House Republicans recently introduced H.R. 3441, a bill that aims to clarify and narrow the definition of “joint employer” under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA).
The bill proposes the following uniform definition:
A person may be considered a joint employer in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment.”
H.R. 3441 would also define “essential terms and conditions of employment” to include: hiring; firing; determining compensation; assigning schedules, positions, and tasks; day-to-day supervision; and administering discipline. The bill appears to have been introduced in response to recent joint employer decisions arising under the NLRA and FLSA.
Background: You may remember the National Labor Relations Board’s controversial Browning-Ferris decision from August 2015, which expanded the definition of joint employer to include those who possess the right to indirectly control the terms and conditions of employment of another’s employees. Before Browning-Ferris, a company had to actually exercise immediate and direct control over another company’s employees before it would be deemed a joint employer. The Browning-Ferris decision caused companies to reexamine their corporate relationships in a variety of contexts (e.g., user/supplier, parent/subsidiary, franchisor/franchisee, etc.).
In 2015 and 2016, the US Department of Labor (DOL) issued guidance that similarly expanded the definition of joint employer under the FLSA. However, this year the DOL withdrew that Obama-era guidance, telling companies to instead rely on longstanding regulations and case law, which identify several factors for courts to consider when deciding whether a joint employment relationship exists. See, e.g., 29 C.F.R. § 791.2; Barfield v. New York City Health & Hosps. Corp., 537 F.3d 132, 143 (2d Cir. 2008).
Key Takeaway: The law may change in the near future, but for now Browning-Ferris remains controlling, as do the relevant DOL regulations and cases interpreting them. Until H.R. 3441 or a similar proposed bill becomes law, companies should continue to think carefully before entering into contracts that reserve the right to directly or indirectly control another company’s employees. If H.R. 3441 becomes law, companies will have greater leeway to retain limited control without assuming joint employer obligations and liabilities.