file101235857424For the last six years, you haven’t seen much on this blog about changes to federal employment laws because, well, there just weren’t any.  What we DID see, however, were changes to regulations and enforcement orders.

Nearly six months into the new Trump administration, we’re now starting to see significant shifts in the federal regulatory scheme too.

A lot of national employment law blogs have been starting to recap them so I’m not going to go too in depth here. Among the changes? A death-knell to the persuader rule, and, earlier this month, a pullback of guidance on joint employment and independent contractor rules.   And it looks like the overtime rule changes are still in limbo as well, with the DOL “rethinking” such rules in news articles this week.

You don’t need to have a law degree to understand that these changes will favor companies.

Last night too, the Trump administration named the final member of a new National Labor Relations Board who will, no doubt, start rolling back other labor law decisions that have favored employees and labor unions as well.

But what will the impact be in Connecticut?

It’s still a bit early to tell, but I think the impact may be muted in some ways. After all, we have a CONNECTICUT Department of Labor that still marches to its own drum.  For example, it has taken a pretty aggressive view on who is (or is not) an employee vs. an independent contractor.

Indeed, as I’ve discussed before, the Obama-era rule changes might have, in fact, helped level the playing field for some Connecticut employers who have felt that they have had to comply with stricter Connecticut rules which made them less competitive nationwide.  With the rollback of some of these rules at the federal level, Connecticut’s higher standards may come back into play more often.

That may be overstating it a bit, but Connecticut employers will have to play catchup to figure out the patchwork of federal and state regulations and the interplay between them.

Perhaps it is more fair to say that things are still shaking out this year for Connecticut employers.  The General Assembly session that just ended was more quiet than most.  But at a national level, employers shouldn’t be too quick to make too many changes because there seems to be many more aspects in flux than in years past.

The only thing I’ll predict for the next six months is that we have all the ingredients in place for a wild roller coaster ride with more changes than we’ve seen in some time.

So buckle up.   Things are just getting interesting.

By now, it’s really not a big surprise when the NLRB reverse course on a prior decision. This week, the NLRB did it again.  My colleague, Jarad Lucan, provides this quick update on temporary/contract employees being allowed to join unions.  Read on.

Lucan_J_WebIn 2004 the National Labor Relations Board in its Oakwood Care Center case said that temporary and permanent workers must bargain separately unless the employer gives consent.

Yesterday, however, the NLRB overturned that precedent stating, “[b]y requiring employer consent, Oakwood has . . . allowed employers to shape their ideal bargaining unit, which is precisely the opposite of what Congress intended.”

Now, after a ruling in Miller & Anderson, temporary workers provided by staffing agencies do not need an employer’s permission to join unions that include its full-time employees as long as they share a “community of interest” with full-time workers.

In dissent, board member Philip Miscimarra said that along with the NLRB’s 2015 joint employer decision in Browning-Ferris Industries Inc, the NLRB’s latest ruling would create issues for  companies that use contract labor and force many staffing firms to bargain with unions that represent the full-time workers of other companies.

As we have discussed previously, in Browning-Ferris, the NLRB said companies may be deemed joint employers of contract workers if they have the potential to control working conditions.  Previously, the board required proof of actual, direct control.

With its latest decision, it could now be easier for workers found to be joint employees under the Browning-Ferris standard to unionize.   Of course, the actual impact of both decisions still remains to be seen.

My former colleagues who write the Management Memo blog also shared this tip for employers as a result of the decision:

At a minimum, a detailed risk assessment of an employer’s workforce and its reliance upon its own employees and temporaries, leased and contract labor employed and controlled, in whole or in part, by so-called supplier employers is in order. “User” employers should determine the goals and risks associated with a relationship and determine whether it is possible and/or desirable to attempt avoid a joint employer relationship or embrace it but attempt to control liability. Both “supplier” and “user” employers should look for contractual provisions regarding defining the relationship, including who controls and does not control certain aspects, indemnification provisions, provisions related to responses and responsibilities related to union organizing and collective bargaining and similar concerns. Experienced labor counsel should be consulted to assist in these issues.

Photo Courtesy Library of Congress c. 1943
Photo Courtesy Library of Congress c. 1943

It’s hard getting excited about joint employment.

In fact, it’s pretty yawn-inducing.  (Seriously, get a cup of coffee before reading this.)

But a few weeks back, the Department of Labor issued some new guidance on the topic that has been making the rounds of the employment law blogs.

Now, you might be asking — what is joint employment? Well, I can dispel with the notion that it has to do with medical marijuana. Rather, the DOL has described two types of relationships and how the administrative interpretation (AI) plays into it:

Horizontal joint employment exists where the employee has employment relationships 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. The analysis focuses on the relationship of the employers to each other. ….

Vertical joint employment exists 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 or she is economically dependent on, and thus employed by, another entity involved in the work. This other employer, who typically contracts with the intermediary employer to receive the benefit of the employee’s labor, would be the potential joint employer. Where there is potential vertical joint employment, the analysis focuses on the economic realities of the working relationship between the employee and the potential joint employer.

For the vast majority of employers, this guidance will have little impact. If you use mainly full or even part time staff, you may not have to worry about joint employer issues — you ARE the employer.

In some industries, like construction, hospitality, agriculture and janitorial work, there could be an impact.  In some instances, a larger firm could be liable if a subcontractor did not pay its employees minimum wage or unemployment benefits.  If you subcontract out a lot of work, the decision is a good reminder to review your agreements and review the tests that a court may use to rule on the issue.

Various law firms have been issuing guidance on this. One alert states:

The issuance of this AI should serve as a reminder to businesses that they need to think carefully about whether they may be viewed as joint employers over workers they do not consider to be their employees, even workers over whom they have little control. If they are likely to be considered joint employers, they need to consider whether they want to take steps to decrease this likelihood. For example, if two closely related entities concurrently make use of the services of certain employees, they may want to consider ending that approach. On the other hand, they may choose to accept the fact that they will be viewed as joint employers, identify the potential risks and liabilities that may result from joint employment, and decide in advance how they intend to minimize and allocate those risks, such as through an indemnification agreement.

Companies involved in intermediary worker engagements (e.g., staffing companies, subcontractors, and other intermediaries) will want to ensure, to the extent feasible, that they are not considered employers of each other’s employees.

I think that’s important to keep in mind.  But remember that this isn’t exactly a new issue. I’ve been talking about joint employer issues for years — it’s just that we’re seeing some more publicity about it now.

HallofFame200pxV32007 seems like yesterday.

And yet, eight years after I started this blog and over 1800 posts later (and a Hall of Fame entry), I’m pretty sure 2007 WASN’T yesterday.

So for this year’s anniversary post, I thought I would capture what I think are some of the biggest storylines from the last eight years.  This isn’t definitive, but there are a few things that stand out.

1.  Social Media – Well this first one was easy, right? What’s amazing is that I didn’t even talk about Facebook and its impact on employers until fall 2008.  In that post, I talked about whether employers should use those sites in their hiring practices.  Since then, there seems to be no corner of the workplace that hasn’t been touched by social media. And yet, I’m also struck by the fact that there is a perceptible sign that we’re seeing this area mature. Less discussions about whether to have a social media policy. And less handwringing about whether social networking site posts are discoverable.  Yes, there are still unsettled areas on this  — the NLRB’s guidance continues to shift — but social media isn’t nearly as foreign as it was back in 2007.

2. The Return of the NLRB – Any discussion of the last eight years certainly must discuss the NLRB under the Obama Presidency.  There are those who complain about the political nature of the agency, but it’s always been a creature of various Presidential administrations.  But what we’ve seen over the last few years in particular is use of cases and regulations to chart new ground (or reverse older ground) in elections, workplace communications, and, last month, joint employer status. As such, we’ve seen union membership increase in several states, like Connecticut.  Make no mistake: On this day after Labor Day, unions and labor law have received a big old proverbial shot in the arm the last several years.  The election in 2016 will be a pivotal year in determining whether this changes continue.

3. The Battle Over Disabilities – True, there are plenty of other noticeable changes since 2007, but one that barely gets mentioned is the Americans with Disabilities Act Amendments Act.  It was one of the last employment law bills signed by President Bush and became effective January 1, 2009.  The Act changed the debate on litigation involving employees with disabilities. Instead, the Act said that courts should interpret the act to provide the coverage to individuals “to the maximum extent permitted.”  For example, previously, courts and employers had to determine a person’s disability including any mitigating measures that the individual had such as prosthetics, medications or hearing aids. Now, employers and courts must ignore those measures.   As a result, ADA cases have moved from “threshold” issues (whether the person has a disability) to “liability” issues (whether the person was actually discriminated against).

While EEOC disability charges increased markedly from 2008 to 2010 – that probably had more to do with the economy than anything else. Claims have levelled off since then and have even dropped from their peak in 2012.

A lot has changed since I started this blog in 2007.  I thank you all for your continued readership.  We’ll see what the next year brings.

My colleague, Jarad Lucan, who has been busy with his own labor cases, today returns with post about the latest from the NLRB.  There are many posts out there on the subject (here, here, and here, for example), so Jarad is going to touch on its impact for Connecticut employers.  

Lucan_J_WebAs you’ve no doubt read, the National Labor Relations Board, refined its test for determining whether two ostensibly separate entities can be viewed as joint-employers.  In its Browning-Ferris Industries of California, Inc. case, the Board concluded that Browning-Ferrris was a joint employer of workers supplied to it by a staffing agency that it contracted with.

According to the Board:

Today, we restate the Board’s joint-employer standard to reaffirm the standard articulated by the Third Circuit in Browning-Ferris decision [A different case involving the same employer here]. Under this standard, the Board may find that two or more statutory employers are joint employers of the same statutory employees if they “share or codetermine those matters governing the essential terms and conditions of employment.” In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.

Central to both of these inquiries is the existence, extent, and object of the putative joint employer’s control. Consistent with earlier Board decisions, as well as the common law, we will examine how control is manifested in a particular employment relationship. We reject those limiting requirements that the Board has imposed–without foundation in the statute or common law–after Browning-Ferris. We will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry.  As the Supreme Court has observed, the question is whether one statutory employer “possesse[s] sufficient control over the work of the employees to qualify as a joint employer with” another employer. Nor will we require that, to be relevant to the joint-employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly–such as through an intermediary–may establish joint-employer status.

But the outstanding question is: How big is this decision?

From our perspective, it’s still “to be determined.”

Certainly, it’s significant that the Board’s indication that it will no longer require that joint employers actually exercise the authority to control terms and conditions of employment, necessarily means that employers in business relationships such as the one at issue in the Browning-Ferris case may have joint-bargaining obligations that they do not even know exits and may be liable for unfair labor practices without engaging in any wrongdoing.

But this case will likely be appealed and it remains to be seen how much of this decision will be adopted by the courts.

Whatever the impact, the decision is significant enough that Congress is already discussing legislation to specifically address the decision.

Although the decision only applies to private sector employers, Connecticut’s State Board of Labor Relations looks to federal law for guidance in interpreting our State’s labor laws.

Thus, all employers in Connecticut, both private and public sector, should review this decision and any business contracts that may be impacted closely.  Independent contractor and franchise agreements, in particular, should be reviewed to be brought up to the latest in employment law. If you haven’t had your contracts renewed in the last decade, it’s probably time to do so now.

Can an employee work for more than one employer at the same time? Under a theory of law called “joint employment”, the answer is yes.

But how do you make that determination?

Suppose a private bus company provides services all over Connecticut. It’s largest customer happens to be a very large private university in the state. The company provides both interstate and intrastate service for the university, as well as shuttle bus service for the campus.

Are the bus drivers employees of both the bus company and the university?  A recent case in the federal court in Connecticut set forth the various tests that the courts in Connecticut use to make that determination.

(Ultimately, the court denied the drivers’ claims that they were employees of the university.)

The court’s decision in Velez v. New Haven Bus Service can be downloaded here.

The Tests

Where a plaintiff claims multiple simultaneous employers, or “joint employers” under the FLSA, “the overarching concern is whether the alleged employer possessed the power to control the workers in question . . . with an eye to the economic reality presented by the facts of each case.”  In this so-called “economic reality” test, a court must first evaluate whether the alleged joint employer exercised formal control over a plaintiff’s employment.

The Second Circuit has recognized a four-factor joint-employer test to establish formal control, which asks whether an employer: (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.

Simple enough, right?

Well, not exactly.  In fact, the Second Circuit “did not hold . . . that those [four] factors are necessary to establish an employment relationship” as the court said in another case (Zheng v. Liberty Apparel Co.).  That decision applied a “functional control” test.

In doing so, a court may also consider the following factors:

(1) whether [the putative employer’s] premises and equipment were used for the plaintiffs’ work; (2) whether [the direct employer] had a business that could or did shift as a unit from one putative joint employer to another; (3) the extent to which plaintiffs performed a discrete line-job that was integral to [the putative employer’s] process of production; (4) whether responsibility under the contracts [between the direct and putative employers] could pass from one [entity] to another without material changes; (5) the degree to which the [putative employers or its] agents supervised plaintiffs’ work; and (6) whether plaintiffs worked exclusively or predominately for the [putative employer].

As the District Court recognized in the Velez case, the Second Circuit has not announced a definitive set of factors to establish functional control, recognizing that there will be “different sets of relevant factors based on the factual challenges posed by particular cases.”

How many of those factors will need to be met to satisfy a claim? That’s still unclear, but in the Velez case, two was not enough to establish joint employment.

The Takeaway?

Of course, longtime readers will know that this is not a new topic. 

Employers should always be vigilant in making it clear who is and is not an employee of theirs. If you contract out certain work (food service, for example), make sure that you are not crossing the lines that seem like you are more their employer than a customer. For example, if you set these contractors’ hours and discipline them and they only worked for you, that might be closer to the joint employment relationship than you may have intended.

Contracts may help, but as you can see from the above, the courts will look past the language and look to either the “economic realities” or the “functional control” to make that final determination.

“How You Doin’? said the character Joey from the TV show “Friends“.  I say that here because this post is about the “joint employer” test for the Fair Labor Standards Act and its an otherwise dry post.

“I know!” (You might be saying, if you were Monica from that same show.)

“Could that BE any more boring?” (To paraphrase Chandler.)

Your response should be, a la, Rachel, “Nooooo!!!

But here’s why you should care and not take a break from this topic (besides knowing that “We were on a break” is not a valid defense to an FLSA claim.) 

Friends and Joint Employers

In this age of leased employees and independent contractors who aren’t really independent, wage & hour issues like joint employment are getting more heavily scrutinized by the Department of Labor and courts.

So how does the issue of a “joint employer” come up? 

Two ways: First when employees work for two employers, and the total hours worked is over 40, the employee may be eligible for overtime if the employers share the employee or get benefit from that employee’s work.

Second, if the employee works for two employers, then the employer may have to include him or her in determining the the number of employees each employer has.

The Wage & Hour Development blog reported on an important new case out of the Third Circuit Court of Appeals recently.  While it hasn’t yet been adopted in Connecticut or the Second Circuit, it is already providing important guidance to courts and employers elsewhere because its logic is perceived to be sound.

The Court concluded that Enterprise Holdings Inc. was not a joint employer with its car rental subsidiaries’. The plaintiff assistant managers could not seek relief against the parent company. As recapped in the blog post:

In its groundbreaking opinion, the Third Circuit enumerated a standard that involves examination of the putative employer’s: 1) ability to hire and fire the relevant employees; 2) ability to issue and implement work rules/assignments; 3) ability to establish conditions of employment for the workers; 4) involvement in day-to-day supervision of workers, notably the right to discipline; and, 5) actual control of employee records, such as payroll, insurance, or taxes.

The Court took pains to point out that these factors are not exclusive and should not be rigidly applied. The Court emphasized that if other factors demonstrated that an entity exercised significant control over a group of employees, then that evidence, when coupled with the enumerated factors, might be persuasive on the issue of whether a joint employment relationship exists.

So what’s the takeaway from this? If faced with a joint employer question, courts will look at the control and direction by the employer.  If you use leased employees or joint employer relationships, this case should give you new reason to review them to make sure they can pass muster under this test.

Hopefully, it makes sense. Otherwise, I may have to follow the advice from Chandler: “You have to stop the Q-Tip when there’s resistance.”

While I dig back out from vacation, my colleague Jon Orleans forwarded this update on a recent case in the Second Circuit. While the case is from New York, it may ultimately have some implications in Connecticut if it is appealed.   No, the OTHER Rick's....

A recent decision from the Southern District of New York certifies an FLSA collective  class of exotic dancers (“entertainers”) who claim that they were improperly classified as independent contractors rather than employees. 

If you only read the first couple of paragraphs of the typical news story about the decision, you probably chuckled at the reference to instructions given to the women by the club where they work – Rick’s Cabaret in New York – on how to strip. 

Maybe an image of Humphrey Bogart flashed through your mind. (Ed. note: You’ll thank me for a link to the Casablanca version, not the actual "Rick’s Cabaret"). 

But for an employment lawyer, the more important (if not more interesting) part of the decision is its discussion of the “joint employer” doctrine and the liability of a parent corporation for the actions of its subsidiary.

The issue arose on the defendants’ motion to dismiss, so of course the court assumed the truth of the facts pled by the plaintiffs. 

Plaintiffs alleged that they were employed at Rick’s Cabaret by its owner RCI Entertainment (New York) Inc. (“RCI NY”), a subsidiary of Rick’s Cabaret International, Inc. (“RCII”). After discussing the Twombly and Iqbal standards for evaluating complaints on motions to dismiss, the court observed that the term “employee” is defined quite broadly under both federal and New York law. 

Then the court applied the “economic reality” theory – looking to the totality of the facts and circumstances – to determine whether the plaintiffs had alleged sufficient facts to permit an inference that RCII was a joint employer with RCI NY. Plaintiffs had alleged that RCII employs regional managers who oversee the operations of the subsidiary clubs; that the regional managers hire the general managers who work at the clubs; that the general and regional managers report to the CEO of RCII, who is also president of each of the subsidiaries; and that RCII distributes the rules and guidelines the entertainers are required to follow, and enforces them through its agents the regional and general managers. 

Plaintiffs further alleged that the decision to classify them as independent contractors rather than employees was made by the CEO of  the parent company.

The court found these allegations sufficient to state a claim for joint employer liability, and went on to certify a class under Fed.R.Civ.P. 23(b)(3), holding among other things that the need for individualized damage calculations did not defeat the requirement that common questions of law and fact predominate over questions affecting only individual members. 

What’s the Bottom Line for Employers?

The lesson here for employers is that attempts to insulate a parent entity from liability under the FLSA by creating operating subsidiaries may well fail if the parent exercises any significant degree of control over the employment policies of the subsidiary.

The case is Sabrina Hart, et al. v. Rick’s Cabaret Int’l Inc., et al., No. 09 Civ. 3043, slip op. (SDNY December 20, 2010) (Koetl, J.). A copy of the opinion may be downloaded here.