA and MSPA.” It also differentiated between “horizontal” joint employment and “vertical” joint employment.”( Click here and here for review.) In July 2015, the DOL issued AI-2015-1, in which it also expressed an expansive view of “employment” with respect to worker classification. (Click here for review on that.) Specifically, it said that “most workers are employees under the FLSA’s broad definitions”, thus creating a presumption of employment for most workers. Last week the DOL withdrew both those Administrative Interpretations. What happens now? Read on and we’ll explore…
Let’s first look at why the DOL issued the Administrative Interpretations in the first place. Under the DOL’s Wage and Hour Division Administrator, David Weil, the premise that the “fissured workplace” necessitated these AI’s. You may be asking yourself “What in the world is the fissured workplace premise?” Simply put, it states that certain arrangements such as franchising and use of independent contractors and temporary employees cause more wage and hour violations. Basically, the AI’s expanded the definition of “employer” and “employee” for liability purposes. The concern was that many employers have exploited workers, using the “independent contractor” or the temporary worker or even the franchise model to avoid paying for workers compensation coverage, offering health benefits complying with minimum wage and overtime tax withholding requirements.
Many employers were understandably concerned or even upset about these two Administrative Interpretations–in addition to NLRB’s expansive positions on employment relationships. The expanded definition of “joint employment” certainly poses a threat to the very underpinnings of the franchise model. As for the worker classification issue, there are some instances in which the worker actually wants to be an independent contractor and not an employee. These Administrative Interpretations were felt by many to go too far.
Does the withdrawal of these two AI’s mean anything, and if so, what? The answer is that it depends on what if anything follows this action. Labor Secretary Alex Acosta in his confirmation hearing stated that with respect to defining joint employment he prefers the “direct and immediate control” standard, or the “traditional” view as opposed to the “right to control”. Right to control means that as long as a business has the right to control an employee’s work and work conditions it is a joint employer even if it doesn’t actually do so. The traditional view looks to who actually controls the worker, and his/her work and work conditions.
Now, I don’t want to be a wet blanket here (does anybody ever really want to be a wet blanket?) but before we get too excited let’s take a look at where things stand now. While Secretary Acosta’s own position, coupled with the withdrawal of these AI’s (which by the way are not actually law, but a statement of the DOL’s position at that time) seem promising to employers, they really do not resolve the issue of who is or is not a joint employer. Why is that? First, since the AI’s are not law their withdrawal is not a change in any law. Second, the NLRB as of now still applies the more expansive definition of an employer in determining joint employment. The NLRB will still look at who has the right to control one or more employees’ work or work conditions rather than who actually does so. At best we may therefore have two different standards being applied simultaneously by two separate agencies. For employers who do not wish to be hung up in these types of disputes, it could still effectively necessitate application of the more expansive definition.
Similarly, since the NLRB applies an expansive definition of who is an employee, it also takes the position that many workers classified as independent contractors are really employees entitled to protection under the National Labor Relations Act. So once again, even though the DOL may have withdrawn its Administrative Interpretation stating that most workers, regardless of how they are actually classified are really employees, the NLRB still appears to be holding fast to that position.
So what should you do now? Assuming you have been complying with all labor and employment laws and all expanded definitions up until now, your best bet might be to wait it out for now. The DOL may be relaxing its position on who is or is not your employee. That said, the NLRB, as of now, is not. Most importantly however, the laws themselves have not changed. It is still illegal to classify someone as an independent contractor if your relationship with your worker(s) sufficiently resembles that of an employer and employee. If you retain the right to control the work and work conditions of any one or more people rendering services to you, the NLRB will still consider you their employer. It is likely still in your interest to be guided accordingly. Even under the traditional standard, however, if you have someone working for you through a temporary staffing agency or even a contractor’s or affiliate’s employee may, you may still be a joint employer with the attendant responsibilities.
As you can see, this is not exactly a straightforward inquiry. Proceed with caution, and if you have any doubts at all, reach out to your friendly employment counsel.
I think we’ve said enough about that topic for now. See you next week!
Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.
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