Two federal agencies are seeking public comment on proposed rules that would establish new definitions and standards for determining whether an individual is considered an employee of a given organization.  Both rules have important implications for aging services providers, and LeadingAge will work with members to inform our comment submissions on these proposals.

National Labor Relations Board: Joint Employer Standard

The National Labor Relations Board (NLRB) is proposing to rewrite the current standard for determining whether separate entities are joint employers under the National Labor Relations Act (NLRA).  This standard is very important, as a joint employer may be required to bargain with a union representing jointly employed workers and may be liable for unfair labor practices committed by another organization.

The definition of joint employer has shifted twice in recent years.  In 2015 the NLRB significantly expanded the definition through its decision in a case called Browning-Ferris Industries of California, Inc. (BFI).  BFI established that the Board would consider evidence of reserved and indirect control over employees’ essential terms and conditions of employment when analyzing joint employer status. This contrasted with the standard that had applied for many years prior, requiring an organization to exercise actual, direct control over another entity’s workers for joint status to be found.

Following litigation on appeal of the BFI decision, NLRB in 2020 issued a final rule stating that an entity must exercise substantial direct and immediate control over essential terms and conditions of employment of another organization’s employees (wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction), for joint employment to be determined.

The NLRB’s proposed rule brings another shift, turning away from the direct and immediate control standard and, like the standard announced in BFI, defining joint employer to include an entity that either possesses or exercises, whether directly or indirectly, the authority to control essential terms and conditions of employment; it would also establish a broader definition of “essential terms and conditions” than exists under the current rule.

As proposed, the rule covers many common business relationships that historically may not have been considered joint employment under the NLRA, such as contractual relationships with temporary staffing agencies, which raises important implications and potential risks for aging services providers.

Comments on the proposed rule are due to the NLRB by Dec. 7, and we will provide additional information for members as our work continues to develop comments articulating our concerns.

Department of Labor: Definition of Independent Contractor

The U.S. Department of Labor (DOL) Wage and Hour Division has published a proposed rule that revises the current analytical framework for determining whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA).  

The issue of how an individual is classified is important because FLSA protections such as minimum wage and overtime pay apply to employees but not to independent contractors.  A DOL statement announcing the proposal notes that the rule is intended to reduce misclassification of individuals as independent contractors, an issue that the agency says affects a wide range of workers in the home care, janitorial services, trucking, delivery, construction, personal services, and hospitality and restaurant industries, among others.

For decades the DOL and courts have applied an “economic reality” test to determine the appropriate classification.  The core question here is whether, as a matter of economic reality, a worker is either economically dependent on the employer for work (and is thus an employee) or is in business for themself (and is thus an independent contractor).

The current regulation governing this analysis became effective in March 2021, and it identifies five relevant factors:

• the nature and degree of control over the work
• the worker’s opportunity for profit or loss
• the amount of skill required for the work
• the degree of permanence of the working relationship between the worker and the employer, and
• whether the work is part of an integrated unit of production

The 2021 rule designates the first two as “core factors” that are most relevant to and carry the most weight in the analysis, while the other three have less probative value.

DOL is proposing to rescind the 2021 rule and replace it with a framework under which multiple factors would be used to assess the economic realities of a working relationship, with no predetermined weighting:

• the worker’s opportunity for profit or loss depending on managerial skill
• investments by the worker and the employer
• the degree of permanence of the work relationship
• the nature and degree of the employer’s control,
• the extent to which the work performed is an integral part of the employer’s business, and
• whether the worker uses specialized skills to perform the work and whether those skills contribute to business-like initiative.

The proposal notes that additional factors may also be relevant, meaning this list is not exhaustive.

The Department of Labor is seeking feedback on all aspects of the proposed rule and has set a deadline of Dec. 13 for submission of comments.  As with the NLRB rule, LeadingAge will work with our various Member Networks to identify the implications of the proposal and inform our comments.