jointemploymentforstaffing: how(to(navigate(compliance ......thought’leadership’series’...

Thought Leadership Series

Presented by:

Bruce M. Steen, Partner, McGuireWoods

Moderator:

Adrianne Nelson, Director, Global ServicesStaffing Industry Analysts

Sponsored and presented by

December 13, 201610 am PT/ 1 pm ET

©2016 by Crain Communications Inc. All rights reserved. 1

Joint Employment for Staffing: How to Navigate Compliance & Mitigate Risk

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Welcome to the Staffing Industry Analysts Thought Leadership Series

Suppliers Of Staffing Services Share Their Expertise

The Staffing Industry Analysts Industry ThoughtLeadership Series provides the perspective of the suppliersof staffing services. The views expressed in this webinarare those of the sponsor and not necessarily that ofStaffing Industry Analysts.

This webinar is broadcast through your computer speakers via the audio broadcasting icon on your screen. You may adjust the sound volume by using the slide bar on the audio broadcasting icon. If you cannot access the audio, you may dial into the call by dialing 1-‐650-‐479-‐3208 and using access code 668 203 237 Need further assistance? Contact SIA customer service at 800-‐950-‐9496.

©2016 by Crain Communications Inc. All rights reserved 2


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Today’s Speaker


Adrianne Nelson, Director, Global Services

Moderator:

Bruce M. Steen, Partner, McGuireWoods

www.mcguirewoods.com

Joint Employment for Staffing: How to Navigate Compliance & Mitigate Risk

Presented by: Bruce M. Steen

McGuireWoods | 6CONFIDENTIAL

Joint or Co-EmploymentThe Changing Workforce

§ Currently, nearly 40 million contingent workers§ Working in a variety of settings

• Services Directly from Non-Employee Workers– Independent contractors– Consultants

• Services from Another Company’s Employees– Outsourcing non-core functions– Franchisor/Franchisee Relationships

§ Our focus: the Staffing Agency Model


Advantages of Contingent Workers§ A nimble and reactive workforce§ Elimination of payroll taxes§ Relief from Workers’ Compensation & Unemployment

Insurance obligations§ Not Responsible for Wage and Hour Compliance§ Absence of Employment Law Claims§ Workers not covered by

• Health plans• Retirement plans


But, What are the Risks?

§ Misclassification§ Joint employment§ 10% to 20% of companies may misclassify at least one worker§ “Target” Industries

• Construction• Trucking• GIG Economy• Financial services


Who Cares and Why Should You Care?§ Joint Employment/Misclassification Issues are Front Burner

Issues at both federal and state level§ Actors

• Federal agencies and regulators• State Agencies and regulators• Labor Unions• Plaintiffs’ Bar

§ Why?• Revenue through unpaid taxes and penalties• Damages, penalties and attorneys’ fees


Federal Agencies & Regulators:U.S. Dep’t of Labor

§ Joint initiative with state regulators to investigate contingent worker arrangements

§ Emphasis on wage and hour§ DOL’s July 15, 2015 Administrative Interpretation – focusing on

fissured industries and large companies with large contingent workforces


Federal Agencies & Regulators:U.S. Dep’t of Labor

§ DOL’s working presumption is that “most workers are employees under the FLSA”

§ DOL’s “Six Factor Test”• Work integral to the company’s business?• Tenure of the contingent worker?• Nature and degree of control?

§ Solis v. Cascom, Inc. (S.D. Ohio) – $2,000,000 in overtime pay and penalties for cable television installers

§ $74,000,000 in FY 2015


National Labor Relations Board:Browning-Ferris Industries (BFI)

§ Issue: Were recycling workers assigned to Browning-Ferris by a staffing agency jointly employed by Browning-Ferris?

§ NLRB said yes§ Why did it matter?

• The Teamsters Union was trying to organize the recycling workers

• If joint employees, then Browning-Ferris also had a duty to bargain



§ A new Joint Employer Standard:• Two or more companies are joint employers if they “share or

codetermine those matters governing the essential terms and conditions of employment”

§ “Sufficient Control” exists even if it is• Reserved rather than exercised• Indirect (such as through a staffing company) rather than direct and

immediate§ The limits are difficult to discern



• Immediate and Significant Backlash– Congressional action– Trade and industry groups

• Will Browning-Ferris survive?• If it does, what are the implications?

– Ironically could discourage corporate accountability and worker protection initiatives

– “Reserved control” may have a significant impact on the franchise model


§ EEOC• Renewed emphasis on 1997 Enforcement Guidance• Broad definition of joint employer• Construction, janitorial services, call centers and staffing firms.

§ OFCCP• Continue to pursue the “Single Entity Test” • Result will be to expand AAP obligations


CaliforniaConsiderations

§ Labor Code 226.8 – unlawful for an employer to willfully misclassify workers as independent contractors

§ Civil penalties of $5,000 to $25,000 per violation§ Private Attorney General Act (PAGA) representative actions and

penalties (and attorneys’ fees)


Costs of Getting it Wrong

§ Scrutiny by State and Federal Regulators Can Result in:• Employment taxes• Fines/penalties (e.g., failure to verify eligibility under E-Verify/I-9

regulations)• Disqualification of benefit plans under the Tax Code


Costs of Getting it Wrong

§ Labor Union Issues for “Joint Employers”• May be required to bargain with its contingent workers• Potential union activity on its property (e.g., picketing)

§ Growing Number of Private Actions Throughout the Country Challenging Contingent Worker Arrangements• Wage and hour claims• Employee benefit claims• Traditional employment claims• Class actions


Judicial Victories and Settlements

§ California Labor Commissioner concludes that Uber driver = Uber employee

§ California Class Action• Class of 385,000 Uber drivers in California and Massachusetts• Alleging that they were employees and entitled to expense

reimbursement• Parties agreed to settle for $100M• But, the court rejected it

– Not fair and reasonable– Less than .1% of the potential damages– Not do enough to change business practices


Judicial Victories and Settlements

§ McDonald’s and the employees of one of its California franchisees agreed to settle a wage and hour class action for $3.75M ($1.75M for the workers in 5 restaurants and $2M for the attorneys).

§ The advice from one franchise industry pundit: "Franchisors should not get involved in or exert any authority over the training, hiring, firing, wages, hours or other terms and conditions of employment for the employees of their franchisees."


Judicial Victories and Settlements§ McDonald’s denies it is a joint employer

of the franchisee’s employees.

§ McDonald’s Battle with the NLRB (31 franchisees in 6 NLRB regions)

§ August 2016 Agreement with DOL

§ FLSA compliance assistance and training for franchisees


More and More Litigation

§ Pacer§ Lyft§ Supply chain and logistics

carriers§ Financial Services Industry§ Even “Exotic Dancers”


Recognizing Risk: Warning Signs§ Former employees engaged as contractors§ Contractors doing the same work as

employees § Extended tenure – is there a rule of thumb?§ Contractors “looking like employees”

• Attending employee meetings• Wearing company uniforms, using company

email accounts§ Tasks integral to the business§ Contractor dedicated exclusively to the client


Minimizing and Allocating Risk:What You & Your Clients Should be Doing?

§ Conduct internal reviews and audits to identify risk§ Review all labor supply relationships§ Evaluate your business partners?

• Do they have good HR and compliance practices?• Are they classifying and paying their employees properly?• Do they have adequate coverage (e.g., workers’ compensation)

§ Allocating Risk by Contract


Allocating and Minimizing Risk by Contract

§ Properly document the contingent worker relationship§ Identify the employer§ Allocate responsibility in the contract for:

• Tax compliance• Wage and hour compliance• Insurance compliance• Regulatory compliance


Minimizing and Allocating Risk by Contract:the Element of Control

§ The staffing firm or the upstream employer should reserve the right to control the work• Define on-site supervision protocols• Consider have staffing firm on-site supervision

§ The client should not recruit, select, discipline or terminate contingent workers

§ The client can negotiate the bill rate, but not the contingent workers’• Rate of pay, or• Benefits


Allocating and Minimizing Risk by Contract

§ The contingent workers should not be subject to the client’s human resources and workplace policies

§ Contracts should include indemnification provisions allocating the liability exposure risks – But see the “California Exception”

§ Consider arbitration clauses, with class/collective action waivers


Minimizing Risk: Operational Considerations

§ Consider “restructuring” the relationship – e.g., the location of the work being performed

§ Reinforce the lack of joint employment in your communications• Labels matter• Contingent workers should report to the staffing agency and their

upstream employer, not their assignment manager• Your clients’ assignment managers should communicate with the

staffing agency or upstream employer regarding issues with contingent workers


Questions or Comments?www.mcguirewoods.com

www.kronos.com

HELPFUL LINKShttps://blog.dol.gov/2016/01/20/are-you-a-joint-employer/https://www.dol.gov/whd/flsa/jointemployment.htmhttp://sireview.staffingindustry.com/2016/10/01/benefit-counsel-lighten-load/



Upcoming Staffing Industry Analysts Webinars:

January 17, 2017, 10 AM Pacific / 1PM Eastern Staffing Industry Analysts SIR Webinar


THANK YOU!

Copies of the slides and a link to the audio recording will be distributed to all attendees within 48 hours following the webinar. A replay of the webinar will be available at www.staffingindustry.com

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