Joint Employment and Federal Contractors

Joint employment, and the issues it brings, has been around for a while. But with the NLRB decision last year in Browning Ferris II, the scope of what it means to be a joint employer has broadened. And while there is no regulation spelling out this new standard, the DOL and OFCCP are jumping on board.

So What Changed?

Prior to the second Browning Ferris decision, in order to be a joint employer you had to be involved in “key” terms of employment such as hiring and termination decisions. This meant the temporary workers you hired through a staffing agency or the vendor staff you used for maintenance were not your employees in the eyes of the law.

The most recent ruling removed the “key” qualifier and broadened the determination to consider employers who “…share or codetermine those matters governing the essential terms and conditions of employment.”  This new definition means if you decide what hours are worked, what projects are worked on, what quality of work must be met, etc. you could and most likely will be considered a joint employer of temporary, independent contractor, and vendor staff workers.

What Does this Mean?

The new standard is being adopted by OSHA, DOL’s Wage & Hour Division, and the OFCCP. If you are found to be a joint employer, you could have joint and several liability for things like minimum wage and over-time compliance of the staffing agencies you use, safety standards for your vendor staff on premises, EEO compliance of potential applicants within a staffing agency, and record-keeping standards for your vendors.

The impact is so broad, the Wage and Hour Division issued an Administrative Interpretation this past January.

DOL’s Administrative Interpretation

Under FLSA, an individual can be an employee to two or more employers at the same time {29 C.F.R. 791.2(a)}. The DOL decided to provide guidance on how to determine joint employment status for FLSA purposes.  The DOL’s Administrative Interpretation (AI) is based on a fissured workplace theory that makes joint employment more common.  It includes examples such as Hotels/Hospitality, Home Healthcare, Construction, and Logistics but does not limit its guidance to just these industries.  Instead, the AI reviews vertical and horizontal relationships and applies a seven factor “economic reality” checklist.

You can read the full AI at the DOL’s website.

What is the Impact to Federal Contractors?

The OFCCP has adopted the DOL guidelines and is becoming more aggressive in using the decisions to broaden audits. OFCCP is using a single entity test of around 18-22 questions and horizontal relationships to include subcontractors and subsidiaries in audits who would not have been considered in the past. They are also using vertical relationships to request audit data from staffing agencies, specifically applicant flow, and could even go as far as asking why temporary workers are not included in an AAP.

What Can I Do?

  • Work with legal counsel to ensure detailed indemnity clauses in vendor and staffing agency contracts
  • Work with legal counsel to ensure flow down clauses are in place in contracts with staffing agencies
  • Review websites to see how your company describes relationships with various other entities (Do you list yourself as working together as one company on the Web?)
  • Avoid overlap with Company Board of Directors; keep separate corporate records; document efforts to keep Companies separate.
  • Ensure different hiring policies & procedures, handbooks, and personnel policies for subcontractor/temporary workers
  • Conduct a privileged audit
  • Know your company’s risk tolerance
  • Complete due diligence on vendors, business partners, and subcontractors
  • Call us for assistance!

Contributed by Jenn Montgomery – Jenn is a Sr. Consultant with the Fort Worth, Texas office of The HR Consultant. She has worked in HR with a specialization in Analytics for the past 15 years.

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