Most employers, particularly franchises and contractors, were relieved when the federal government revised its regulations on joint employers earlier this year. The State of New Jersey was not one of them, and now, it’s joining a broad lawsuit to overturn the new rule.
Attorney General Gurbir Grewal has joined a coalition of 17 attorneys general in filing a lawsuit to stop the federal government from eliminating what it calls key labor protections for workers. The lawsuit, filed in U.S. District Court in New York, challenges a U.S. Department of Labor rule that narrowed the joint employment standard under the Fair Labor Standards Act (FLSA).
The joint employment standard determines when more than one employer is responsible under the FLSA because both exert sufficient influence over a worker’s employment.
To be a joint employer under the current rule, “a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees,” the National Labor Relations Board (NLRB) explained in an announcement last week. The rule became final Feb. 26, but will not take effect until 60 days after it is published in the Federal Register.
According to the NLRB, the new rule reflects the rules that were in place five years ago when a different board decided to dramatically expand them. The NLRB spelled out what exactly constitutes substantial control over employees, which would make the parent company of a franchise or the contractor who hired a subcontractor subject to penalties. The NLRB characterized the changes as making “clear that control exercised on a sporadic, isolated, or de minimis basis is not ‘substantial,’” and not an indication of joint employment.
The rule uses four factors to determine joint employer status: whether the entity (1) hires or fires the employee; (2) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records.
Grewal said, “The rule does not permit consideration of other factors indicative of joint employment, such as whether an employee is economically dependent on a potential joint employer. Additionally, the rule only permits consideration of an employer’s right to control an employee where there is evidence that the employer actually exercises that right.”
Critics of an expanded rule claim that it was an attempt by some unions to make it easier for them to organize workers at fast-food restaurants, and that the ruling resulted in increased charges against franchisees motivated by the opportunity to reach the deeper pockets of franchisors.