Joint Employer Status: Navigating the New Rules

1. Webinar Wednesdays JOINT EMPLOYER STATUS The Tidal Wave of the Future Anna Elento-Sneed October 2015 envision, strategize and actualize

2. DISCUSSION TOPICS • What is a “joint employer”? • New joint employer rules • National Labor Relations Board (NLRB) • United States Department of Labor (USDOL) • Equal Employment Opportunity Commission (EEOC) • Occupational Safety & Health Administration (OSHA) • What does this mean for businesses? • Suggestions moving forward

3. WHAT IS A JOINT EMPLOYER? • General Definition • Two or more entities share control and/or supervision of same employee(s) • Examples of Possible “Joint Employer” Situations • Parent corporation subsidiary • Employer staffing agency (or PEO) • Contractor subcontractor • Owner management company • Franchisor franchisee

4. NEW JOINT EMPLOYER RULES - NLRB • Evolution of the Joint Employer Doctrine • Prior to 1982, NLRB focused on “right to control” work of employees • Did putative employer retain power to hire, set wages, set working hours, approve overtime, determine manner and method of work, inspect and approve work, discipline and terminate • Control may be direct or indirect • Joint employer status found when entities “share or codetermine those matters governing the essential terms and conditions of employment • Between 1982 and present, NLRB narrowed the standards for joint employer • Power to control was not enough; finding of joint employer status turned exclusively on actual exercise of control • Control must be direct, immediate and not “limited and routine”

5. NEW JOINT EMPLOYER RULES - NLRB • Browning-FerrisIndustries Decision, 362 NLRB No. 186 (2015) • Facts of the case • BFI (recycling business) contracted with Leadpoint Business Services (staffing agency) to provide temporary labor (sorters, screen cleaners and housekeepers) • Per contract, BFI: • Oversees operations and productivity; sets work hours for the facility; determines number of employees needed for day; sets safety policy and work quality standards; retains authority to reject personnel sent by Leadpoint; and can examine Leadpoint’s books and records • Leadpoint: • Supervises day-to-day operations; schedules work; recruits, interviews and hires workers; provides wages and benefits; handles orientation and training; assigns work to employees; ensures coverage for shifts and determines who works overtime; handles counseling, discipline and terminations • Union seeking to represent BFI employees also petitioned to represent Leadpoint employees working alongside the BFI employees • Regional Director ruled in favor of BFI using narrowed definition of joint employer • Case appealed to the NLRB

6. NEW JOINT EMPLOYER RULES - NLRB • Browning-FerrisIndustries Decision, 362 NLRB No. 186 (2015) • Arguments from NLRB General Counsel and Union: • Contingent workforce has grown significantly – user firms exercise indirect control over terms and conditions of employment • NLRB’s current definition too narrow – should adopt broader standard to effectuate purposes of NLRA • NLRB should find joint employer status where putative employer wields sufficient influence over working conditions of other company’s employees such that “meaningful bargaining” cannot occur without putative employer • BFI is joint employer of Leadpoint’s employees because it shares or codetermines terms and conditions of employment • Arguments from BFI and employer groups: • Cannot show meaningful control by looking at contractual rights – must look to actual practice of parties • Standard proposed by General Counsel would give NLRB Regional Directors discretion to determine whether to order companies to bargain jointly • Should not resort to vague standards – need predictability in the law

7. NEW JOINT EMPLOYER RULES - NLRB • Browning-FerrisIndustries Decision, 362 NLRB No. 186 (2015) • NLRB’s Comments • Noted that under NLRA, term “employee” is not limited to employees of a particular employer • Noted that NLRB’s current joint employer standard too narrow -- must adapt to changes in economy and growth of contingent workforce • NLRB’s “New” Standard for Joint Employer • Entities are “employers” within the meaning of the common law (i.e. control) • Both entities share or codetermine those matters governing the essential terms and conditions of employment • Putative employer possesses sufficient control over employee’s essential terms and conditionsof employment – exercise of direct, actual control not necessary • New standard will require case-by-case analysis

8. NEW JOINT EMPLOYER RULES - USDOL • Joint Employer Test under FLSA Set Out 29 CFR Part 791 • Multi-factor test • Nature and degree of control of the workers • Degree of supervision, direct and indirect, of the work • Power to determining the pay rates or methods of payment of the workers • Right, directly or indirectly, to hire, fire, and modify the employment conditions of the workers • Preparation of payroll and the payment of wages • Permanency and exclusivity of employment • Ownership of the property and facilities where the work occurs • Degree of skill required to perform the job • Investment in equipment and facilities • No one factor is controlling

9. NEW JOINT EMPLOYER RULES - USDOL • Joint Employer Test under FLSA Set Out 29 CFR Part 791 • Examples of joint employer relationships per 29 CFR 791.2(b)(3) • There is an arrangement between the employers to share the employee’s services • The employer is acting, directly or indirectly, in the interest of the other employer in relation to the employee • The employers are not completely disassociated with respect to the employment of a particular employee and share the employee because one employer controls or is under common control of the other employer • If two entities are found to be joint employers, hours worked for each of the entities is aggregated to determine whether overtime is owed • Employee works 25 hours for Company A • Employee works 20 hours for Company B • Company A and Company B are joint employers • Total hours worked by shared employee is 45 for the work week • Company A and/or Company B owe employee 5 hours worth of overtime • Who pays??

10. NEW JOINT EMPLOYER RULES - EEOC • EEOC Guidelines Address Joint Employer Status • Joint employer status comes up as a jurisdictional issue • Question is whether EEOC has jurisdiction over the putative employer • Inquiry focuses on number of individuals serving the putative employer • Applicable Enforcement Guidance • EEOC No. 915.002 (12/03/97) – Application of EEO Laws to Contingent Workers Placed by Temporary Employment Agencies and Other Staffing Firms • EEOC No. 915.002 (12/22/00) – Application of ADA to Contingent Workers Placed by Temporary Agencies and Other Staffing Firms

11. NEW JOINT EMPLOYER RULES - EEOC • Factors Considered by EEOC in Determining Covered Employment • The firm or client has the right to control when, where, and how the worker performs the jobs • The work does not require a high level of skill or expertise • The firm or client rather than the worker furnishes the tools, materials, and equipment • The work is performed on the premises of the firm or the client • There is a continuing relationship between the worker and the firm or the client • The firm or the client has the right to assign additional projects to the worker • The firm or the client sets the hours of work and the duration of the job • The worker is paid by the hour, week, or month rather than for the agreed cost of performing a particular job • The worker has no role in hiring and paying assistants • The work performed by the worker is party of the regular business of the firm or the client • The firm or the client is itself in business • The worker is not engaged in his/her own distinct occupation or business • The firm or the client provides the worker with benefits (insurance, leave, workers compensation) • The worker is considered an employee of the firm or the client for tax purposes • The firm or the client can discharge the worker • The worker and the firm or client believe that they are creating an employer-employee relationship

12. NEW JOINT EMPLOYER RULES - EEOC • What Happens in Joint Employer Situations • Charge filed by joint employee is filed against both entities • Joint employer may not be told about claim filed against the other • Charges are mediated, investigated, conciliated separately • Information from one entity can be used against the other entity • If a right to sue letter is issued, it will be up to the Charging Party to decide whether to file one lawsuit against both entities, or file separately

13. NEW JOINT EMPLOYER RULES - OSHA • OSHA Launched Temporary Worker Initiative in 2013 • Purpose was to increase focus on temporary workers and employers’ responsibilities for protecting workers from workplace hazards • Agency also noted increase in use of contingent workers • Joint employment is legal concept where traditional employer-employee relationship is shared by two or more employers in such a manner that they each bear responsibility for compliance • OSHA will hold temporary staffing agency and “host” employer jointly liable for injuries • Initiative simply re-emphasized long-standing agency policy • OSHA publications recommend joint employers communicate with one another to ensure workers are protected, and responsibility in the event correction is needed

14. WHAT DOES THIS MEAN FOR BUSINESS? • Taking a “Tactical” View • Federal agencies are “dusting off” their long-standing policies regarding joint employers • There are no definitive standards for determining joint employer status -- determination made case-by-case • The more control asserted by an entity over a worker’s terms and conditions of employment, the more likely a joint employment relationship will be found • Decision on joint employment status is left to agency’s discretion • If you do not agree with the agency’s determination, your recourse is to appeal to federal court • For Hawaii employers, this may require appeal to U.S. Supreme Court

15. WHAT DOES THIS MEAN FOR BUSINESS? • Taking a “Strategic” View • Federal agencies (NLRB, USDOL, EEOC and OSHA) once again making attempts to slow the development of the economy • Concerned about growth in contingent workers • Expanding definition of “employer” and increasing their enforcement power • Agency stance will result in backlash from conservative courts and Congress • Whether the agencies efforts will continue in the long-run will depend upon results of upcoming Presidential election • In the meantime, the law will be “unsettled” • Expect more contentious litigation

16. SUGGESTIONS FOR MOVING FORWARD • Decide whether you need to outsource • Carefully select your business partners • Have legal counsel review contracts with third party companies – be sure to address (and document) • Extent of control • Cooperation in the event of an agency investigation and/or litigation • Coordination of insurance coverage • Primary and secondary liability • Designate an individual to monitor third party arrangements • Know the division of control • Stick to the contract • Reassess your needs periodically

17. FOR MORE INFORMATION • If you have any follow up questions, email us at • aes@esandalaw.com • tgibo@esandalaw.com • For access to these materials, email bdasilva@esandalaw.com • Our next webinar will be November 4, 2015 and will cover • Handling Gender Identity Issues