by Michael D. Billok, Esq., Bond Schoeneck & King, Albany
Federal agencies—under the guise of expanding the definitions of employer and employment—are looking to hit a trifecta against independent contractors, franchisors, parent companies and similar entities. Three agencies in particular seem to think it's a good bet.
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Wage and Hour Division
In April 2014, David Weil became the new head of the U.S. Department of Labor's Wage and Hour Division (WHD).
Before leading the WHD, Weil had published a book titled The Fissured Workplace, a dense lament on the perceived evils of independent contracting and franchising. Weil claims companies want to "have it both ways" by not bearing responsibility for the workers whose labor benefits them.
Thus, it wasn't surprising that Weil would seek to remedy those perceived evils at the WHD. However, the extent to which his philosophy has reached other agencies is surprising.
Fast forward to July 2015, when Weil issued an Administrator's Interpretation turning the classic test for independent contractor status on its head.
The central tenet used to be control: Does the company set the worker's hours, have the power to discipline the worker, supervise and direct the worker, etc., or instead does the company simply give the worker the contours of the job, and pay contingent on the acceptability of the work?
The new Administrator's Interpretation, however, focuses on the "economic realities" of the work arrangement, and whether the worker is "economically dependent" on the company.
Most workers have some dependence on the source of the income, and therefore unless a worker has multiple sources of income to demonstrate that he or she is truly in business for himself or herself, many people who currently consider themselves to be independent contractors are now employees in the eyes of the Wage and Hour Division.
National Labor Relations Board
But the Wage and Hour Division is not the only agency to get into the act. In August, the National Labor Relations Board (NLRB) issued a controversial decision in the Browning-Ferris case.
It basically held that a staffing agency, franchisor or contractor that reserves the right to make decisions affecting a worker's employment, even if the entity does not actually exercise that right, will likely be considered a joint employer.
In short, the NLRB is also seeking to follow Weil's lead and fuse "the fissured workplace" to hold contractors and other types of entities responsible for possible employment violations under the guise of joint employment.
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OSHA steps in, too
Not to be outdone, OSHA is going for the trifecta.
The International Franchise Association (IFA) has disclosed that it is receiving reports from its members that OSHA investigators are seeking information and documents during inspections to tie franchisors into those inspections in order to cite them as employers along with franchisees.
The IFA is concerned that OSHA is (at the behest of unions such as the Service Employees International Union) looking to simply treat franchisors as employers regardless of the details of a franchisor-franchisee relationship.
Indeed, the IFA obtained a copy of an internal OSHA memo that shows that OSHA is looking to follow the WHD and NLRB's lead, trying to determine whether the relationship between franchisors and franchisees could make both jointly "liable as employers under the OSHA Act." The memo continued:
As a general matter, two entities will be determined to be joint employers when they share or codetermine those matters governing the essential terms and conditions of employment and the putative joint employer meaningfully affects the matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.
What it means for employers
In short, any entity with franchisees, independent contractors or other vendors should pay attention to this emerging trend.
Be well aware that any investigation or inspection by the federal agencies tasked with enforcement of labor and employment laws—U.S. Department of Labor's Wage and Hour Division, the NLRB and now OSHA—may seek to expand the investigation or inspection well beyond just the franchisee or contractor inspected, to any franchisor, parent company or beneficiary of a contract for services.
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- The IRS's 10-question test to establish worker classification. Ignore these rules at your peril
- The secret way to avoid back taxes even if the IRS reclassifies your workers
Why the 1099 could blow up in your face and cost you a fortune
- How to negotiate a fair price with an independent contractor
- The one trick to writing an iron-clad freelancer contract that protects you from lawsuits
- The simple steps to integrating freelancers into your permanent staff without hassles
- And so much more!