Another Update to the Definition of “Joint Employment”

A food franchise’s employees are confused.

While they understand their location has its own owners, they were interviewed at least once by the corporate office during the hiring process and the handbook they were given appears to be from corporate as well. While most of the content seems to apply, it also contains operational and procedural information that is contrary to what they were told during at their worksite during orientation and did not mention the name of the separate entity that employs them.

A second location, also run by the same owners, lends employees to the original location when they are short-staffed and vice versa. While the total employee count does not normally matter to the workers, one employee noticed that minimum wage in their city differed based on employee count. When she approached the owners, they let her know that the count was per location as they were separate business entities, so they didn’t qualify for the higher minimum wage.  The employee reached out to corporate and was told they did not have control over how the franchise owner paid.

Joint employment… or not?

Joint employment, put simply (and explained in a previous blog post), is found to exist where two separate legal entities share the ability to control or determine essential terms and conditions of employment including hiring, firing, disciplining, supervising, scheduling, and directing employees. And per the FLSA, “A determination of whether the employment by the employers is to be considered joint employment or separate and distinct employment for purposes of the act depends upon all the facts in the particular case”.

The Browning-Ferris joint employment standard, that came into effect during President Obama’s administration, expanded the definition to include companies that have “indirect control” over employees which could include a franchisor relationship with its franchisees or a distant parent company with one of its entity companies, even if they are not involved in the day-to-day operations of the business. It was briefly overturned in 2017, however, another reversal in February of 2018 has brought it back into effect.  This means that employers are once again subject to the expanded definition of what it means to be a joint employer, that of direct or indirect control over an entity and its employees.

What’s next?

The Save Local Business Act, which has been in the Senate since late 2017, seeks to solidify the definition of joint employment to limit it only to companies who have “direct control” over their employees. This would limit liability for wage and hour and other internal decisions and workplace issues to the direct employer alone. In the meantime, the current expanded definition stands.

What should employers do?

Companies with franchises or far-removed entities should continue to monitor and carefully examine their employment practices and the amount of involvement and control they have in staffing, scheduling, and wage and hour decisions of their day-to-day operations. It may be advisable to seek the opinion of legal counsel as to whether a particular relationship should be considered joint employment under the expanded definition.

Click the link to view the recent blog: The Possibilities of Commission Pay or check back for more on human resources, payroll, insurance and benefits.