NATSO Analysis: Joint Employer and the Nature of Employment

As NATSO has previously reported, the National Labor Relations Board (NLRB) in December reversed the controversial Obama-era standard for "joint employment" under the National Labor Relations Act. This was a positive development for employers, particularly in the travel center industry where contract workers (such as equipment inspectors and delivery personnel) and franchise relationships are ubiquitous. However, businesses must remain vigilant of these issues because joint employer liability remains a fact-specific, often state-by-state issue.

NATSO members have grappled with uncertainty about the definition of "joint employer" since 2015, when the NLRB issued a decision known as "Browning Ferris." In that case, the NLRB ruled that by merely exercising indirect control, or by possessing unexercised potential control over work conditions, one could be a joint employer.

As a joint employer, a company may be held liable for labor violations committed by other employers with whom they contract. A company would also assume collective bargaining responsibilities if the other employer was unionized. This had the potential to inject serious complexity into travel centers' business operations: Some companies feared that they would be considered joint employers with all of their contractors, franchisees, etc., and decided to enhance their control over those entities' day-to-day operations in order to mitigate liability exposure. Some NATSO members feared that they would have to get more involved, for example, in who equipment inspectors hired and how many hours those individuals worked per week. They also feared losing control of their franchisee operations (e.g., quick-service restaurants in their facility) if the franchisor elected to impose near total control over their franchisees.

On the other hand, some companies took the opposite approach under the expanded joint employer standard and tried to exert significantly less control over their contractors and franchisees, neglecting to assist counter-parties on certain matters for fear of triggering joint employer liability.

The uncertainty surrounding the issue created much confusion and higher operational and legal costs.

NATSO welcomed, therefore, the NLRB recently reviving the much narrower, easier to understand and implement, pre-Browning-Ferris NLRB joint employer standard. Specifically, the NLRB clarified that going forward, "a finding of joint employer status shall once again require proof that putative joint employer entities have exercised joint control over essential employment terms (rather than merely having 'reserved' the right to exercise control), the control must be 'direct and immediate' (rather than indirect), and joint-employer status will not result from control that is 'limited and routine."

For example, now, merely telling employees what work to perform, or where and when to work, would generally not satisfy this narrower joint employer standard. Rather, to create a joint employer relationship, the putative employer must also have directed the employees on how to perform the job.

Although this is a step in the right direction, there is still no guarantee that the narrower "direct control" standard will be permanent. For this reason, NATSO continues to support the Save Local Businesses Act, which the House of Representatives passed last year. The legislation, which faces an uphill battle in the Senate, would cement the more favorable joint employer standard into law and eliminate the prospect that the standard will remain fluid as presidential administrations change.

The labor community will continue to push back on efforts to undercut the joint employer standard, however, and employers should be prepared for much fluidity in the months and years ahead.

There has been a consistent trend in recent years where employer-employee relationships are being abandoned in favor of more contract / free-lance work (think Uber's relationship with its drivers). The labor community strongly believes that formal employment is preferable for a variety of reasons (access to unemployment insurance, workers' compensation, overtime pay, healthcare benefits, anti-discrimination laws, and the right to form a union, to name a few.) There will be much pushback if employers continue to gravitate away from these relationships.

That trend will only be exacerbated by a provision in the recent tax reform law Congress passed that allows sole proprietors -- along with owners of partnerships or other so-called "pass-through entities" -- to deduct 20 percent of their revenue from their taxable income. The tax savings may prove enticing to employees who would choose to set out on their own and function as outside contractors. The provision may also be a boon for employers who are trying to reduce their payroll costs. Workers hired as contractors, who tend to be cheaper, may be less likely to complain about their tax status under the new tax law.

In the meantime, it appears clear that the Trump Administration will continue to exercise its authority to alleviate some of the expansive, labor-friendly measures taken by the Obama Administration. In December 2017, for example, the NLRB's General Counsel issued a sweeping memorandum signaling the agency's new approach to many controversial rulings and interpretations from the Obama-era board. The memo indicates the NLRB is likely to continue reconsidering and reversing course on key issues under the National Labor Relations Act.

The Department of Labor, meanwhile, has already set in motion plans to update the rules governing employee Overtime pay in a manner that is far less expansive than what the Obama Administration envisioned. The Obama Administration's controversial rule would have more than doubled the threshold under which workers must be paid overtime. How the Trump Administration resolves this issue will be the primary labor issue to watch in 2018.

NATSO's most recent comments to the Department of Labor on the Overtime issue are available here.

via Business Feeds

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