WASHINGTON — The Labor Department on Wednesday waded deeper into the contentious issue of joint employment, seeking to clarify who is accountable for violations of employment laws when two different entities, like a manufacturer and a staffing agency, both have ties to the same worker.þþThe department issued the guidance as arguments in a high-profile case that raises similar questions involving McDonald’s are set to begin before an administrative law judge as early as next month. The case will help determine whether McDonald’s is a joint employer and whether it therefore shares responsibility for alleged labor violations at some of its franchised stores.þþ“I think there are misconceptions that are out there in the business community, both intentional and unintentional, about what really are their responsibilities,” David Weil, the administrator of the Labor Department’s wage and hour division, said in an interview. “As many of these industries become more complex, some of those misconceptions have increased.”þþThe Labor Department, through Mr. Weil’s division, is charged with enforcing the federal employment laws that grant minimum wage and overtime protections, and the guidance details, in effect, when a company could be held liable for violations on the part of a contractor or staffing agency it hires or a franchisee it has a relationship with. In some cases the joint employer determination is critical for recovering unpaid wages because the contractor is a shell company with few resources of its own.þþTogether with earlier high-profile guidance issued last summer, which sought to bring clarity to the question of who companies must classify as an employee and who they can classify as an independent contractor — an increasingly contentious issue for so-called gig economy companies like Uber and Lyft — the guidance appears intended to influence the thinking of employers in a way that long outlives the current administration.þþ“When you’re crafting an administrator’s interpretation, you don’t craft it for a life span of the next year,” Dr. Weil said. “It’s an enduring document. It has legs beyond next January.”þþOne critical source of confusion on the issue is the difference between the joint employer doctrine as it relates to workers’ rights to organize, which are protected by the National Labor Relations Board, and the doctrine as it relates to minimum wage and overtime protections, which the Labor Department is responsible for enforcing.þþIn labor organizing, which applies in the McDonald’s case, the main question is whether the parent company exercises control, directly or indirectly, over employees at another company like a franchise or contractor. For example, if the parent company effectively supervises employees of a franchisee, or can effectively hire and fire them, that is typically a strong indication of joint employment.þþBy contrast, the Labor Department relies on a substantially broader doctrine to determine joint employment when it enforces the laws that grant minimum wage and overtime protections, having to do with the underlying “economic realities” of the situation.þþUnder that doctrine, an upstream company can be considered a joint employer of another company’s workers even if it doesn’t exert direct or indirect control over them. If the upstream company handles payroll and provides facilities, equipment and transportation for workers of a contractor that it hires, for example, and if the workers are easily replaceable, this might warrant considering it a joint employer, even if it doesn’t supervise the workers or hire and fire them.þþAccording to the guidance, quoting a federal circuit court opinion, “courts have found economic dependence under a multitude of circumstances where the alleged employer exercised little or no control or supervision over the putative employees.”þþIn a blog post accompanying the guidance, Dr. Weil noted that the joint employment issue had become more urgent as companies had adopted a greater variety of arms-length arrangements with workers. He cited recent victories by the department, on behalf of workers, against DirecTV, which a federal court in Washington State deemed last year to be a joint employer of installers hired by a contractor, and J & J Snack Foods, which agreed to pay over $2 million in back wages and damages to workers hired by two staffing firms the company relied on.þþUnlike a law or a formal regulation, Dr. Weil’s guidance does not receive deference in courts, which are free to disregard it. But Michael C. Harper, an expert on employment and labor law at Boston University School of Law, pointed out that such guidances could influence actions by employers, often under the influence of management lawyers urging clients to take pre-emptive action.þþConversely, plaintiffs’ lawyers may find the interpretation helpful when litigating cases. “You have a document you can present in court,” said Benjamin I. Sachs, a professor of labor and employment law at Harvard Law School. “You can say the administrator of the wage and hour division sees it this way.”þþMr. Harper warned, however, that the guidance risked creating confusion around some of the same issues it was written to clarify. He suggested that “economic dependence” was itself a vague concept. “If I operate a hamburger joint across from a big manufacturing plant, I’m dependent on that plant,” he said, “but my employees are not employees of that plant.”þþMr. Harper said that as a policy matter he preferred applying the joint employment concept in a way that focused on the capitalization of the downstream company. Under that approach, if the contractor or franchisee runs a fly-by-night operation with little or no capital, then the upstream company should be pursued as a joint employer, he argued. If the contractor or franchisee has capital and can afford to pay back wages, then it would generally be the one the department pursues.þþBefore his Labor Department appointment, Dr. Weil brought attention to what he has termed the “fissuring” of the workplace, thanks to the rise of more arms-length employment relationships. Some critics of the new guidance say it unfairly impugns the motives of employers.þþ“I think there’s an unfortunate suggestion that these relationships are structured to deny a fair day’s pay for a fair day’s work,” said Marshall B. Babson, a Democratic lawyer appointed to the National Labor Relations Board by President Ronald Reagan who now represents employers in labor cases. He said that if someone worked for a staffing agency and was not paid properly, then the staffing agency should be “on the hook” for the violation.þþAsked about responses in this vein from the business community, Dr. Weil said that he viewed his guidance on this and other issues as “teachable moments” that would benefit both workers and their employers by making enforcement action less necessary.þþ“I fully plan to speak to a lot of business groups in the next few months,” he said. “I want people to understand what we’re doing, why we’re doing it.”
Source: NY Times
