The Department of Labor (DOL) has issued guidance establishing new standards for determining "joint employment" under the federal Fair Labor Standards Act. The guidance would expand the number of employers who would be considered "joint employers" with other entities, and is just the latest step in the Executive Branch's effort to expand the definition of "employment" to enhance worker benefits.
In addition to the recent DOL guidance, the National Labor Relations Board (NLRB) last year revised the joint employer standard to expand the scope of joint employment under the National Labor Relations Act, a different though complimentary statute than the Fair Labor Standards Act that was addressed in the DOL guidance. Broadening the joint employer standard will expose more companies to legal liability for how their subcontractors, staffing agencies, and franchisees treat their employees. Further, when two or more employers jointly employ an employee, the employee's hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due or whether offers of healthcare coverage are required under the Affordable Care Act.
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 purpose of the guidance last week was to expand statutory coverage of the Fair Labor Standards Act to many small businesses.
For the first time, DOL in the guidance differentiates between "horizontal" joint employment and "vertical" joint employment, and provides guidance on assessing each category.
- Horizontal joint employment involves relationships between or among two or more employers that are sufficiently related with respect to the employee that they jointly employ the employee.
- Vertical joint employment focuses on the employee's relationship with the employer and another intermediary entity. DOL will apply the so-called "economic realities" test in evaluating the relationship between or among the entities at issue, based on a variety of factors.
NATSO is preparing a detailed analysis of these recent Joint Employer developments, which will be available in the coming days. In the meantime, NATSO members are advised to review their business-to-business relationships in light of the new guidance.
You can view the guidance in its entirety here
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