Browning-Ferris: What the ‘joint employer’ decision means for wage and hour suits

Browning-FerrisThe National Labor Board (NLRB) announced its decision in Browning-Ferris Industries of California last week, and under the National Labor Relations Act, significantly expands ‘joint employer’ liability. This increases employer accountability for employee wages and work conditions and foreshadows a trend in wage and hour litigation in which a wider range of employers are liable for wage and hour violations.

The case focused on a staffing agency that provided employees to Browning-Ferris. The decision determined the staffing agency and Browning-Ferris are ‘joint employers’. The decision says that two or more companies are ‘joint employers’ if they have the ability to govern the terms and conditions of employment. Before this decision, a company was only a ‘joint employer’ if they do govern the terms and conditions of employment.

This potentially closes a number of loopholes corporations use to avoid paying higher wages, taxes and worker’s compensation, by positioning themselves as a non-joint employers, thusly avoiding any liability for potential wage and hour violations.

This doesn’t decide if ‘joint employment’ is relevant in franchises like McDonalds, but this decision is seen as a signal from the NLRB that joint-employer abuse is coming to an end. It is expected that the DOL Wage and Hour Division will cite this expanded view of ‘joint employers’ to support their expansion of employers who may be found responsible for wage and hour violations. It is likely the decision will support “a broad view of joint employment under the Fair Labor Standards Act’s “economic realities” test for whether an employment relationship exists.”

Because the Wage and Hour Division is not limited by the common law’s right to control test, it is expected to relax the joint employer standard using the more flexible economic realities test. This could be used by the DOL to pursue employers for wage and hour violations even if they have not had a direct relationship with the relevant employees.

Employers are expected to reassess their exposure to wage and hour claims in light of the new decision regarding ‘joint employers’. This would include examining contractual relationships with third-party employers to determine if they may qualify as a ‘joint employer’.

AFLCIO says this decision is important because it “makes it more possible for working people to organize and bargain with the employer that has authority to control the terms of their employment.” The Economic Policy Institute puts the decision in a broader historical context, calling it ‘bittersweet’ because it restores the ‘joint employer’ laws to the state it was in before 1984 Reagan era changes. “It won’t level the playing field between workers and corporations. It just turns back the clock to a fairer set of rules.”

Relevant Reading:

SeyFarth ShawManagement Alert: How will Browning-Ferris Change the Test for Joint-Employer Status for Union and Non-Union Employers?

Dianne Rose LaRocca, DLA PiperNLRB Joint Employer Redefinition Threatens Franchises

Dwight Steward, Ph.d.EmployStatsOverview of FLSA Violation Research

 

J.R. Randall

J.R. Randall is an economist who resides in the Bay Area. He focuses his interest on range of economic topics. He has interest in deep sea fishing and art.