In 2015, the National Labor Relations Board (NLRB) expanded the joint employer doctrine through its controversial decision in Browning-Ferris Industries of California. The House of Representatives will vote today on the “Save Local Business Act” (SLBA), a recent effort advanced in Congress to re-define the concept of “joint employers” for collective bargaining purposes as well as wage-and-hour, safety, and other employment liability.  If passed, the bill would effectively undo Browning-Ferris.

The Browning-Ferris decision broadened the standard used in evaluating joint employment beyond the “direct and immediate” control over the essential terms and conditions of employment.  Instead, it created a two-part “indirect control” test for determining “employer” status that examined whether a common law relationship exists with the employee(s) in question and whether the potential employer “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.” That broadened standard drew significant criticism and caused concern across a variety of industries, as companies that merely had “potential” or “reserved control” to hire, terminate, discipline, supervise, and direct an affiliated company’s employees – but who did not actually exercise that right – could now be liable for various employment claims and collective bargaining requirements.

If passed by Congress and signed into law, the SLBA would limit the extent to which affiliated businesses are considered to be “joint employers” under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA).  Under the SLBA’s proposed terms, a person could be considered a joint employer under the NLRA only where it “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment” over an employee.  The definition of “employer” under the FLSA would also be amended to include a reference to the NLRA’s definition, which is consistent with the Department of Labor’s decision in June 2017 to withdraw prior guidance that applied the broadened joint employer definition to the FLSA.

After the Browning-Ferris decision, franchisees, which typically get standardized training and employment manuals from franchisors, and staffing agencies, which recruit temporary workers for their client companies, feared increased liability under the new joint employer standard.  Unsurprisingly, then, the U.S. Chamber of Commerce, National Retail Federation, and the International Franchise Association all support the bill. Opponents argue, however, that the bill would enable wage theft by immunizing unscrupulous employers and would reduce collective bargaining rights of employees.

Until the SLBA becomes law, companies, including those using franchise models and staffing agencies, should be aware of potential liability not only for their own actions, but also for those of any other entity with which they can be determined to be a joint employer.  For more information on how to manage these liabilities, please contact one of Frantz Ward LLP’s Staffing Industry attorneys.

Recently, House Republicans renewed efforts to rein in expansion of two federal labor laws’ joint employer definition by introducing the Save Local Business Act (“SLRA”) (H.R. 3441). The SLRA limits how affiliated companies are considered joint employers for collective bargaining liability purposes and within wage and hour laws.

The SLRA represents an expanded effort to reverse the National Labor Relations Board’s (“NLRB”) Browning-Ferris Industries of California Inc., 362 NLRB No. 186 (Aug. 27, 2015) decision. In Browning-Ferris, the NLRB reversed a 30-year old standard for determining joint employer status under the National Labor Relations Act (“NLRA”). According to Browning-Ferris, affiliated companies are joint employers if they 1) “are both employers within the meaning of the common law” and 2) “share or co-determine” matters governing the essential terms and conditions of employment. Under the first prong, the NLRB focuses on a company’s “right to control” employees and does not consider whether the company exercises that right. For example, a company may create a common law employer relationship if it reserves ultimate discharge authority over temporary workers but does not exercise that right. For the second prong, the NLRB defines “essential terms and conditions” to include wages, hours, hiring, firing, and supervision. Evidence of controlling these “essential terms and conditions” may include dictating the number of contingent workers supplied and controlling schedules or overtime.

The SLRA also addresses recent expansion of the joint employer definition by courts under the Fair Labor Standards Act (“FLSA”). For example, in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the federal Fourth Circuit Court of Appeals, covering Maryland, North Carolina, South Carolina, West Virginia, and Virginia, applied an expanded test to conclude that general and subcontractors were joint employers. Under the Salinas-applied test, joint employment exists when 1) two companies “share, agree to allocate responsibility for, or otherwise codetermine – formally or informally, directly or indirectly – the essential terms and conditions of a worker’s employment” and 2) the companies’ combined influence “over the terms and conditions of the worker’s employment” renders the person an employee instead of an independent contractor. This determination has significant implications because, as joint employers, both companies must comply with the FLSA as it relates to an individual’s entire employment for a workweek. In other words, a company must add the hours worked for both employers to determine whether and to what extent the individual earned overtime pay.

The SLRA rolls back these expanded definitions by redefining joint employer in both the NLRA and FLSA.  Specifically, under the Act:

A person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment (including hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, and administering employee discipline).

Ultimately, the bill seeks to reinstate the traditional joint employer standard and restore some semblance of predictability that the NLRB eviscerated in the Browning-Ferris decision. Although the House is on recess, the bill will almost assuredly proceed within Education and Workforce Committee upon Congress’s September return. In addition, the bill could quickly move to the House floor for consideration and, with sufficient support, advance to the Senate. Frantz Ward will keep close track of the bill and provide updates on the SLRA’s progress.

In a development that may be of interest both to those who follow Fair Labor Standards Act (“FLSA”) developments and to those interested in mediation, the U.S. District Court of the Southern District of New York has mandated early mediation for all FLSA cases. The pilot program responds to the surge in FLSA case filings by sending cases to mediation immediately upon the appearance of the defendant.

The mediation is to be scheduled within four (4) weeks of the Court’s issuance of its standard order. Limited disclosures are required as follows:

  1. Both parties to produce any existing documents describing plaintiff’s duties and responsibilities
  2. Both parties to produce records of pay and hours worked by plaintiff
  3. Plaintiff to produce spreadsheet of alleged underpayments and other damages
  4. Defendant to produce documents describing compensation policies
  5. If claiming inability to pay, defendant to produce proof of financial condition

If the mediation is successful, the parties are then required to provide a memorandum to the Court so that it can perform its function of approving the FLSA settlement.

Some see a conflict between the voluntary process of mediation and forcing parties to participate in it. However, getting parties to agree to mediate disputes before discovery has taken place is a tough sell, especially to lawyers. In FLSA cases, the key facts are often available and material/factual issues may be limited. FLSA cases should lend themselves well to early resolution, and mandating prompt mediation with limited, but relevant, disclosures is probably well worth the investment in the pilot project. It remains to be seen if other courts will follow along.

By now most employers are (hopefully) aware that the U.S. Department of Labor has significantly changed some of the rules governing exemptions from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”). The revised regulations will go into effect on December 1, 2016, and they will principally do the following:

  • Immediately double the minimum salary threshold for the “white collar” exemptions to $913 per week ($47,476 annualized)
  • Adjust the minimum salary threshold for inflation every three years
  • Change the way the minimum salary threshold is calculated so that employers can count certain bonuses and commissions toward as much as 10% of the threshold
  • Set the total annual compensation requirement for the highly-compensated employee exemption to the annual equivalent of the 90th percentile of full-time salaried workers nationally (i.e., $134,004)

Needless to say, these unprecedented changes present significant challenges for employers. Given the potential consequences of noncompliance it is essential that employers act immediately to ensure they have taken all necessary steps to comply with the new regulations prior to December 1st. While each workplace will be different, some general suggestions that employers should consider include the following:

  • Immediately identify exempt positions that fall below the new minimum salary threshold and consider
    • Who will get a pay raise to maintain the exemption
    • Who will be reclassified as non-exempt
  • For reclassified employees, study the employees’ average hours worked for purposes of setting new pay rates
  • Given the likelihood of increased litigation and stepped up DOL enforcement, consider reclassifying other “vulnerable” positions
  • Ensure accurate timekeeping of all hours worked
    • Train reclassified employees, many of whom will be uncomfortable with or resistant to tracking their hours worked
    • Train managers
    • Address “bring your own device” issues (e.g., after-hours e-mails, texts, and phone calls)
  • Review and update policies and procedures
    • Policies related to overtime
    • Policies related to recording hours worked
  • Communicate the changes to your workforce
  • Plan for future inflation-driven adjustments to the minimum salary threshold to the extent possible