Joint Employment: The Long and Winding Road

PK Law previously reported upon the decision of the National Labor Relations Board (“NLRB”) regarding Browning Ferris Industries (“BFI”) and the creation of a “new” joint employment standard.  That new standard substituted indirect control, or a reserved right to control, whether or not actually exercised, over employment issues for direct control over those issues in National Labor Relations Act (“NLRA”) matters.  After that decision, in August, 2015, the Teamsters were certified as the bargaining unit for the workers in question in the BFI matter.  BFI refused to bargain with the Teamsters; it filed an unfair labor practices charge with the NLRB; and the NLRB held that the NLRA was violated by BFI.  BFI appealed the case to the U.S. Court of Appeals for the District of Columbia Circuit in order to challenge the August, 2015 determination that it was a joint employer with a staffing agency that supplied workers to BFI.  (Browning Ferris Industries of California, Inc. d/b/a BFI Newby Island Recycling v. The National Labor Relations Board, Case No. 16-1028, January 20, 2016, Motion to Intervene filed by Teamsters Local 350, January 29, 2016.)  In a decision subsequent to the NLRB’s decision in the BFI case the NLRB held that applying the new standard to the facts of the subsequent case did not result in the creation of a joint employment relationship. (Green Jobworks, LLC/ACECO, LLC (A Joint Employer), Employers, and Construction and Master Laborers’ Local Union No. 11, Petitioner, Case No. 05-RC-154596, October 15, 2015.)

On January 20, 2016 the U.S. Department of Labor, Wage and Hour Division (“DOL”) issued Administrator’s Interpretation No. 2016-1, “Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act” in which “Horizontal and Vertical Employment Analyses in FLSA and MSPA Cases” is discussed.  The guidance states that “The vertical joint employment analysis is used to determine, for example, whether a construction worker who works for a subcontractor is also employed by the general contractor, or whether a farmworker who works for a farm labor contractor is also employed by the grower.”  However, that guidance states very definitively that:

“As WHD [Wage and Hour Division] has explained, the Supreme Court and the Circuit Courts of Appeals apply an economic realities analysis to determine the existence of an employment relationship under the FLSA and MSPA. See, e.g., Home Care AI; Misclassification AI; Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 301 (1985) (the test of employment under the FLSA is economic reality); Goldberg v. Whitaker House Co-op, Inc., 366 U.S. 28, 33 (1961) (the economic realities of the worker’s relationship with the employer are the test of employment); 29 C.F.R. 500.20(h)(5)(iii). The particular economic realities factors relied upon differ somewhat depending on the court, and courts routinely note that other additional relevant factors may be considered, but regardless, it is not a control test.” (emphasis added)

The guidance went on to analyze seven factors which it believes to be indicative of “economic realities”:

  1. Directing, Controlling, or Supervising the Work Performed.
  2. Controlling Employment Conditions.
  3. Permanency and Duration of Relationship.
  4. Repetitive and Rote Nature of Work.
  5. Integral to Business.
  6. Work Performed on Premises.
  7. Performing Administrative Functions Commonly Performed by Employers.

 Although several of the above indicate control to be a relevant factor and the guidance states that some courts look solely to the control factors, the emphasis ought to be on “economic realities” and an “…expansive definition of “employ” as including “to suffer or permit to work” must be considered when determining joint employment…” so as to further the remedial purposes of the FLSA and MSPA.

 In March, the battle over joint employment status took another turn on the long and winding road through the NLRB and, eventually, the courts, when McDonald’s appeared before the NLRB for regional hearings on its status as a joint employer with its franchisees.  The hearing officer for the NLRB will either dismiss the case, which is unlikely, or proceed to determine two things:  whether McDonald’s, the franchisor, is a joint employer with its franchisees and, if so, whether it has violated federal labor laws.  According to published reports, opening statements have been given by McDonald’s Corp. (franchisor and its franchisees) and the NLRB’s attorneys.  Witnesses will provide testimony, according to those reports, beginning the week of March 14.  The hearings, to be held in NLRB regions across the country, stem from the 2014 opinion of the NLRB’s General Counsel that McDonald’s could be held liable for any unfair labor practices of its franchisees.

Holding McDonald’s as a joint employer could make the unionization of workers easier by allowing a vote on collective bargaining across all franchised restaurants as opposed to individual locations.  If union representation is obtained, it is possible that the collective bargaining process would produce a demand for higher wages for workers as well as make them eligible for more benefits under various state and federal laws.  For McDonald’s, it would be faced with higher costs in the form of liability insurance for acts of its franchisees as well as the cost of greater benefits and wages for workers which it may be forced to share with franchisees.

PK Law’s Employment and Labor attorneys have extensive experience in the application and interpretation of wage and hour laws for employers.  To contact an attorney in PK Law’s Worker Misclassification and Wage and Hour Law Group click here.  For additional information contact information@pklaw.com.

 This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.