Joint Employer Issues

Transcription

1 Garen Dodge Jackson Lewis P.C. Reston Diane Ennist Carey International, Inc. Washington, D.C. Joint Employer Issues February 23, 2016 Tegna (and webcast) ACC-NCR McLean, Virginia 22107

2 Garen Dodge Garen E. Dodge is a Principal in the Washington, D.C. Region, office of Jackson Lewis P.C. He is Leader of the firm s Government Relations practice, and co-coordinator of the firm s Government Contracts industry group. He is also a co-coordinator of the firm s Background Checks industry group. Mr. Dodge s diverse practice covers the spectrum of labor and employment litigation. His recent victories include serving as lead counsel in a jury trial alleging defamation in Fairfax, Virginia Circuit Court, obtaining an injunction in DC federal court in a noncompete case, and prevailing in a five day arbitration involving allegations of age and national origin discrimination. Throughout his career, he has served as counsel of record in seminal U.S. Supreme Court and appellate cases as Amicus Curiae. Mr. Dodge advises clients on issues involving privacy, discrimination, background checks, harassment, wage and hour, and occupational safety and health. He assists companies in establishing workplace programs, and trains supervisors and employees on effective personnel policies. He represents clients before Congress and key federal agencies on labor and employments issues, and has testified before agencies such as the U.S. Commission on Civil Rights. Mr. Dodge has been recognized by Smart CEO as one of its Go To Lawyers and by Lawdragon as a Leading Lawyer. For many years, he has also been named a Super Lawyer in both Washington, D.C. and Virginia, and has long been AV rated by Martindale-Hubbell. Mr. Dodge is a member of the Virginia, District of Columbia and Wisconsin bars. He is a Member of the United States Supreme Court bar, as well the federal and state courts in Virginia, District of Columbia and Wisconsin. He is a member of the Labor Relations Committee of the U.S. Chamber of Commerce and serves as General Counsel to the Council for Employment Law Equity. He served as an Attorney-Advisor for the U.S. Department of Labor, Office of the Secretary, Benefits Review Board from Mr. Dodge received his B.A. summa cum laude from the University of Wisconsin Green Bay in He earned his J.D. in 1982 from the College of William & Mary Marshall-Wythe School of Law. 2

3 Diane Ennist Diane Ennist is SVP, General Counsel and Corporate Secretary of Carey International, Inc., a global leader in chauffeured transportation since She oversees all of Carey's legal affairs, as well as the franchise department. Prior to joining Carey in 2006, Diane was the Vice President, Deputy GC of Litigation for Freddie Mac. Before that, Diane was a Senior Trial Counsel at the United States Department of Justice and earlier, practiced commercial litigation at a large law firm in Ohio. She serves on the ACC NCR Board. Diane graduated from the University of Rochester with a B.A. Magna Cum Laude with High Distinction. She received her J.D. with Honors from the Ohio State University and was elected to the Order of the Coif. She is a member of the bars of the States of Ohio (inactive) as well as Virginia, the District of Columbia, several federal appellate bars, and the United States Supreme Court. Diane is the immediate past president of the board of Family Services, Inc., a diverse $25 million social service non-profit and serves as a co-chair of ACCNCR s Diversity Committee. 3

4 Presentation Outlook The NLRB s New Joint Employer Standard DOL s Interpretation Legislative Action in Wake of the Board s New Standard o Federal o State Impact of the New Standard on Other Federal Agencies o Department of Labor (FLSA, FMLA, OSHA) o U.S. Equal Employment Opportunity Commission (EEOC) o Office of Federal Contract Compliance Programs (OFCCP) Practical Considerations to Minimize Finding of Joint Employer Status Walling Off Subsidiary/Affiliate 4

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6 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) Browning-Ferris (BFI) operates a waste recycling facility. BFI subcontracts employees from Leadpoint to sort recyclable items inside the facility and to perform basic housekeeping functions. Teamsters (Union) filed a petition to represent approximately 240 employees, which were comprised of sorters, housekeepers, and screen cleaners. The Union already represented approximately 60 direct BFI employees who worked on the exterior of the facility. 6

7 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) Prior Joint Employer Standard: Where two separate entities share or codetermine those matters governing the essential terms and conditions of employment. Control must be direct and immediate (i.e. hiring, firing, supervision, and direction). 7

8 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) New Modified Joint Employer Standard: (1) whether a common law employment relationship exists; (2) whether the potential joint employer possesses sufficient control over employees essential terms and conditions of employment to permit meaningful bargaining. Control under the new standard can be direct, indirect, or even a reserved right to control, whether or not that right is ever excised. 8

9 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) What Does the Board Consider a Common Law Employment Relationship? o Restatement (Second) of Agency o Section 220(1) provides that a servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other s control or right to control. (emphasis added) 9

10 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) What is sufficient control under the new joint employer standard? Direct, Indirect, or a Reserved Right to Control. Whether or not that right is ever exercised. 10

11 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) Possible indicators of joint employer status: Controlling the number of employees needed for job or task. Safety rules and standards. Establishing production standards. Determining job duties. Instruction relating to the means and manner to accomplish a job. 11

12 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) Possible indicators of joint employer status (continued): Training employees or establishing employee training requirements. Indirectly controlling employees wages through a commercial agreement. Retaining potential control over employment conditions reserved in commercial agreements. Retaining the right to terminate the relationship. Requiring employees to follow rules or handbooks. 12

13 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) Possible indicators of joint employer status (continued): Imposing highly standardized operational requirements. Owning facilities/equipment where employees work. Requiring operational modifications. Monitoring and auditing operations. Setting maximum wage rates for employees. 13

14 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015) Current Status On September 4, 2015, a tally of ballots showed a vote in favor of union representation. The Teamsters were certified. Teamsters filed an unfair labor practice charge against BFI, claiming that the Company was refusing to recognize or bargain with the Union. The Board issued a unanimous decision, finding BFI and Leadpoint, as joint employers, had violated the NLRA. BFI appealed the decision to the U.S. Court of Appeals for the D.C. Circuit on January 20,

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16 U.S. Department of Labor FLSA AI Wage and Hour Administrator David Weil Protecting workers in fissured workplaces Expanding the definition of employer both horizontally and vertically. Using an Administrator s Interpretation and FAQ s to provide clarity around the proper interpretation of a statutory or regulatory issue. January 20, 2016 Administrator s Interpretation No Fair Labor Standards Act Statutes share the same definition of employment, includes to suffer or permit to work. This definition was written to have as broad an application as possible. Distinct from narrow definition of employment under NLRA AI is not the law but is the agency's standard and may be accorded deference by the courts 16

17 U.S. Department of Labor FLSA AI Horizontal Joint Employment Where employee has employment relationship with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee. Focus is on the relationship of the employers to each other. FLSA regulations provide guidance on how to analyze the relationship Example 1: Separate restaurants that share economic ties and have same managers controlling both restaurants Example 2: Home health care providers that share staff and have common management. 17

18 U.S. Department of Labor FLSA AI Horizontal Joint Employment 18

19 U.S. Department of Labor FLSA AI Relevant Factors for Assessing Horizontal Joint Employment Who owns the potential joint employers; Do the potential joint employers have any overlapping officers, directors, executives, or managers; Do the potential joint employers share control over operations; Are the potential joint employers operations inter-mingled; Does one potential joint employer supervise the work of the other; Do the potential joint employers share supervisory authority for the employee; Do the potential joint employers treat the employees as a pool of employees available to both of them; Do the potential joint employers share clients or customers; and Are there any agreements between the potential joint employers. 19

20 U.S. Department of Labor FLSA AI Vertical Joint Employment o Where the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider or other intermediary employer) and the economic realities show that he/she is economically dependent on, and thus employed by, another entity involved in the work. o Unlike horizontal joint employer relationship, vertical joint employment analysis examines the economic realties of the worker to determine whether the employees are economically dependent on those potential joint employers an are thus their employees. 20

21 U.S. Department of Labor FLSA AI Vertical Joint Employment 21

22 U.S. Department of Labor FLSA AI Factors for Assessing Vertical JE and Economic Dependence Directing, Controlling, or Supervising the Work Performed Controlling Employment Conditions Permanency and Duration of Relationship Repetitive and Rote Nature of Work Integral to Business Work Performed on Premises Performing Administrative Functions Commonly performed by Employers 22

23 U.S. Department of Labor FLSA AI Impact of Administrator s Interpretation The Administrator s Interpretation is not the law. It is the DOL s interpretation of established law. Will likely be provided judicial deference Allows employers to predict focus of DOL investigation Provides clear guidance for DOL investigators Likely used by other agencies to expand the definition of joint employment 23

24 U.S. Department of Labor FLSA/MSPA Potential cost of joint employer status: o wage and overtime liability together with liquidated damages and the worker s attorneys fees. Potential sources of joint employer liability: o Specific industries have been frequent targets of wage and hour claims and investigations. o Specific industries have become a favorite target for class, FLSA collective, and multi-plaintiff lawsuits seeking millions of dollars and often driven by attorneys' fees claims. 24

25 U.S. Department of Labor FLSA AI Previous AI in 2015 regarding independent contractors expanded the definition of employee. This January 2016 AI expands the definition of employer Prior focus was on the horizontal employer Now the focus is also on the vertical employer 25

26 Congressional Action in Response to NLRB s New Joint Employer Standard The Protecting Local Business Opportunity Act (S.2015/H.3459) was introduced on September 9, 2015 by Senator Lamar Alexander (R-Tenn) and House Representative John Kline (R-Minn). The Act seeks to amend the definition of employer under the NLRA. o Section 2(2) of the National Labor Relations Act (29) U.S.C. 152(2)) is amended by adding at the end the following: Notwithstanding any other provision of this Act, two or more employers may be considered joint employers for purposes of this Act only if each shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct and immediate.. 26

27 Congressional Action in Response to NLRB s New Joint Employer Standard Appropriations Rider Sec None of the funds made available by this Act may be used to investigate, issue, enforce or litigate any administrative directive, regulation, representation issue or unfair labor practice proceeding or any other administrative complaint, charge, claim or proceeding that would change the interpretation or application of a standard to determine whether entities are joint employers in effect as of January 1,

28 Congressional Action in Response to NLRB s New Joint Employer Standard On September 28, 2015, Senator Mike Lee (R-UT) introduced The Protecting American Jobs Act (S. 2084) which would transfer prosecutorial and adjudicative authority over labor disputes from the NLRB to federal courts. The bill would effectively strip the Board of its power to prosecute and adjudicate labor dispute. 28

29 Washington DC Efforts Coalitions: CSLB Strategy: FY 2017 Appropriations Rider March 17, 2016 Hearing, House Small Business Subcommittee 29

30 State Legislative Action Several states have passed legislation aimed at curtailing the impact of the NLRB s new joint employer standard. On February 1, 2016, the Indiana House of Representatives passed bipartisan legislation (House Bill 1218) codifying that a franchisor is not considered to be an employer of a franchisee or a franchisee s employees. Tennessee, Texas, Michigan and Louisiana recently passed legislation which provides that a franchisor shall not be considered an employer of a franchisee or the franchisee s employees. 30

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32 U.S. Department of Labor Family and Medical Leave Act Issued in January 2016 o Issued Fact Sheet #28N: Joint Employment and Primary and Secondary Employer Responsibilities Under FMLA Definition of Joint Employment: o Joint employment exists when an employee is employed by two (or more) employers such that the employers are responsible for compliance with the FMLA. 32

33 U.S. Department of Labor Family and Medical Leave Act The primary employer is responsible for: o Giving required notices to its employees; o Providing FMLA leave; and o Maintenance of health benefits. The primary employer is also mostly responsible for job restoration. 33

34 U.S. Department of Labor Family and Medical Leave Act A secondary employer is responsible for accepting the individual upon return from FMLA o As long as the company continues to use an employee from the staffing agency, and the agency chooses to place this employee with the company. As a secondary employer, the company would also be prohibited from interfering with an employee's FMLA rights and also from discriminating against him/her for protected activities, even if the company is not otherwise a covered employer, as defined above, under the FMLA 34

35 U.S. Department of Labor Family and Medical Leave Act Determining who is a primary and secondary employer: o Who has authority to hire and fire, and to place or assign work to the employee; o Who decides how, when, and the amount that the employee is paid; and o Who provides the employee s leave or other employment benefits. In the case of a temporary placement or staffing agency, the agency is most commonly the primary employer. 35

36 U.S. Department of Labor Family and Medical Leave Act Employees who are jointly employed by two employers must be counted by both of them in determining the employer s coverage and employee eligibility under FMLA, regardless of whether the employee is maintained on one or both of the employers payrolls. The employees worksite is the primary employer s office from which the employee is assigned or to which the employee reports. o However, if the employee has physically worked for at least one year at a facility for a secondary employer, then the employee's worksite is that location. 36

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38 U.S. Department of Labor Occupational Safety and Health Administration Draft policy prepared by DOL s Office of the Solicitor illustrates the agency s intent to hold franchising corporations responsible, at least in part, in OHSA and other labor law enforcement actions against franchisee businesses. The draft policy addresses whether, for purposes of OSHA, a joint employment relationship can be found between the franchisor and the franchisee, leading both entities to be liable as employers. 38

39 U.S. Department of Labor Occupational Safety and Health Administration A joint employer standard may apply where the corporate entity exercises direct or indirect control over working conditions, has the unexercised potential to control working conditions, or based on the economic realities. o Control includes such matters as hiring, firing, discipline, supervision and direction. Draft policy also contains laundry list of documents and information OSHA should obtain to reach its determination. 39

40 U.S. Department of Labor Occupational Safety and Health Administration If OSHA s (draft) joint employer policy advances, OSHA s ability to cite a host employer would be enhanced and could be used by unions as leverage against employers who have been targeted for organizing. An expansion of the joint employer standard could also provide an opportunity for OSHA to ratchet up fines against a parent company for repeated violations. 40

41 U.S. Department of Labor Occupational Safety and Health Administration In January 2015, two GOP house leaders accused the DOL of lying about not coordinating with the NLRB on the draft policy. These allegations come in light of new evidence showing that the NLRB s GC and staff at the DOL discussed the joint employer standard over a video conference call. Due to the significance of the NLRB s new joint employer standard, it is not surprising that discussions would have taken place in advance of its issuance; however, the DOL s failure to provide correspondence or otherwise cooperate with the investigation is, at best, curious. 41

42 Joint Employer Liability Regulated by The U.S. Equal Employment Opportunity Commission The EEOC filed an amicus brief in Browning-Ferris stressing that the Board s joint employer standard will influence judicial interpretation of Title VII. Compensatory damages are capped under Title VII, and the caps generally increase as the number of employees increases. Thus, the plaintiff s bar will be encouraged to establish joint employer status because doing so could increase the number of employees, thereby increasing the amount of available damages. Threshold coverage may impact the small business exception. 42

43 Joint Employer Liability Regulated by The Office of Federal Contract Compliance OFCCP administers and enforces three federal contractbased rights laws that require most federal contractors and subcontractors, as well as federally assisted construction contractors, to provide equal employment opportunities. Anticipated expansion of jurisdictional reach through single entity test. Published a question and answer application on the single-entity test which contains 27 questions to guide potential contractors through the analysis. 43

44 Practical Considerations to Minimize Finding of Joint Employer Status There is no specific test. Ensure that the agreement with the contractor supports the fact that you are not a joint employer; and ensure that the practice is consistent with the agreement. One end of the continuum is to give the contractor complete control, and evaluate contractor s performance. On the other end of the continuum is to eliminate the contractor entirely and directly employ those working at the facility. 44

45 Practical Considerations to Minimize Finding of Joint Employer Status Review and revise agreements to support your position that Company A is not a joint employer of Company B s employees. Some terms to consider for the contractor agreement: o Company B s employees are solely employed by Company B; the parties do not intend to create a joint employer relationship. o Recite that Company B alone retains the sole right to and then include a list of employment decisions such as hire its employees, determine their wages and benefits, assign, schedule, train, discipline, and terminate its employees. o Include a statement that Company A shall not and does not have the right to.and include all of the rights Company B alone has in this list. 45

46 Practical Considerations to Minimize Finding of Joint Employer Status Ensure that Company B has its own employment policies and procedures. You can review them as part of due diligence when deciding whether to enter into or renew your contract with them. To the extent Company A concludes that it must exercise some control over the operation, minimize it to the extent possible and realize that any control, or right to control, that you retain may be used against you to support a finding that you are a joint employer. 46

47 Practical Considerations to Minimize Finding of Joint Employer Status Review indemnification language. Consider requiring Company B to indemnify Company A for any costs incurred in opposing a joint employer claim. o Include language that Company B will cooperate with you in presenting your defense to the joint employer claim by making available management representatives to prepare for hearings and to testify at hearings, and to provide documents reasonably requested by Company A relating to this issue. o Should Company B reimburse Company A s representative for the cost of bargaining? Bring the contracted work in-house. 47

48 Governance Structure Practical Tips to Wall Off A Subsidiary or Affiliate o Rather than a VP or General Manager, implement a corporate structure with truly separate president, board and officers o Board members unique to that company (no overlapping board members between sub and parent) o Processes and presentations to report up to the board of parent o Strict adherence to corporate formalities such as board meetings, keeping Minutes, and structured reporting mechanisms o Sub should have its own policies, even if mirror those of the parent, and should be tailored for the subsidiary o Contract between parent and sub (possibly a franchise contract) should make clear that parent is not a joint employer with the sub o No specific safe harbor 48

49 Employment Structure Practical Tips to Wall Off A Subsidiary or Affiliate o Focus on employment, hiring, firing, reviews, discipline, supervision, pay decisions o All HR decisions for the sub must be made locally o Employees at the sub only work for the sub and are paid by the sub o If parent has employees in that jurisdiction, set up a new payroll company o Move the employees of the parent to a different facility so they are not in the same building o No cross-use of employees between parent and sub. Employee works for one or the other o Sub should have separate connection to the payroll services provider (could be in a Shared Services Contract ) o Sub takes physical possession of the personnel files and maintains them (will need secure facility) o Training to take on new officer and director roles 49

50 Practical Tips to Wall Off A Subsidiary or Affiliate Other o Check real and personal property leases so that only the sub is on the lease o Consider your insurance policies. DIC (Difference In Coverage) insurance for your new officers and directors o Develop Shared Services Contract (for services such as bank accounts, billing, marketing) shared with the parent o Accounting must be able to accurately track the credits and debits between parent and subsidiary o Be sure you can produce separate P&Ls o Necessarily means ceding control by parent, but separation must be real and not window-dressing 50

51 Joint Employer Issues Questions? Garen Dodge (703) Diane Ennist (202) (Version 1) 51