Blurry, Evolving Joint-Employment Guidance Tough for Employers to Navigate, Experts Say

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By Christine Pulfrey

Broad federal and judicial interpretations of joint employment seem poised to revert to earlier, narrower definitions, but in the interim employers struggle to navigate varied guidance on what the relationship means and how it is determined.

The number of states that have passed laws to narrowly define the joint-employment relationship has jumped in the past three years since recent federal regulations and rulings expanded the definition. Whether such laws ease or exacerbate employer confusion about compliance requirements and risks remains to be seen.

“Risks arising under labor and employment laws, and particularly those affecting employee pay, increase and become perceptively exaggerated when the guardrails are blurry,” which is the case with current wage and hour law regarding joint employment, Brett C. Bartlett, a partner at Seyfarth Shaw LLP’s Atlanta office, told Bloomberg BNA in a May 12 email.

States Narrow Definitions

In 2017, eight states have passed measures defining joint-employment relationships, doubling the number of states that have joint-employer laws.

Arizona ( H.B. 2322 ), Arkansas ( S.B. 695 ), Georgia ( S.B. 277 ), Kentucky ( S.B. 151 ), North Carolina ( S.B. 131 ), North Dakota ( H.B. 1139 ), South Dakota ( S.B. 137 ) and Wyoming ( S.B. 94 ) signed into law joint-employer measures, and all but Georgia’s law are to take effect by Aug. 31. Georgia’s law took effect Jan. 1.

Alabama ( H.B. 390 ) and New Hampshire ( S.B. 89 ) bills are under consideration. Virginia passed a bill ( H.B. 1394 ) but then was unable to override the governor’s veto. Five states introduced bills that were not signed into law: Mississippi, Missouri, Nebraska, South Carolina and Washington.

Before 2017, eight states had signed into law measures clarifying that a franchiser is generally not the employer of its franchisees or its franchisees’ employees: Indiana , Louisiana , Michigan , Oklahoma , Tennessee , Texas , Utah and Wisconsin .

“While legislation differs from state to state, generally they all establish that an employee of a franchisee is not an employee of the franchiser,” said Jenna Weisbord, communications and marketing manager for the International Franchise Association, which supported enactment of the state laws and is pushing for Congress to enact federal legislation.

“There is nothing a law-abiding business owner can do to assure themselves they won’t run afoul of a joint-employment charge under any number of state and federal statutes,” said Michael Layman, IFA’s vice president of federal government relations.

It is unclear whether, under a Feb. 24, 2017, executive order ( E.O. 13777) to repeal or replace burdensome regulations, the Labor Department would revise or revoke a Jan. 20, 2016, Administrator’s Opinion ( AI 2016-1) that broadened the joint-employment relationship to include businesses that use employees of third parties.

Meanwhile, employers also are affected by recent cases that broaden the joint-employer relationship.

A federal appeals court ruling is pending on whether to reject a standard for determining joint employment that was adopted by the National Labor Relations Board in 2015 and that allows a joint-employment relationship to exist even if the employer exercises only indirect control over workers ( Browning-Ferris Indus. of Calif. Inc. v. NLRB, D.C. Cir., No. 16-1028, oral argument 3/9/17 ).

In oral arguments before a federal appeals court March 9, the NLRB defended its stance that companies can be joint employers if they “share or co-determine” the employment terms of a group of workers. The standard overturned precedents that said employers must exercise direct and immediate control over workers to share legal responsibility.

Another recent ruling said that the determination of joint-employment liability under the Fair Labor Standards Act must be based on the circumstances of the whole activity.

In the Fourth Circuit ruling, “a court must determine whether alleged joint employers are not ‘completely disassociated’ with respect to the employment of a particular employee,” Bartlett said. “If they are not completely disassociated, then they are joint employers” ( Salinas v. Commercial Interiors Inc., 2017 BL 21081, 4th Cir., No. 15-1915, 1/25/17 ).

“While other courts across the land seem to be taking heed of the winds of narrowing change back to something that would not make employers presumptively responsible for the violations of their vendors and affiliates, the Fourth Circuit’s ruling (which would apply to all employers within that Circuit) went the complete other direction,” Bartlett said.

The lesson from Salinas and similar rulings is that “businesses need to be diligent and careful in establishing barriers between themselves and other entities” lest the third parties with whom they work are perceived to be joint employers, Bartlett said.

“There are some circumstances that will almost certainly lead a court to conclude that a joint employment relationship exists, even when diligent and careful steps have been taken to keep businesses’ interests and employees separate,” Bartlett said. “Because of this, businesses should make sure that the entities with which they work—their affiliates, their subsidiaries, their staffing companies and their vendors, among others—maintain clean bills of health around pay-law compliance.”

Contracts and agreements should include provisions clarifying that one business’s workers are not employed by the other and that there is indemnification for fees, costs and liabilities stemming from claims or violations of law, Bartlett said.

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