Joint Employment: DOL Issues Adminstrator’s Interpretation
By Martha J. Zackin
The legal concept of joint employment has been around for many years, first gaining national prominence in 1996, after a federal appeals court found Microsoft to be a co-employer of thousands of workers classified either as “contractors” or “temporary employees” retained through a staffing company. The case, Vizcaino v. Microsoft,, 97 F.3d 1187 (9th Cir. 1996), ultimately settled for $97 million dollars.
In 2015 the National Labor Relations Board weighed in, with Browning-Ferris Industries of California, Inc., 362 NLRB No. 186. As described in a press release describing the BFI decision, the NLRB will now find two or more entities to be joint employers of a single workforce if “(1) they are both employers within the meaning of the common law; and (2) they share or codetermine those matters governing the essential terms and conditions of employment.” In evaluating joint employment status, the NLRB considers whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, such as a staffing company. Remarkably, with BFI, the NLRB will find joint employment even where a company has not actually exercised control, but has merely “reserved the authority to do so.”
Multiple federal courts also joined the discussion in during 2015, with both the Third and the Fourth Circuit Courts of Appeals finding staffing buyers to be joint employers with the staffing companies whose workers performed the services. Although the tests applied by the courts were slightly different, the courts in both Butler v. Drive Automotive, 793 F.3d 404 (4th Circuit 2015) and Faush v. Tuesday Morning, Inc., (3rd Circuit 2015) focused on the staffing buyers’ right to control the manner and means by which the work was performed.
Today, the Department of Labor offered its view on joint employment, issuing Administrator’s Interpretation No. 2016-1. Not surprisingly, the DOL advocates an expansive definition of joint employment “to ensure that workers receive the protections to which they are entitled.” Within the Administrator’s Interpretation, the DOL introduces the concepts of “horizontal joint employment” and “vertical joint employment.” According to the DOL, both “horizontal” and “vertical” joint employment exist when “an employee is employed by two (or more) employers and the employers are responsible, both individually and jointly, for that employee under the law.” With “horizontal” joint employment, an employee may be employed by two companies that share operations. The “vertical” joint employment relationship is akin to the traditional staffing relationship, where a business obtains workers through an arrangement with an intermediary employee.
With the Administrator’s Interpretation, the DOL also published a blog entry, along with FAQ’s graphic illustrations of “horizontal joint employment” and “vertical joint employment.”
A broad standard of joint employment will have a significant impact on many businesses. For example, entities deemed to be joint employers may find themselves liable for actions taken by their contractors and suppliers, if those contractors and suppliers are deemed to be joint employers. Moreover, under the expansive definition described above, non-unionized employers found to be joint employers of unionized entities may find themselves subject to collective bargaining obligations. Small businesses and franchise owners may be responsible for medical care under the Affordable Care Act, among other laws, if their employees are grouped together and counted with the employees of their co-employers.
Stay tuned for further developments.