There has been a lot of judicial activity involved in trying to identify an appropriate test for determining whether an employee is in fact actually employed by two different employers. This circumstance generally arises when one business (primary) engages another (secondary) and the contracting business exercises sufficient control whereby the “law” is compelled to treat them jointly.
There are several competing government agencies that confront joint employment that are using different tests to determine if the two employers are so tightly “joined” that the employee is considered employed by both employers.
The Fair Labor Standards Act
In a case based upon a Fair Labor Standards Act (FLSA) issue handed down last month from the federal Fourth Circuit Court of Appeals, the Court used an updated six factor test to determine joint employment. The test criteria used was:
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1. Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;
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2. Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to—directly or indirectly—hire or fire the worker or modify the terms or conditions of the worker’s employment;
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3. The degree of permanency and duration of the relationship between the putative joint employers;
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4. Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
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5. Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and
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6. Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment tools, or materials necessary to complete the work.
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The above set of questions comprises the latest of no less than seven different tests federal courts have used to sort out whether the employer of one entity that contracts with a second business and is providing a service to the first employer with that person, is now a co-employer of that employee for purposes of determining liability for wrongful employment actions.
The National Labor Relations Board
In a case that shook the labor relations world, in 2015 the National Labor Relations Board (NLRB) dramatically expanded its definition of joint employment using a standard that found joint employment if the contracting employer extends even “indirect control” over the second employer. Known as the Browning-Ferris decision, the NLRB changed its own test previously used to determine joint employer status from a test that found the business using the secondary business employee could be a joint employer only if they exercised “direct and immediate control” over employment matters of that second employer’s worker. The NLRB changes this test to finding joint employment can exist even when the first company only has indirect and unexercised control over the second employer’s worker.
The NLRB’s Browning Ferris case is under appeal to the District of Columbia Circuit Court of Appeals where it ran into some tough questioning during oral arguments last week. Judges from the DC Circuit pointed out that the NLRB’s new test of control would hypothetically find joint employment if for example a hotel contracted with a lawn maintenance company and chose to request the grass be cut shorter by the lawn company’s employee. This is a good sign that the pro-labor NLRB may finally find itself reigned in.
The NLRB is concerned that certain employers use contractors to avoid liability for actions under the National Labor Relations Act.
The Equal Employment Opportunity Commission
Though not the subject of any recent case, the EEOC also has its concerns about two employers exercising control over an employee. It has enforcement guidance that uses a multi-prong test to determine whether two employers should be treated as one in the event some form of a discrimination complaint is made between the two employers. This enforcement guidance document provides direction regarding the application of the anti-discrimination statutes to temporary, contract, and other contingent employees.
The factors the EEOC uses are from the US Supreme Court decision laying out its criteria for finding joint employment:
a) the firm or the client has the right to control when, where, and how the worker performs the job;
b) the work does not require a high level of skill or expertise;
c) the firm or the client rather than the worker furnishes the tools, materials, and equipment;
d) the work is performed on the premises of the firm or the client;
e) there is a continuing relationship between the worker and the firm or the client;
f) the firm or the client has the right to assign additional projects to the worker;
g) the firm or the client sets the hours of work and the duration of the job;
h) the worker is paid by the hour, week, or month rather than for the agreed cost of performing
a particular job;
I) the worker has no role in hiring and paying assistants;
j) the work performed by the worker is part of the regular business of the firm or the client;
k) the firm or the client is itself in business;
l) the worker is not engaged in his or her own distinct occupation or business;
m) the firm or the client provides the worker with benefits such as insurance, leave, or workers'
compensation;
n) the worker is considered an employee of the firm or the client for tax purposes (i.e., the entity
withholds federal, state, and Social Security taxes);
o) the firm or the client can discharge the worker;
p) the worker and the firm or client believe that they are creating an employer-employee
relationship.
As the EEOC guidance points out, the list is not exhaustive. As reported recently in the EPTW Quick Hits “The EEOC’s strategic enforcement plan for 2017 to 2021 adds a priority that it identifies joint employment as an emerging and developing issue aimed to address complex employment relationships and structures in the 21st century workplace surrounding temporary workers. The priority seeks to clarify: the employment relationship and the application of workplace civil rights protections in light of the increasing complexity of employment relationships and structures, including temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.”
The takeaway for HR is to understand that the Department of Labor’s Wage and Hour Division, the Equal Employment Opportunity Commission, and the independent National Labor Relations Board each have a different way of determining joint employment status, and employers should understand what that may mean if they are using any kind of sub-contractor to perform services for the company. With the various agencies all developing their own definitions on the employment relationship, which may not cross over to the other agencies legal requirements, this situation is confusing to all. ASE will continue to provide updates to keep our members informed on this very complex area of employment law that is seeing a lot of judicial and regulatory action.
Sources: NLRB's Joint Employer Test Comes Under Fire At DC Circ. Law 360 by Vin Guerrieri 3/9/2017; EEOC Notice Number 915.002