Man in a suit with text: "Co-Employment Part 2"

Recent Developments in Co-Employment

Pinnacle Group Blog

Last week, in part one of our co-employment series, we established some basic definitions and concepts around co-employment and how it can create risk for staffing clients. This week we are going to talk about a few recent developments that reflect how regulators are treating co-employment relationships and what clients can expect going forward. This week we are going to use the term “joint employment” and “joint employer,” as these terms appear most frequently in the decision and guidance we will be discussing.

The big news in late August 2015 regarding co-employment was the National Labor Relations Board’s (NLRB) Browning-Ferris decision. This decision held that a union could organize and represent a group of workers at a Browning-Ferris Industries worksite that included staffing company employees.

In reaching its decision, the NLRB set aside 30+ years of legal precedent to find that Browning-Ferris was a joint employer of the staffing company’s employees and that those employees could be represented by the union along with Browning-Ferris’s direct employees. This is despite the fact that the contract between Browning-Ferris and the staffing company expressly stated that the staffing company was the sole employer and that the staffing company dealt with all human resources issues of its employees, including hiring them, setting their wages, paying them, setting their schedules, providing them insurance, and managing their time off requests.

Comparing the NLRB’s old and new definitions of joint-employment helps explain why this decision has been seen as such a game changer. Under the previous joint employer standard, each of the parties would have to directly affect matters relating to the employment relationship (hiring, firing, supervision, discipline, etc.) to be considered a joint employer. The new standard expands the definition to include indirect influence over such matters, including when it’s through a third-party intermediary such as a staffing firm.

The long-term outcomes of this decision are unclear, as many legal and legislative challenges are likely. But in the meantime, companies are concerned about the expansive new definition of joint employment and how it will impact their businesses – and not only in the union context. Federal agencies are collaborating on enforcement efforts more and more, and if one agency expands the definition of joint employment, it is likely that others will follow suit.

In fact, on January 20, 2016, the DOL published its own guidance regarding joint employment by issuing an Administrator’s Interpretation (“AI”) with subject “Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act.” As with the Browning-Ferris decision, the AI defines joint employment more expansively than before allowing it to target larger employers who rely on staffing companies and others to augment their workforces.

The DOL has long pursued joint employers, including staffing firm clients, for FLSA violations relating to individuals providing services to them, so in one sense, this is nothing new. However, the DOL’s expanded definition of joint employment uses an “economic realities” test that is a departure from prior DOL standards and makes it easier for the DOL to find that a joint employment relationship exists. This makes it more likely that the DOL will pursue staffing firm clients more aggressively if there are wage and hour violations relating to staffing firm employees, and it is the DOL’s stated intention to do so.

Next week we will share some of the strategies we believe best position clients to reduce co-employment risk in this evolving regulatory environment while engaging effectively with their contingent workforce in a way that supports their business objectives rather than frustrating them.