The Labor Department has expanded the circumstances under which it would consider two businesses to be “joint employers,” making both liable for legal violations by the other.
The action comes as another federal agency, the National Labor Relations Board, is pushing for a more expansive definition of the term, which would vastly expand legal liability for large employers and make it easier for unions to organize them.
The department’s wage and hour division issued an “administrator’s interpretation” Wednesday stating that the “growing variety” of business models in the economy had created “evolving employment scenarios” that required it to update its rule on joint employment, defined as when two or more employers are jointly liable for any violations of federal worker protection laws against a group of employees.
“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,” said David Weil, administrator of the Labor Department’s wage and hour division.
The announcement is not an official department rulemaking, a process that can take months or even years, and therefore has less legal weight. Rather, it is the department saying how it will interpret the existing law and indicating what types of cases it will pursue. Business groups said they had no advance word that the announcement was coming out and were still examining it.
Business groups oppose expanding the definition, arguing it is unfair to make one company liable for violations of another.
“The Labor Department’s concept of a joint employer is even worse than what we’ve seen from the NLRB,” said David French, senior vice president of the National Retail Federation. “Lawyers are already saying it’s only going to lead to more litigation. Congress has to stop the spread of this Orwellian Big Brother approach to government before it can go any further. This type of interference in well-established business practices is just one more roadblock to job creation and economic recovery. Ultimately, it’s American workers and families who will suffer.”
Randel Johnson, the Chamber of Commerce’s senior vice president for labor, immigration and employees benefits, characterized the move as the administration trying to squeeze out whatever it could before President Obama’s tenure ends and a new administration takes over.
“They have only got months left. They’re going to be pumping this stuff out in the hopes that some court of appeals picks up on it and defers to the agency,” Johnson said. “We expect a salvo of these kind of things as the administration winds down.”
Historically, the joint employer standard that the government has used is when both employers have active, direct control over the workers. The labor board, the main federal enforcement agency for union-related issues, has recently challenged that. In a decision last year in a case called Browning-Ferris, it said that under the National Labor Relations Act contractors can be considered to be joint employers of their subcontractors’ workers. The board is also pursuing a case against McDonald’s Corp., saying that it is a joint employer with its franchisees, despite of them being privately owned business that rent out the corporate brand. The labor board’s standard would make labor organizing easier by allowing the unions to target the corporate parent rather than going after individual frachisees.
Business groups have called on Congress to rein in the labor board. Some Republican lawmakers agree, but those efforts have gained little traction.
Wednesday’s announcement by the Labor Department said that it would extend similar logic from the Browning-Ferris and McDonald’s cases to ones involving the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, laws that cover worker compensation. The department will now consider there to be a joint employment situation if one company has “indirect” control over another employer’s workforce, making both liable for ensuring that the employees are properly compensated.
“In other words, each joint employer is individually responsible, for example, for the entire amount of wages due. If one employer cannot pay the wages because of bankruptcy or other reasons, then the other employer must pay the entire amount of wages; the law does not assign a proportional amount to each employer,” the announcement said.
This would be especially true in cases in which “one employer may also be larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance,” the announcement said. In effect, the department is saying it will start pursuing more cases against large companies involving violations by smaller ones that it did business with.
“That’s why this administration wants an expansive definition of who is a joint employer. The question here is to what degree has David [Weil] changed the legal standards to get to the result he wants to get at,” Johnson said.
