Labor Issues Update: Key Developments on Overtime, Joint Employer Issues

There were several important developments the week of March 14 on two labor issues that are critical to NATSO members: Efforts to expand the universe of employees entitled to overtime pay and the joint employer issue, which could expose companies to legal liability for how their subcontractors, staffing agencies, and franchisees treat their employees.

Legislation was introduced that would prevent the Department of Labor (DOL) from finalizing rules revising overtime pay requirements until DOL conducts a comprehensive economic analysis on the impact of mandatory overtime expansion to small businesses, nonprofits, and public employers.  The Protecting Workplace Advancement and Opportunity Act was introduced in the Senate and House by Sen. Tim Scott (R-S.C.) and Rep. Tim Walberg (R-Mich.), and cosponsored by Sen. Lamar Alexander (R-Tenn.) and Rep. John Kline (R-Minn.).  NATSO is an active member of the Partnership to Protect Workplace Opportunity, a diverse group of associations, businesses, and other stakeholders representing employers in almost every industry, which is advocating on behalf of this legislation. 
In July 2015, DOL proposed new rules governing which employees are eligible for overtime pay.  The proposal would significantly expand the number of employees who are required to receive overtime pay for hours worked in excess of 40 hours per week. That rule was sent to the Office of Management and Budget the week of March 14, which is typically the final stage of the rulemaking process.  The rule is expected to be finalized within the next 45-90 days. It is uncertain when the final rule will formally take effect. 
Specifically, the proposal would increase the minimum salary threshold for overtime eligibility to $970/week ($50,440/year) and index this number to inflation.  DOL is also considering changing the "duties test" that governs what types of activities employees exempt from overtime pay are able to do as part of their jobs in order to still be exempt. 
Although some changes to the overtime rules may be necessary, NATSO has argued in its comments submitted to DOL in 2015 that making an excessively large number of employees eligible for overtime pay will lead to unintended consequences that ultimately will harm the very employees that DOL is seeking to protect.  Specifically, NATSO said that any changes to the salary threshold should account for regional cost-of-living differences. NATSO further emphasized that there should be no changes to the duties test, which currently accommodates the fact that many upper level managerial and executive personnel at truckstops and travel plazas occasionally perform more menial, non-exempt duties. 
If enacted, the legislation introduced last week would help ensure that regulators account for these important considerations in developing a final overtime rule. 
Joint Employer 
Opening arguments kicked off the week of March 14 in a long-awaited National Labor Relations Board (NLRB) case that could make franchisers liable for labor violations committed by their franchisees. The case could have a number of significant ramifications for NATSO members, many of whom operate franchise restaurants and are potentially franchisors to various travel plaza locations.  
The NLRB has recently revised the so-called "joint employer" standard to expand the scope of determining "co-employment" under the National Labor Relations Act.  Specifically, the NLRB decided that a company could be considered a "joint employer" if it possesses the right to control various terms and conditions of employment, regardless of whether that company actually exercises such control. It also makes businesses more susceptible to workforce unionization by imposing new collective bargaining obligations and allowing unions the ability to strike or picket a large corporate entity rather than the individual location where there is a dispute.
The attorney for McDonald's blasted the NLRB's effort to expand the joint employer standard as politically motivated, brought by the NLRB "at the behest of the SEIU."  He said that "independent franchises alone" control the core terms and conditions of employment at their stores, and that if any business owners are found to have violated labor law, they bear responsibility, not McDonald's corporate.
This case is highly fact-intensive, so while a ruling against McDonald's would be a negative development, it will not be determinative for other franchise relationships. For example, although McDonald's does not set wages, benefits, or work schedules at franchise-operated locations, certain operations consultants have reportedly crossed the line from giving "advice" into providing "direction." This is not necessarily the case at other businesses. 
NATSO has provided a joint employer summary and compliance guide outlining issue's implications for NATSO members and providing best practices.
David Fialkov's photo

David Fialkov

David Fialkov is the Vice President of Government Relations, as well as the Legislative and Regulatory Counsel, at NATSO. In this capacity, Mr. Fialkov directs NATSO's legislative, regulatory, and legal strategy on a range of issues, including transportation, energy and fuels, labor, data security, and taxes. Mr. Fialkov also oversees NATSO's political engagement program, including individualized legal and political counsel to member companies. Prior to joining NATSO, Mr. Fialkov was the senior associate in the Government Affairs and Public Policy practice at the law firm of Steptoe and Johnson in Washington, D.C. At Steptoe, Mr. Fialkov advised clients on legislative, regulatory, and political issues, as well as legal concerns. His primary clients included trade associations representing the motor fuel wholesale and retail industries, including the National Association of Convenience Stores and the Society of Independent Gasoline Marketers of America. Mr. Fialkov's focus was not only on the motor fuels business, but also the litany of other issues that retailers confront, including labor matters, foodservice issues, healthcare and employment issues, tax matters and data security. Prior to joining Steptoe, Mr. Fialkov graduated with honors from George Washington University Law School. He received his B.S. Summa cum laude with highest honors from Clark University in Worcester, MA. He lives in Washington, D.C. with his wife Allison and daughter Lilah. More

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