The U.S. Department of Labor issued guidance Wednesday broadening the definition of joint employment, in which two or more businesses can be held responsible for compliance of laws regarding employees.

Saying the definition of “employment” in the Fair Labor Standards Act of 1938 and the Migrant and Seasonal Agricultural Worker Protection Act of 1983 “was written to have as broad an application as possible … It is possible for a worker to be jointly employed by two or more employers who are both responsible, simultaneously, for compliance” of regulations.  

The DOL said that more businesses were changing their organizational models, “by, for instance, sharing employees or using third-party management companies, independent contractors, staffing agencies or other labor providers.” Such arrangements increased the likelihood of joint-employment scenarios, it said.

The DOL cited as an example an employee who works for two restaurants “that are organized as two different companies but share operations,” such as common managers, common employees or shared scheduling or payroll functions. It also could include a staffing company and the company where that staff member works, such as a hotel.

It stated, however, that franchisees and franchisors are not necessarily joint employers, although they might be.

“The form of business organization, such as a franchise, does not necessarily indicate whether joint employment is present,” it said in a fact sheet issued today. “Indeed, the existence of a franchise relationship, in and of itself does not create joint employment.”

Instead, the DOL’s Wage and Hourly Division must issue an Administrator’s Interpretation, “a form of sub-regulatory guidance, when further clarity around the proper interpretation of a statutory or regulatory issue is appropriate.”

The National Council of Chain Restaurants decried the guidance, calling it “a misguided intrusion in the affairs of America’s small businesses.”

“The Labor Department is codifying a radical concept of employer-employee relationships and it is the most aggressive attempt yet to build on the flimsy foundation built by the [National Labor Relations Board]’s Browning-Ferris Decision,” NCCR executive director Rob Green said in a statement.

The NLRB’s case involving Houston-based waste management firm Browning-Ferris Industries called for a broader definition of joint-employer status between contractors and subcontractors, or franchisors and franchisees. It found that franchisors could be considered a joint employer and held liable for the hiring practices of franchisees.

“Trial lawyers will love the new lawsuits that will result of this policy,” Green said. “We call on Congress to review this new policy as soon as possible.”

He added: “Setting up intentionally vague standards to govern the relationship between different businesses, including subcontractors and franchisees, is a recipe for confusion, litigation and overzealous enforcement.

Green said the new broad definition of employment, derived from the FLSA and MSPA definitions that include “to suffer or permit to work,” is broader than the National Labor Relations Act provisions cited last year, which required an element of “directing and controlling.”

Contact Bret Thorn at bret.thorn@penton.com.
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