Joint Employer Issues

Joint Employer Issues February 23, 2016

Tegna (and webcast)

ACC-NCR

McLean, Virginia 22107

Garen Dodge

Jackson Lewis P.C. | Reston

Diane Ennist

Carey International, Inc. | Washington, D.C.

Garen Dodge

Garen E. Dodge is a Principal in the Washington, D.C. Region, office of Jackson Lewis P.C. He is Leader of the firm’s Government

Relations practice, and co-coordinator of the firm’s Government Contracts industry group. He is also a co-coordinator of the firm’s

Background Checks industry group.

Mr. Dodge’s diverse practice covers the spectrum of labor and employment litigation. His recent victories include serving as lead

counsel in a jury trial alleging defamation in Fairfax, Virginia Circuit Court, obtaining an injunction in DC federal court in a non-

compete case, and prevailing in a five day arbitration involving allegations of age and national origin discrimination. Throughout

his career, he has served as counsel of record in seminal U.S. Supreme Court and appellate cases as Amicus Curiae. Mr. Dodge

advises clients on issues involving privacy, discrimination, background checks, harassment, wage and hour, and occupational

safety and health. He assists companies in establishing workplace programs, and trains supervisors and employees on effective

personnel policies. He represents clients before Congress and key federal agencies on labor and employments issues, and has

testified before agencies such as the U.S. Commission on Civil Rights.

Mr. Dodge has been recognized by Smart CEO as one of its “Go To Lawyers” and by Lawdragon as a “Leading Lawyer. For many

years, he has also been named a “Super Lawyer” in both Washington, D.C. and Virginia, and has long been “AV” rated by

Martindale-Hubbell.

Mr. Dodge is a member of the Virginia, District of Columbia and Wisconsin bars. He is a Member of the United States Supreme

Court bar, as well the federal and state courts in Virginia, District of Columbia and Wisconsin. He is a member of the Labor

Relations Committee of the U.S. Chamber of Commerce and serves as General Counsel to the Council for Employment Law Equity.

He served as an Attorney-Advisor for the U.S. Department of Labor, Office of the Secretary, Benefits Review Board from 1982-

1985.

Mr. Dodge received his B.A. summa cum laude from the University of Wisconsin – Green Bay in 1979. He earned his J.D. in 1982

from the College of William & Mary Marshall-Wythe School of Law.

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Diane Ennist

Diane Ennist is SVP, General Counsel and Corporate Secretary of Carey International, Inc., a global

leader in chauffeured transportation since 1921. She oversees all of Carey's legal affairs, as well as the

franchise department. Prior to joining Carey in 2006, Diane was the Vice President, Deputy GC of

Litigation for Freddie Mac. Before that, Diane was a Senior Trial Counsel at the United States

Department of Justice and earlier, practiced commercial litigation at a large law firm in Ohio. She

serves on the ACC NCR Board.

Diane graduated from the University of Rochester with a B.A. Magna Cum Laude with High Distinction.

She received her J.D. with Honors from the Ohio State University and was elected to the Order of the

Coif. She is a member of the bars of the States of Ohio (inactive) as well as Virginia, the District of

Columbia, several federal appellate bars, and the United States Supreme Court. Diane is the immediate

past president of the board of Family Services, Inc., a diverse $25 million social service non-profit and

serves as a co-chair of ACCNCR’s Diversity Committee.

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Presentation Outlook

The NLRB’s New Joint Employer Standard

DOL’s Interpretation

Legislative Action in Wake of the Board’s New Standard o Federal

o State

Impact of the New Standard on Other Federal Agencies o Department of Labor (FLSA, FMLA, OSHA)

o U.S. Equal Employment Opportunity Commission (EEOC)

o Office of Federal Contract Compliance Programs (OFCCP)

Practical Considerations to Minimize Finding of Joint

Employer Status

Walling Off Subsidiary/Affiliate

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Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015)

• Browning-Ferris (BFI) operates a waste recycling facility.

• BFI subcontracts employees from Leadpoint to sort recyclable

items inside the facility and to perform basic housekeeping

functions.

• Teamsters (Union) filed a petition to represent approximately

240 employees, which were comprised of sorters,

housekeepers, and screen cleaners.

• The Union already represented approximately 60 direct BFI

employees who worked on the exterior of the facility.

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Browning-Ferris Industries of California, Inc., 362 NLRB

No. 186 (August 27, 2015)

Prior Joint Employer Standard:

Where “two separate entities share or codetermine

those matters governing the essential terms and

conditions of employment.”

Control must be “direct and immediate” (i.e. hiring,

firing, supervision, and direction).

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New “Modified” Joint Employer Standard:

(1) whether a common law employment relationship exists;

(2) whether the potential joint employer “possesses sufficient

control over employees’ essential terms and conditions of

employment to permit meaningful bargaining.”

Control under the new standard can be direct, indirect, or even a

reserved right to control, whether or not that right is ever

excised.

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What Does the Board Consider a Common Law

Employment Relationship?

o Restatement (Second) of Agency

o Section 220(1) provides that a “servant is a person

employed to perform services in the affairs of

another and who with respect to the physical

conduct in the performance of the services is

subject to the other’s control or right to control.”

(emphasis added)

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No. 186 (August 27, 2015)

What is “sufficient control” under the new

joint employer standard?

Direct, Indirect, or a

Reserved Right to Control. Whether or not that right is ever exercised.

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Possible indicators of joint employer status:

Browning-Ferris Industries of California, Inc., 362

NLRB No. 186 (August 27, 2015)

• Controlling the number of employees needed for job or task.

• Safety rules and standards.

• Establishing production standards.

• Determining job duties.

• Instruction relating to the means and manner to accomplish a job.

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Possible indicators of joint employer status (continued):



• Training employees or establishing employee training requirements.

• Indirectly controlling employees’ wages through a commercial agreement.

• Retaining potential control over employment conditions reserved in commercial agreements.

• Retaining the right to terminate the relationship.

• Requiring employees to follow rules or handbooks.

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Possible indicators of joint employer status (continued):



• Imposing highly standardized operational requirements.

• Owning facilities/equipment where employees work.

• Requiring operational modifications.

• Monitoring and auditing operations.

• Setting maximum wage rates for employees.

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No. 186 (August 27, 2015)

Current Status

On September 4, 2015, a tally of ballots showed a 73-17 vote in favor of

union representation. The Teamsters were certified.

Teamsters filed an unfair labor practice charge against BFI, claiming that

the Company was refusing to recognize or bargain with the Union.

The Board issued a unanimous decision, finding BFI and Leadpoint, as

joint employers, had violated the NLRA.

BFI appealed the decision to the U.S. Court of Appeals for the D.C.

Circuit on January 20, 2016.

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U.S. Department of Labor FLSA AI

• Wage and Hour Administrator David Weil

• Protecting workers in fissured workplaces

• Expanding the definition of employer both horizontally and vertically.

• Using an Administrator’s Interpretation and FAQ’s to provide clarity around the proper

interpretation of a statutory or regulatory issue.

• January 20, 2016 Administrator’s Interpretation No. 2016-1

• Fair Labor Standards Act

• Statutes share the same definition of employment, includes “to suffer or permit to work.”

This definition was written to have as broad an application as possible.

• Distinct from narrow definition of employment under NLRA

• AI is not the law but is the agency's standard and may be accorded deference by the courts

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Horizontal Joint Employment

• Where employee has employment relationship with two or more employers and

the employers are sufficiently associated or related with respect to the employee

such that they jointly employ the employee.

• Focus is on the relationship of the employers to each other.

• FLSA regulations provide guidance on how to analyze the relationship

• Example 1: Separate restaurants that share economic ties and have same managers

controlling both restaurants

• Example 2: Home health care providers that share staff and have common

management.

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http://www.dol.gov/whd/flsa/jointemployment.htm

U.S. Department of Labor

FLSA AI

Relevant Factors for Assessing


• Who owns the potential joint

employers;

• Do the potential joint employers have

any overlapping officers, directors,

executives, or managers;

• Do the potential joint employers share

control over operations;

• Are the potential joint employers’

operations inter-mingled;

• Does one potential joint employer

supervise the work of the other;


supervisory authority for the

employee;

• Do the potential joint employers treat

the employees as a pool of employees

available to both of them;


clients or customers; and

• Are there any agreements between the

potential joint employers.

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FLSA AI

Vertical Joint Employment

o Where the employee has an employment relationship with one employer

(typically a staffing agency, subcontractor, labor provider or other

intermediary employer) and the economic realities show that he/she is

economically dependent on, and thus employed by, another entity involved

in the work.

o Unlike horizontal joint employer relationship, vertical joint employment

analysis examines the economic realties of the worker to determine whether

the employees are economically dependent on those potential joint employers

an are thus their employees.

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Vertical Joint Employment

http://www.dol.gov/whd/flsa/jointemployment.htm

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Factors for Assessing Vertical JE and Economic Dependence

Directing, Controlling, or Supervising the Work Performed

Controlling Employment Conditions

Permanency and Duration of Relationship

Repetitive and Rote Nature of Work

Integral to Business

Work Performed on Premises

Performing Administrative Functions Commonly performed by Employers

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Impact of Administrator’s Interpretation

•The Administrator’s Interpretation is not the law.

• It is the DOL’s interpretation of established law.

•Will likely be provided judicial deference

•Allows employers to predict focus of DOL investigation

•Provides clear guidance for DOL investigators

•Likely used by other agencies to expand the definition of joint

employment

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U.S. Department of Labor FLSA/MSPA

Potential cost of joint employer status:

o wage and overtime liability together with liquidated

damages and the worker’s attorneys’ fees.

Potential sources of joint employer liability:

o Specific industries have been frequent targets of wage

and hour claims and investigations.

o Specific industries have become a favorite target for

class, FLSA collective, and multi-plaintiff lawsuits

seeking millions of dollars and often driven by

attorneys' fees claims.

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•Previous AI in 2015 regarding independent contractors expanded the

definition of “employee”.

•This January 2016 AI expands the definition of “employer”

•Prior focus was on the horizontal employer

•Now the focus is also on the vertical employer

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Congressional Action in Response to NLRB’s New

Joint Employer Standard

The Protecting Local Business Opportunity Act

(S.2015/H.3459) was introduced on September 9, 2015

by Senator Lamar Alexander (R-Tenn) and House

Representative John Kline (R-Minn). The Act seeks to

amend the definition of “employer” under the NLRA.

o “Section 2(2) of the National Labor Relations Act (29) U.S.C. 152(2)) is

amended by adding at the end the following: “Notwithstanding any

other provision of this Act, two or more employers may be

considered joint employers for purposes of this Act only if each

shares and exercises control over essential terms and conditions of

employment and such control over these matters is actual, direct

and immediate.”.

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Appropriations Rider

“Sec. 408. None of the funds made available by this Act may

be used to investigate, issue, enforce or litigate any

administrative directive, regulation, representation issue or

unfair labor practice proceeding or any other administrative

complaint, charge, claim or proceeding that would change the

interpretation or application of a standard to determine

whether entities are “joint employers” in effect as of January 1,

2014.”

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On September 28, 2015, Senator Mike Lee (R-UT)

introduced The Protecting American Jobs Act (S.

2084) which would transfer prosecutorial and

adjudicative authority over labor disputes from the

NLRB to federal courts. The bill would effectively strip

the Board of its power to prosecute and adjudicate

labor dispute.

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Washington DC Efforts

Coalitions: CSLB

Strategy: FY 2017 Appropriations Rider

March 17, 2016 Hearing, House Small

Business Subcommittee

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State Legislative Action

Several states have passed legislation aimed at curtailing

the impact of the NLRB’s new joint employer standard.

On February 1, 2016, the Indiana House of

Representatives passed bipartisan legislation (House Bill

1218) codifying that a franchisor is not considered to be

an employer of a franchisee or a franchisee’s employees.

Tennessee, Texas, Michigan and Louisiana recently passed

legislation which provides that a franchisor shall not be

considered an employer of a franchisee or the franchisee’s

employees.

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Family and Medical Leave Act

Issued in January 2016

o Issued Fact Sheet #28N: Joint Employment and Primary

and Secondary Employer Responsibilities Under FMLA

Definition of Joint Employment:

o Joint employment exists when an employee is employed by

two (or more) employers such that the employers are

responsible for compliance with the FMLA.

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The primary employer is responsible for:

o Giving required notices to its employees;

o Providing FMLA leave; and

oMaintenance of health benefits.

The primary employer is also mostly

responsible for job restoration.

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A secondary employer is responsible for accepting the

individual upon return from FMLA

o As long as the company continues to use an employee from the

staffing agency, and the agency chooses to place this employee

with the company.

As a secondary employer, the company would also be

prohibited from interfering with an employee's FMLA

rights and also from discriminating against him/her for

protected activities, even if the company is not otherwise

a covered employer, as defined above, under the FMLA

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Determining who is a primary and secondary

employer:

o Who has authority to hire and fire, and to place or assign work to

the employee;

o Who decides how, when, and the amount that the employee is

paid; and

o Who provides the employee’s leave or other employment

benefits.

In the case of a temporary placement or staffing agency,

the agency is most commonly the primary employer.

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Employees who are jointly employed by two employers

must be counted by both of them in determining the

employer’s coverage and employee eligibility under

FMLA, regardless of whether the employee is maintained

on one or both of the employers’ payrolls.

The employees worksite is the primary employer’s office

from which the employee is assigned or to which the

employee reports.

o However, if the employee has physically worked for at least one

year at a facility for a secondary employer, then the employee's

worksite is that location.

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Occupational Safety and Health Administration

Draft policy prepared by DOL’s Office of the Solicitor

illustrates the agency’s intent to hold franchising

corporations responsible, at least in part, in OHSA and

other labor law enforcement actions against franchisee

businesses.

The draft policy addresses whether, for purposes of

OSHA, a joint employment relationship can be found

between the franchisor and the franchisee, leading both

entities to be liable as employers.

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A joint employer standard may apply where the

corporate entity exercises direct or indirect control over

working conditions, has the unexercised potential to

control working conditions, or based on the economic

realities.

o Control includes such matters as hiring, firing, discipline,

supervision and direction.

Draft policy also contains laundry list of documents and

information OSHA should obtain to reach its

determination.

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If OSHA’s (draft) joint employer policy advances, OSHA’s

ability to cite a host employer would be enhanced and

could be used by unions as leverage against employers

who have been targeted for organizing.

An expansion of the joint employer standard could also

provide an opportunity for OSHA to ratchet up fines

against a parent company for repeated violations.

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In January 2015, two GOP house leaders accused the DOL of

lying about not coordinating with the NLRB on the draft

policy.

These allegations come in light of new evidence showing that

the NLRB’s GC and staff at the DOL discussed the joint

employer standard over a video conference call.

Due to the significance of the NLRB’s new joint employer

standard, it is not surprising that discussions would have taken

place in advance of its issuance; however, the DOL’s failure to

provide correspondence or otherwise cooperate with the

investigation is, at best, curious.

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Joint Employer Liability Regulated by

The U.S. Equal Employment Opportunity Commission

The EEOC filed an amicus brief in Browning-Ferris stressing

that the Board’s joint employer standard will influence

judicial interpretation of Title VII.

Compensatory damages are capped under Title VII, and the

caps generally increase as the number of employees increases.

Thus, the plaintiff’s bar will be encouraged to establish joint

employer status because doing so could increase the number

of employees, thereby increasing the amount of available

damages.

Threshold coverage may impact the small business exception.

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Joint Employer Liability Regulated by

The Office of Federal Contract Compliance

OFCCP administers and enforces three federal contract-

based rights laws that require most federal contractors

and subcontractors, as well as federally assisted

construction contractors, to provide equal employment

opportunities.

Anticipated expansion of jurisdictional reach through

“single entity” test.

Published a “question and answer” application on the

single-entity test which contains 27 questions to guide

potential contractors through the analysis.

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Practical Considerations to Minimize

Finding of Joint Employer Status

There is no specific test.

Ensure that the agreement with the contractor supports

the fact that you are not a joint employer; and ensure

that the practice is consistent with the agreement.

One end of the continuum is to give the contractor

complete control, and evaluate contractor’s performance.

On the other end of the continuum is to eliminate the

contractor entirely and directly employ those working at

the facility.

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Review and revise agreements to support your position

that Company A is not a joint employer of Company B’s

employees.

Some terms to consider for the contractor agreement:

o Company B’s employees are solely employed by Company B; the parties

do not intend to create a joint employer relationship.

o Recite that Company B alone retains the sole right to…and then include

a list of employment decisions…such as hire its employees, determine

their wages and benefits, assign, schedule, train, discipline, and

terminate its employees.

o Include a statement that Company A shall not and does not have the

right to ….and include all of the rights Company B alone has in this list.

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Ensure that Company B has its own employment policies

and procedures. You can review them as part of due

diligence when deciding whether to enter into or renew

your contract with them.

To the extent Company A concludes that it must exercise

some control over the operation, minimize it to the

extent possible and realize that any control, or right to

control, that you retain may be used against you to

support a finding that you are a joint employer.

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Review indemnification language. Consider requiring

Company B to indemnify Company A for any costs

incurred in opposing a joint employer claim.

o Include language that Company B will cooperate with you in

presenting your defense to the joint employer claim by making

available management representatives to prepare for hearings

and to testify at hearings, and to provide documents reasonably

requested by Company A relating to this issue.

o Should Company B reimburse Company A’s representative for

the cost of bargaining?

Bring the contracted work in-house.

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Practical Tips to “Wall Off”

A Subsidiary or Affiliate

• Governance Structure

o Rather than a VP or General Manager, implement a corporate structure

with truly separate president, board and officers

o Board members unique to that company (no overlapping board

members between sub and parent)

o Processes and presentations to report up to the board of parent

o Strict adherence to corporate formalities such as board meetings,

keeping Minutes, and structured reporting mechanisms

o Sub should have its own policies, even if mirror those of the parent,

and should be tailored for the subsidiary

o Contract between parent and sub (possibly a franchise contract) should

make clear that parent is not a joint employer with the sub

o No specific “safe harbor”

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• Employment Structure

o Focus on employment, hiring, firing, reviews, discipline, supervision, pay decisions

o All HR decisions for the sub must be made locally

o Employees at the sub only work for the sub and are paid by the sub

o If parent has employees in that jurisdiction, set up a new payroll company

o Move the employees of the parent to a different facility so they are not in the same

building

o No cross-use of employees between parent and sub. Employee works for

one or the other

o Sub should have separate connection to the payroll services provider (could be in a

Shared Services Contract )

o Sub takes physical possession of the personnel files and maintains them (will need

secure facility)

o Training to take on new officer and director roles

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• Other

o Check real and personal property leases so that only the sub is on the lease

o Consider your insurance policies. DIC (Difference In Coverage) insurance

for your new officers and directors

o Develop Shared Services Contract (for services such as bank accounts, billing,

marketing) shared with the parent

o Accounting must be able to accurately track the credits and debits between

parent and subsidiary

o Be sure you can produce separate P&Ls

o Necessarily means ceding control by parent, but separation must be real

and not window-dressing

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Joint Employer Issues

Questions?

Garen Dodge

[email protected] | (703) 483-8323

Diane Ennist

[email protected] | (202) 895-1220

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4823-9611-3451 (Version 1)

mailto:[email protected]

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Documents

Joint Employer Issues