U.S. Government Signals More Businesses Liable as Joint Employers

By Robert Iafolla, Andrew Hay and Alexia Garamfalvi

(Reuters) – More U.S. companies could be classified as “joint employers” of workers employed by a staffing agency or contractor and held liable for labor violations tied to those staff, the U.S. Labor Department said in guidance recently published.

Joint employment has emerged as a major issue in franchising, contracting, temporary staffing and other arrangements in which companies use workers but do not directly employ them.

The guidance could affect companies ranging from construction firms to restaurant chains that might be held responsible if, for instance, one of their temp workers did not get paid minimum wage by her employer.

“As the workplace continues to fissure, and as employment relationships continue to become more tenuous and murky, we will continue to identify where joint employment applies and to hold all employers responsible,” David Weil, the administrator of the Labor Department’s Wage and Hour Division, said in a blog post Wednesday.

The department is tasked with enforcing the Fair Labor Standards Act, which sets out standards for minimum wage and overtime pay. The guidance can be used in litigation and administrative proceedings and courts may pay deference to it, though they are not required to because it is not a formal regulation.

In a 15-page document the department explained how to analyze joint employment in “vertical” arrangements, when one company contracts with another company, and “horizontal” arrangements, when one worker is employed by two related companies.

The guidance comes as the Obama administration is moving to make millions more Americans eligible for overtime pay under the FLSA. The Labor Department issued a proposed rule last year that would more than double the maximum income a salaried worker can earn and still be eligible for mandatory overtime to $50,440.

It is also part of a broader federal government push to hold employers accountable to workers. In August, the National Labor Relations Board, which oversees labor law issues related to collective bargaining, expanded its standard for determining joint employment in the long-awaited Browning-Ferris Industries decision.

A trial that could start next month over whether McDonald’s USA is liable for the alleged labor violations of its franchisees is expected to provide an early test of how the board’s standard applies to franchising.

Wednesday’s guidance, while non-binding, could play a significant role in class action litigation for unpaid overtime and other labor violations by emboldening plaintiffs’ lawyers to bring new lawsuits, said Allan Bloom, an attorney with the law firm Proskauer Rose.

© 2016 Thomson Reuters

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