More States Lock Down Joint-Employer Relationship


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Employers faced with the tangle of joint-employment definitions issued by federal agencies and courts are finding some relief in state laws that are locking down their definitions.

“Almost every time we work with local franchisees, one of the themes that comes up is the declining or less overt help that franchisers are providing going forward,” said Jeff Hanscom, director of state government relations and public policy at the International Franchise Association. “Franchisers are becoming less and less likely to provide a level of assistance for fear of triggering the joint-employer test,” he said.

A franchiser that used to provide software that it used to provide payroll to its franchisee decided to no longer provide that software, operating manuals, best practices, things that they used to freely share, Hanscom said. In the uncertain environment, they are pulling back support services for fear of being a joint employer, he said. 

To provide certainty about joint employment to employers and to state regulators administering labor laws, states have been passing laws to define joint employment, he said.

In 2015, three states passed laws defining the employer-employee relationship. In 2016, six states did so. In 2017, eight states passed such laws, Hanscom said. 

In addition to bills that became law in 2017 in Arkansas, Arizona, Georgia, Kentucky, North Carolina, North Dakota, South Dakota, and Wyoming, an Alabama bill awaits action by Gov. Kay Ivey (R), and a New Hampshire measure bill also could go to Gov. Chris Sununu (R) to act on in early June, he said.

In the five states that introduced bills that did not become law in 2017, “the bills didn’t become law not for opposition but mainly because they ran out of legislative days,” Hanscom said. 

In the last three legislative sessions combined, at least 17 states have passed legislation defining the employer relationship, and Hanscom hopes that by the end of the 2018 legislative session such laws will have been enacted in a majority of states, a development that could encourage state representatives to pass federal legislation to the same effect, which is part of the organization’s plan.

Each state’s law is a little different, but they answer who is and who is not a joint employer, so where claims arise under state labor law, they provide clarity, Hanscom said.

The flip side of the coin is that “we are only addressing state claims under state law,” Hanscom said. “If you are in the Fourth Circuit, there is only so much that state law can do,” he said. To that end, “it is a safe assumption that we are making folks in D.C. are aware of what those at home are doing,” he said. 

In the meantime, it is incumbent upon employers to know the laws in their state. “Do your due diligence in cases regarding joint employment: What have courts ruled, has it been addressed and, if so, how?” Hanscom said. Such information could affect how franchisees conduct themselves, he said.

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