August 16th, 2018
Labor Department Pressed for ‘Joint Employer’ Rule
A pair of House lawmakers and some influential advocacy groups want the Labor Department to take a corporate-friendly approach to a big workplace policy question: When can multiple businesses be considered “joint employers,” with each liable for minimum wage and overtime pay violations?
Reps. Bradley Byrne (R-Ala.) and Henry Cuellar (D-Texas) recently asked Labor Secretary Alex Acosta to issue a new regulation updating joint employer liability under the Fair Labor Standards Act, according to a letter obtained by Bloomberg Law. The lawmakers—along with groups such as the International Franchise Association and HR Policy Association—want the department to limit the circumstances in which one business can be considered a joint employer of another’s workers.
A wide range of businesses have told Byrne and Cuellar that “the federal definitions of ‘joint employer’ have become so overly broad and vague that employers who want to do right by their employees do not understand the new, limitless rules,” the lawmakers said in an Aug. 14 letter to Acosta. “We urge you to use the agency’s available tools to provide clarity for small businesses on this issue,” they wrote.
Joint employment has become a marquee labor policy issue because of its potential to affect a broad swath of businesses and workers in staffing, franchise, and other contractual relationships. The business community says expanded liability makes companies responsible for someone else’s workers. Employee advocates say it gives workers a direct line to those who actually set the terms and conditions of their jobs.
McDonald’s is the subject of ongoing National Labor Relations Board litigation over whether the fast-food giant is a joint employer of franchise workers fired for participating in Fight for $15 demonstrations. Microsoft was recently embroiled in a debate over whether it’s required to bargain with software testers staffed by a third-party company.
The lawmakers and business groups want the DOL to require a business to have direct control over another’s workers to be considered their joint employer.
Acosta—a former NLRB member, prosecutor, and law school dean—has previously expressed some skepticism about using regulations to update laws. He also scrapped a pair of nonbinding Obama-era administrator interpretations on joint employee liability and worker classification shortly after being sworn in.
“In the past, Secretary Acosta has spoken about the pitfalls of sub-regulatory actions because of the important role public input can have in the Department’s regulatory process,” a Labor Department spokeswoman told Bloomberg Law in an email.
Control Question
The DOL and the National Labor Relations Board during the Obama administration took an expansive view, finding that a business that exerts indirect control over another’s workers can be considered their joint employer for minimum wage, overtime, union bargaining, and workplace safety purposes. Supporters say that approach cuts through complicated contractual arrangements to look at who is actually dictating the terms and conditions of workers’ jobs.
“If you are an employee who has been the victim of some sort of violation and your official employer can’t pay out, this is very important,” Jeffrey Hirsch, a labor law professor at the University of North Carolina, told Bloomberg Law. “I think the bigger impact is in the way it shapes firms’ way of doing business. There are lots and lots of franchises as well as plenty of other businesses that could be effected.”
The NLRB, now controlled by Republicans, plans to roll out a proposed rule on joint employment under a federal law protecting unionization and related rights in the coming months. The House last year passed a bill (H.R. 3441) that would restrict joint employer liability to businesses that exert direct control. That measure, which would update federal labor and wage-and-hour laws, has failed to attract the Democrat support needed to move in the Senate.
Cuellar is among a small group of “Blue Dog” Democrats who often side with Republicans on labor and employment issues.
The International Franchise Association lauded Byrne and Cuellar’s request. IFA spokesman Matthew Haller said the lawmakers recognize the importance of “providing clear, long-term rules for employers on joint employer.”
Congress or Agency?
Acosta in nearly 16 months at the helm of the Labor Department has taken a cautious approach to some policy changes. That includes continuing litigation over an Obama administration overtime rule that the DOL has said it plans to junk.
He’s also said Congress, not the DOL, should resolve similar questions about whether certain workers are employees or independent contractors by amending federal laws.
“We’re a democracy, which means that Congress should take the lead,” Acosta said in November 2017 at an American Bar Association event. “It’s very easy for the executive branch through guidance documents to say ‘this is what we think,’ but that’s not the way democracy works. You don’t make laws through executive fiat, you make laws through the legislative process.”
A current DOL regulation interpreting the Fair Labor Standards Act focuses on the relationship between the businesses, rather than between each business and the workers, to determine joint employer liability for minimum wage and overtime purposes. One of the Obama wage and hour memos that Acosta killed last year stated that joint employment “should be defined expansively.”
By Chris Opfer