Now, through the coordinated actions of several federal agencies, many law-abiding business owners are facing a new reality – they may be held liable as a “joint employer” for lawsuits involving employees that they do not directly control.

The sweeping revisions to the various “joint employer” standards began in the National Labor Relations Board’s matter of Browning-Ferris Industries of California Inc. Previously, the board only considered an employer to be a joint employer under the National Labor Relations Act if there was evidence of a significant or substantial degree of direct and immediate control over the hiring, firing, discipline, supervision and direction of employment of another company’s employees. Claiming that a new, broader standard was needed to encourage collective bargaining, the board abandoned that old standard. Specifically, the board held that an employer may now be jointly responsible, even if it only has the unexercised ability to indirectly control – even through an intermediary – any terms and conditions of employment of another company’s employees.

Around the same time as the Browning-Ferris decision, an internal memo from the Occupational Safety and Health Administration surfaced. According to that memo, OSHA directed its inspectors to vet the relationships between companies and franchises to find evidence of joint employer standing under a broader interpretation of their own joint employer standard.

Most recently, on Jan. 20, the Wage and Hour Division of the U.S. Department of Labor issued an administrator interpretation to construe joint employment under the Fair Labor Standards Act, the federal law establishing minimum wage and overtime requirements, among other things, “as broad as possible.” To that end, the division will now consider the prospect of joint employment where:

• The employee works for two employers who are associated or related in some way with respect to the employee (horizontal joint employment) or,
• Where the employee has an employment relationship with one employer and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work (vertical joint employment).

Significantly, in analyzing whether a joint employment relationship exists, the relationship agreed upon by the potential joint employers is not relevant to the division’s determination of joint employment status.

What Does This Mean For Employers?

Going forward, employers should expect to see a trend of federal agencies pursuing a greater number of companies with allegations under a theory of joint employer. Indeed, the Browning-Ferris decision and Wage and Hour Division’s administrative interpretation mention employers in construction, agriculture, janitorial, warehouse and logistics, staffing and hospitality industries, among others, as potential joint employers.

In response to these joint employer standards, all employers should review their business-to-business relationships and practices to assess and minimize their risks in this area. Some concrete steps for businesses to take immediately are:

• Review existing written contracts with other businesses to see whether one party reserves any right to control the working conditions of the other party’s employees, even if that authority is never exercised.
• Determine whether it makes sense to include an express disavowal of any control over another party’s employees in that written contract.
• Review the actual relationships between the parties to see whether one is exercising control over the working conditions of the other’s employees, keeping in mind that, under the new standards, a suggestion that one party take certain actions could be viewed as a requirement that the party must take those actions.

* This article first appeared in The Press-Enterprise on Feb. 21, 2016 Republished with permission.

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