Joint Employer

Employees at Williams Sonoma warehouses

The issue

During the Obama administration, the Department of Labor adopted a broad definition of what constitutes a “joint employer” that exposed retailers and other business to a wide range of claims over labor disputes involving subcontractors and franchisees. During the same period, the National Labor Relations Board issued a decision that took a similar approach.

Under the Trump administration, both DOL and the NLRB have pursued actions to reverse the Obama-era changes. Both DOL and the board have issued proposed regulations that would clear up confusion and protect employers from liability and litigation. NRF supports the new approach. In the meantime, however, legislation has been introduced in Congress that would codify the Obama standards as part of a larger pro-union, anti-employer labor law package known as the PRO Act. NRF is working to defeat that legislation.

Why it matters to retailers

The joint employer issue is important to retailers because they regularly contract with third-party businesses to provide a variety of services in areas including information technology, distribution centers and warehouses, transportation and shipping, and  facilities maintenance, among others. The significant changes to the standard under the previous administration created great uncertainty and opened retailers up to potential claims.

NRF advocates for appropriate joint employer rules

In 2017, DOL withdrew the broadened interpretation of what constitutes a joint employer it had issued in 2016 during the Obama administration. NRF had strongly opposed the 2016 change, saying it led to “seemingly limitless liability” and “growth-chilling litigation.”

Professional woman pointing at computer for colleague

This April, DOL proposed new regulations that would restore certainty by emphasizing the actual exercise of control and adopting a four-part test that was set in a 1983 court case and had been used for decades. Under the proposed rules, a company could only be considered a joint employer if it actively exercises the power to hire and fire the employees in question, supervises and controls their work schedules and conditions of employment, determines their rate and method of payment and maintains the employees’ employment records.

NRF submitted comments to DOL in June supporting the proposed new regulations, saying there has been “substantial confusion” about the joint employer standard due to numerous entities issuing decisions and guidance that conflict with one another, ignore precedent and disregard the original intent of the Fair Labor Standards Act. NRF said there is a “patchwork of various, conflicting and expansive standards and interpretations” that have left employers unsure of and unable to assess their exposure to joint employer liability.

NRF said the new regulations proposed by DOL “would make clear that the actual exercise of control over employees is a prerequisite” and that unexercised control should not affect joint employer status.” While supporting the proposal, NRF urged the department to adopt a number of changes that would provide more clarity for employers and employees trying to understand and apply the proposed new standard.

While DOL’s proposed rules would resolve the matter for FLSA issues such as minimum wage and overtime regulated by that agency, the definition of a joint employer used by the NLRB, which oversees union organizing and related issues, remains in limbo.

a guy is shown loading boxes from a dock into a truck

In 2015, the NLRB ruled in the Browning Ferris Industries case that a company could be a joint employer even if it had indirect or unexercised potential control. Like DOL, the NLRB overturned that ruling in 2017. But the 2017 decision was later vacated, putting the 2015 ruling back in effect. In September 2018, the NLRB proposed new standards – again returning to the requirement for direct and immediate control – that NRF welcomed as “clear, understandable and stable.”

DOL and the NLRB are expected to release final versions of their proposed joint employer rules after reviewing comments from NRF and other groups.

Despite the regulatory moves at DOL and the NLRB, the Obama-era joint employer standards would be made law under the Protecting the Right to Organize Act, a bill that was introduced in the House in May by Education and Labor Committee Chairman Bobby Scott, D-Va., and in the Senate by Health, Education, Labor and Pensions Committee Ranking Member Patty Murray, D-Wash. The PRO Act would also codify a number of other Obama-era rules and proposals on labor issues. NRF is strongly opposed to the measure, saying its “extreme provisions would have serious consequences for employees, employers and the economy as a whole.”