On April 1, 2019, the U.S. Department of Labor (DOL) announced a proposed rule that would revise and clarify the responsibilities of employers and “joint employers” to employees in certain “joint employer” arrangements. The proposal, if adopted, will be the first substantial change to DOL regulations on this topic since 1958. From a workplace safety perspective, how employees are classified is significant in terms of which entity has responsibility for employee training, provision of personal protective equipment, worker supervision and discipline, and liability for safety violations.
The proposed rule comes in the form of amendments to the Fair Labor Standards Act (FLSA). The FLSA allows joint employer situations where an employer and a joint employer are responsible for the employee’s wages. The U.S. Department of Labor states that this proposed rule would “ensure employers and joint employers clearly understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek.”
While ostensibly addressing responsibilities to pay the minimum wage and overtime, the proposed rule “spills over” into definitions of joint employer that are used by OSHA to determine liability for safety standards violations. For example, if companies are found to be “joint employers”, actions taken by one of the “joint employers” can potentially be imputed to the other employer(s) for purposes of finding that a “recognized hazard” exists with a feasible abatement action. Employers should also be concerned about the possible expansion or imputation of corporate-wide settlement agreements to other “joint employers” regarding the risk of “repeat” violations.
The Department of Labor proposes an allegedly clear, four-factor test for the determination of joint employer liability. The Department would consider whether the potential joint employer actually (not theoretically or potentially) exercises the power to:
- Hire or fire the employee(s)
- Supervise and control the employee(s)’s work schedules or conditions of employment
- Determine the employee(s)’s rate and method of payment; and
- Maintain the employee(s)’s employment records
The Department of Labor’s proposal also includes several examples to further clarify the joint employer status.
As many employers are aware, the joint employer concept has been evolving in recent years. The evolution has been driven by a 2015 decision of the National Labor Relations Board (NLRB) (which has a work-sharing agreement with OSHA for whistleblower protections and prosecutions) in the Browning-Ferris line of cases. The Obama-era Department of Labor joint employer policy had been developed and released in response to that decision, which made franchising corporations responsible for OSHA violations and other labor law violations made by the franchise businesses. The 2015 policy provided OSHA with some new enforcement powers against companies found to be “joint employers.” OSHA announced at the time that “a joint employer standard may apply where the corporate entity exercises direct or indirect control over working conditions or has the unexercised potential to control working conditions based on economic realities.” Although the policy remains in effect, as a practical matter, OSHA looks at the following factors when determining joint employer status:
- The overall relationship between corporate headquarters and the franchise
- Written documentation of corporate direction and control of the franchise
- Corporate control over the essential terms and conditions of employment of the employees working at the franchise; and
- Corporate control over the safety and health policies and procedures at the franchise.
The first major development in the Trump administration involving joint employers came in June of 2017 when former Labor Secretary Acosta withdrew the 2015 DOL guidance memorandum. It was removed from the DOL and OSHA websites. Nevertheless, the DOL stated that removal of the joint employer guidance memo from the websites did not change legal responsibilities of employers based on existing case law.
The confusion becomes significant given the steady growth of temporary workers and contract workers. The statistics establish that staffing and temporary workers are “over-represented” in fatal and serious accidents as compared to their overall presence in the workforce. Under the multi-employer worksite doctrine which was addressed in 2018 by the U.S. Court of Appeals, 6th Cir., in Hensel Phelps, OSHA has authority to issue citations to the host employer, the staffing agency, or both employers, for temporary workers exposed to safety hazards.
For employers with worksites that might fall under the changing definitions of “joint employer”, this issue should be monitored closely in terms of DOL and OSHA activity. We will announce the results of the proposed Joint Employer Rule promptly. In the meantime, please contact a member of our Labor and Employment Section with questions or concerns.