Friday, August 5, 2016

$1.4 Million in Overtime Damages: Joint Employer Risks Continue Prominent Rise and Expansion

We have previously blogged (here and here) about the expanding risks of joint employer liability under various employment laws, most prominently the National Labor Relations Act and the Fair Labor Standards Act. Recent developments underline just how prominent these risks are becoming for many businesses, including traditional employers, staffing and temp agencies, and franchised companies.

The U.S. Department of Labor’s (DOL) Wage and Hour Division recently announced it has obtained a federal court consent judgment and order of $1.4 million jointly against United Plastics, a products manufacturer, and against ASI Staffing Group Corp., which supplied contract labor to United Plastics. The DOL’s announcement explained:

The investigation found that to avoid paying proper overtime, ASI Group developed a scheme under which they created additional company names. When employees worked more than 40 hours in a week, the overtime hours were recorded under a separate company name, and some or all of their overtime hours were paid at straight time rates. . . . The investigation disclosed that United Plastics and its principals were aware that ASI Group workers at the Massachusetts and Mississippi United Plastics plants were not being paid proper overtime.

Despite United Plastics’ use of a contractor to provide this labor, the Wage and Hour Division determined that it bears responsibility as a joint employer [Administrator’s Interpretation on Joint Employment] under the FLSA, and is liable along with ASI Group for the back wages, liquidated damages and penalties.

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The resolution of this case should send a strong message that employers can't hide behind staffing agencies to avoid their responsibilities to their workers.

The DOL’s Wage & Hour Division has said this year that joint employment “has recently been a major focus for us.”

In this context of host employers and the temporary agencies or other “supplier employers” they use, the National Labor Relations Board (NLRB) ruled this summer that the regular employees of a host and the temporary workers of a supplier can be included in the same collective bargaining unit without the employer’s consent. Consent was previously required under NLRB case law. This could lead to “joint” employers being required to bargain jointly for a union contract to cover both companies’ workers, creating a complex and potentially divisive situation between them.

Other critical consequences of the NLRB’s ruling include possible joint liability of the two businesses for alleged unfair labor practices. In addition, employers with existing union bargaining units for their regular employees will need to guard against a union attempting to bring temporary workers under the union contract. The NLRB’s ruling could allow this through a process known as “accretion,” whereby workers can be added to the bargaining unit without their having a choice. In an accretion, since there would be no NLRB union election, the employer similarly has no opportunity to speak freely to try to persuade employees to not choose unionization.

These two recent developments focus specifically on the relationship between “contingent” workers and regular employees and their respective employers. The risks they raise, however, apply to franchised companies, professional employer organizations, employee leasing arrangements, and many other situations where more than one business is supplying workers on the same employment site or for the same work. Businesses of all types will want to carefully assess how these risks might affect their business objectives, and proactively take steps to prevent unwanted and potentially damaging results.

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