DOL Withdraws 2016 "Joint Employment" Guidance

By Randi Morrison posted 06-08-2017 02:17 PM

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In a piece of very welcome news, yesterday, the new DOL Secretary announced its withdrawal of the controversial "joint employment" guidance that it issued last year under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act in the form of an administrator's interpretation that has since been removed from the DOL's website. While the underlying regulations and case law remain intact, the long sought-after move potentially signifies a more business fair-and-friendly environment associated with the new administration.

Here was our report on the now-moot guidance included in last year's January 27, 2016 Society Alert - wherein we also discussed the distinct NLRB "joint employer" standard, most recently reported on in the Society Alert Leg & Reg here (see "House Members Urge Hold on NLRB 'Joint Employer' Definition"):

DOL Issues Expansive "Joint Employer" Guidance

Seemingly in response to evolving organizational and staffing models that increasingly entail employee sharing and outsourcing, last week, the DOL issued guidance on joint employment under the Fair Labor Standards Act (FSLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA) in the form of an administrator's interpretation (AI). The AI - which interprets joint employment and thus related potential employer liability under the Acts alarmingly expansively - identifies common scenarios in which two or more employers are deemed to jointly employ an employee and are thus are jointly liable for compliance with the Acts, and purports to provide comprehensive guidance so that employers can properly analyze a potential joint employment scenario. Realistically, the guidance raises additional concerns for employers who rely on subcontractors and/or outsourcing via, e.g., staffing firms.

According to the AI, employment relationships should be analyzed under both a horizontal and vertical joint employment analysis to determine if joint employment exists for purposes of the FSLA and MSPA. Horizontal joint employment may exist when two or more employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee, e.g., where a waitress works for two separate restaurants that are operated by the same entity and are sufficiently associated with respect to the waitress such that they jointly employ the waitress. Whether the employers are sufficiently associated depends - at least in part - on the specific facts as applied to nine factors outlined in the AI.

The vertical employment inquiry focuses of whether the employee of an intermediary employer (e.g., a subcontractor, staffing agency or other contracted labor/services provider) is also deemed to be effectively employed by another employer, i.e., the potential joint employer (the company that may unknowingly be liable for compliance with the FSLA with regard to the subcontracted or outsourced employees). In vertical joint employment situations, the company typically has contracted or arranged with an "intermediary employer" to provide it with labor and/or perform for it some employer functions - such as hiring and payroll. The focus in these cases is the employee's relationship with the potential joint employer and whether that employee is deemed economically dependent on that employer based on a distinct 7-factor "economic realities" analysis - not just the potential joint employer's degree of control.

According to the DOL's FAQs, the Wage & Hour Division issues AIs (described as a form of sub-regulatory guidance) when further clarity around the proper interpretation of a statutory or regulatory issue is appropriate. Morgan Lewis notes that AIs lack the binding effect of a DOL regulation. See the DOL's graphical illustrations of vertical and horizontal joint employment and additional related DOL resources here; these additional memos: Sidley, DLA Piper; and this LA Times article.

See also these articles from The Hill and the LA Times, and these memos from Faegre Baker Daniels and Fox Rothschild concerning this development, as well as the DOL's concurrent withdrawal of informal independent contractor guidance.

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