Proposed joint employer rule includes 4-factor test: hiring and firing, supervision and control, payment, and recordkeeping
Noting it has not meaningfully revised its joint employer regulation since 1958, the Labor Department has announced via press release a proposed rule to revise and clarify the responsibilities of employers and joint employers.
The FLSA allows joint employer situations where an employer and a joint employer are jointly responsible for the employee’s wages. DOL proposes a four-factor test to consider whether the potential joint employer actually exercises the power to:
Hire or fire the employee;
Supervise and control the employee’s work schedules or conditions of employment;
Determine the employee’s rate and method of payment; and
Maintain the employee’s employment records.
The proposal would ensure employers and joint employers clearly understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek, the agency said.
Reduce uncertainty. “This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections,” said Secretary of Labor Alexander Acosta. “Providing public notice and comment is the best way to move forward with another significant deregulatory proposal.”
In June 2017, the DOL withdrew the previous administration’s sub-regulatory guidance regarding joint employer status, which did not go through the rulemaking process that includes public notice and comment.
DOL examples for comment. The proposal also includes a set of joint employment examples for comment that would further assist in clarifying joint employer status, notably in the franchise industry. DOL’s examples include:
(1) Example (nationwide restaurant franchise): An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment affiliated with the same nationwide franchise. These establishments are locally owned and managed by different franchisees that do not coordinate in any way with respect to the employee. Are they joint employers of the cook?
Application: Under these facts, the restaurant establishments are not joint employers of the cook because they are not associated in any meaningful way with respect to the cook’s employment. The similarity of the cook’s work at each restaurant, and the fact that both restaurants are part of the same nationwide franchise, are not relevant to the joint employer analysis, because those facts have no bearing on the question whether the restaurants are acting directly or indirectly in each other’s interest in relation to the cook.
(2) Example (same owner, multiple restaurants): An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment owned by the same person. Each week, the restaurants coordinate and set the cook’s schedule of hours at each location, and the cook works interchangeably at both restaurants. The restaurants decided together to pay the cook the same hourly rate. Are they joint employers of the cook?
Application: Under these facts, the restaurant establishments are joint employers of the cook because they share common ownership, coordinate the cook’s schedule of hours at the restaurants, and jointly decide the cook’s terms and conditions of employment, such as the pay rate. Because the restaurants are sufficiently associated with respect to the cook’s employment, they must aggregate the cook’s hours worked across the two restaurants for purposes of complying with the act.
(3) Example (janitorial services): An office park company hires a janitorial services company to clean the office park building after-hours. According to a contractual agreement with the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services. However, office park personnel do not set the janitorial employees’ pay rates or individual schedules and do not in fact supervise the workers’ performance of their work in any way. Is the office park a joint employer of the janitorial employees?
Application: Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment. The office park’s reserved contractual right to control the employee’s conditions of employment does not demonstrate that it is a joint employer.
(4) Example (landscaping services): A country club contracts with a landscaping company to maintain its golf course. The contract does not give the country club authority to hire or fire the landscaping company’s employees or to supervise their work on the country club premises. However, in practice a club official oversees the work of employees of the landscaping company by sporadically assigning them tasks throughout each workweek, providing them with periodic instructions during each workday, and keeping intermittent records of their work. Moreover, at the country club’s direction, the landscaping company agrees to terminate an individual worker for failure to follow the club official’s instructions. Is the country club a joint employer of the landscaping employees?
Application: Under these facts, the country club is a joint employer of the landscaping employees because the club exercises sufficient control, both direct and indirect, over the terms and conditions of their employment. The country club directly supervises the landscaping employees’ work and determines their schedules on what amounts to a regular basis. This routine control is further established by the fact that the country club indirectly fired one of landscaping employees for not following its directions.
(5) Example (staffing company): A packaging company requests workers on a daily basis from a staffing agency. The packaging company determines each worker’s hourly rate of pay, supervises their work, and uses sophisticated analysis of expected customer demand to continuously adjust the number of workers it requests and the specific hours for each worker, sending workers home depending on workload. Is the packaging company a joint employer of the staffing agency’s employees?
Application: Under these facts, the packaging company is a joint employer of the staffing agency’s employees because it exercises sufficient control over their terms and conditions of employment by setting their rate of pay, supervising their work, and controlling their work schedules.
(6) Example (association providing group benefits): An association, whose membership is subject to certain criteria such as geography or type of business, provides optional group health coverage and an optional pension plan to its members to offer to their employees. Employer B and Employer C both meet the association’s specified criteria, become members, and provide the association’s optional group health coverage and pension plan to their respective employees. The employees of both B and C choose to opt in to the health and pension plans. Does the participation of B and C in the Association’s health and pension plans make the association a joint employer of B’s and C’s employees, or B and C joint employers of each other’s employees?
Application: Under these facts, the association is not a joint employer of B’s or C’s employees, and B and C are not joint employers of each other’s employees. Participation in the association’s optional plans does not involve any control by the association, direct or indirect, over B’s or C’s employees. And while B and C independently offer the same plans to their respective employees, there is no indication that B and C are coordinating, directly or indirectly, to control the other’s employees. B and C are therefore not acting directly or indirectly in the interest of the other in relation to any employee.
(7) Example (supply chain contracts that include code of conduct, wage conditions): Entity A, a large national company, contracts with multiple other businesses in its supply chain. As a precondition of doing business with A, all contracting businesses must agree to comply with a code of conduct, which includes a minimum hourly wage higher than the federal minimum wage, as well as a promise to comply with all applicable federal, state, and local laws. Employer B contracts with A and signs the code of conduct. Does A qualify as a joint employer of B’s employees?
Application: Under these facts, A is not a joint employer of B’s employees. Entity A is not acting directly or indirectly in the interest of B in relation to B’s employees—hiring, firing, maintaining records, or supervising or controlling work schedules or conditions of employment. Nor is A exercising significant control over Employer B’s rate or method of pay—although A requires B to maintain a wage floor, B retains control over how and how much to pay its employees. Finally, because there is no indication that A’s requirement that B commit to comply with all applicable federal, state, and local law exerts any direct or indirect control over B’s employees, this requirement has no bearing on the joint employer analysis.
(8) Example (hotel industry franchise providing sample employment forms, documents): Franchisor A is a global organization representing a hospitality brand with several thousand hotels under franchise agreements. Franchisee B owns one of these hotels and is a licensee of A’s brand. In addition, A provides B with a sample employment application, a sample employee handbook, and other forms and documents for use in operating the franchise. The licensing agreement is an industry-standard document explaining that B is solely responsible for all day-to-day operations, including hiring and firing of employees, setting the rate and method of pay, maintaining records, and supervising and controlling conditions of employment. Is A a joint employer of B’s employees?
Application: Under these facts, A is not a joint employer of B’s employees. A does not exercise direct or indirect control over B’s employees. Providing samples, forms, and documents do not amount to direct or indirect control over B’s employees that would establish joint liability.
(9) Example (shared retail space requiring uniforms, code of conduct): A retail company owns and operates a large store. The retail company contracts with a cell phone repair company, allowing the repair company to run its business operations inside the building in an open space near one of the building entrances. As part of the arrangement, the retail company requires the repair company to establish a policy of wearing specific shirts and to provide the shirts to its employees that look substantially similar to the shirts worn by employees of the retail company. Additionally, the contract requires the repair company to institute a code of conduct for its employees stating that the employees must act professionally in their interactions with all customers on the premises. Is the retail company a joint employer of the repair company’s employees?
Application: Under these facts, the retail company is not a joint employer of the cell phone repair company’s employees. The retail company’s requirement that the repair company provide specific shirts to its employees and establish a policy that its employees to wear those shirts does not, on its own, demonstrate substantial control over the repair company’s employees’ terms and conditions of employment. Moreover, requiring the repair company to institute a code of conduct or allowing the repair company to operate on its premises does not make joint employer status more or less likely under the act. There is no indication that the retail company hires or fires the repair company’s employees, controls any other terms and conditions of their employment, determines their rate and method of payment, or maintains their employment records.
Said Keith Sonderling, Acting Administrator for the Department’s Wage and Hour Division. “The proposed changes would provide courts with a clearer method for determining joint employer status, promote greater uniformity among court decisions, and reduce litigation.”
More information about the proposed joint employer rule is available at www.dol.gov/whd/flsa/jointemployment2019.
The DOL encourages any interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA26. Once the rule is published in the Federal Register, the public will have 60 days to submit comments for those comments to be considered.
Source: Joy Waltemath, J.D.
Survey reveals employees’ major financial stressors, millennials’ interest in gig work
MetLife’s 17th Annual US Employee Benefit Trends Study 2019 reveals that we are now seeing additional trends redefining why we work and what work means to people. According to the study, “[a]s employees leverage work to gain more fulfillment, pursue their goals, and align their values and experiences more authentically, they’re looking to employers to help them manage this new work-life world.”
The study revealed that employees’ number one source of stress is personal finances. “Regardless of age or life-stage, a focus on finances tops the list as the biggest concern employees have day to day.”
Some of employees’ stress about finances stems from short-term concerns, like staying on top of bills or paying for urgent health needs. Others stem from long-term goals — in fact, 3 of employees’ top 5 financial concerns directly relate to retirement, even among those who are relatively confident in their finances.
What are employees’ top 5 sources of financial stress?
Being able to afford the cost of healthcare in retirement – 72%
Outliving my retirement savings – 68%
Having money to pay bills if someone loses their job – 67%
Having money to cover out-of-pocket medical costs – 67%
Ability to rely on Social Security/Medicare in retirement – 66%
Employees say that solutions that help address financial stress are what they need most to thrive in the workplace and at home. Nearly 6 in 10 employees say an appropriate salary is one of the most important elements to successfully navigating and thriving in the workplace, the study states.
“Yet, a moderate salary increase can only help so much when dealing with an unexpected expense, whether it’s a broken bone or a flooded basement. That’s why financial support in the form of financial wellness programs, retirement plans, and a broad set of benefits can play such a crucial role in helping employees manage the unexpected and plan for the future. And employees realize this too — roughly 5 in 10 employees say better benefits are key to thriving.”
The gig economy can be a challenge and an opportunity for employers
The same technologies and evolving expectations that have driven flexibility and the need for new skills have also driven the ability to blend work and life. For instance, the evolution of mobile infrastructure has made part-time work accessible at the tap of a finger. These technologies are introducing an entirely new way of working: the gig economy, characterized by work that is often based on a fixed-term contract or paid per project via a third party or online marketplace.
As employees shift their expectations and needs for fulfillment inside and outside of work, the gig economy offers a unique solution, as it provides employees a useful outlet to gain more short- and long-term flexibility, control their schedules and projects, and earn extra cash.
While interest in the gig economy tends to skew towards younger generations, it’s appealing to older workers, as well. 1 in 2 Gen Z or Millennials, 3 in 10 Gen X, and almost 1 in 4 Boomers are interested in gig work. And gig work is appealing to workers for a variety of reasons.
What are the top 3 reasons full-time workers are interested in gig work? 1) flexible schedule – 31%; 2) ability to work where they want – 29%; and 3) ability to take on multiple different projects – 22%
But ultimately, employees want to ensure that joining the gig workforce doesn’t come at a loss of financial stability — their primary source of stress.
The Study states that employers can use unique levers to cater to employees’ desires for financial security and stability. “Certainly, this means considering salary increases, but also creating benefits packages that most gig opportunities simply can’t compete with. Additionally, creating policies and experiences within the workplace that offer the same gig-like diversity of exposure and flexibility can satisfy employees’ interests in this new type of work.”
CMS Extends Small Group Transitional Relief Policies through 2020
On Mar 25, 2019, CMS issued a new one year extension of its transitional policy for non-grandfathered small group plans that are not compliant with the ACA.
Policyholders will be allowed to renew their transitional plan coverage (commonly referred to as ‘grandmothered plans’) through Oct 1, 2020 as long as the coverage does not extend beyond Dec 31, 2020. If CMS does not issue another extension next year, all non-compliant policies must become compliant by Jan 1, 2021. Any policy renewed during the 2020 calendar year after Jan 1 must have a short plan year in order to terminate by Dec 31. CMS believes that requiring transitional policies terminate immediately before Jan 1, 2021 will “facilitate changing from non-compliant coverage to Affordable Care Act-compliant coverage, which requires a calendar year policy year in the individual market.”
As specified in prior extensions, carriers that renew coverage under the extended transitional relief policy must provide a notice to affected individuals and small businesses about the limitations of non-compliant coverage for each policy year.
We have confirmed with most of the state DOL’s and Departments of Insurance that they will allow grand”mothered” plans to continue, provide policyholders the freedom to change their anniversary dates, and allow carriers to offer short plan renewal options within CMS guidelines.
This is the fifth extension of the transitional relief policy and third under the Trump Administration. While the scope of this extension is again limited to one year, the context of the announcement indicates a longer term commitment to relief continuation. CMS Administrator Seema Verma explains: “Not extending the grandmothered plan policy would cancel plans that are meeting people’s needs today and, as a result, force people to decide between buying coverage they cannot afford on the individual market or going uninsured. By extending the grandmothered plan policy, we are following through on our commitment to protect those left behind by Obamacare.” The CMS press release cites this transitional relief extension and recent actions to expand access to association health plans and short-term health plans as examples of the Trump Administration’s commitment to providing more affordable coverage options to Americans “left behind by the PPACA.”
In response to public pressure, CMS first announced transitional relief for small groups and individuals allowing them renew the coverage they had in place on Oct 1, 2013 even though that coverage did not comply with various ACA market reforms including community rating, essential health benefits, and metallic benefit levels. Timeline of related guidance:
- Nov 14, 2013 – The original transitional policy. Available to policy years beginning Jan 1 – Oct 1, 2014. All non-compliant policies would terminate by Sep 30, 2015.
- Mar 5, 2014 – Extension 1. Available to policy years beginning Jan 1, 2014 – Oct 1, 2016. All non-compliant policies would terminate by Sep 30, 2017.
- Feb 29, 2016 – Extension 2. Available to policy years beginning Jan 1, 2014 – Oct 1, 2017. All non-compliant policies must terminate by Dec 31, 2017.
- Feb 23, 2017 – Extension 3. Available to policy years beginning Jan 1, 2014 – Oct 1, 2018. All non-compliant policies must terminate by Dec 31, 2018.
- Apr 9, 2018 – Extension 4. Available to policy years beginning Jan 1, 2014 – Oct 1, 2019. All non-compliant policies must terminate by Dec 31, 2019.
- Mar 25, 2019 – Extension 5. Available to policy years beginning Jan 1 2015 – Oct 1, 2020. All non-compliant policies must terminate by Dec 31, 2020.
Issue: You would like to implement an adoption assistance program for your company. In order for the financial assistance to be nontaxable, does the program need to be in writing?
Answer: Yes. Adoption assistance programs are governed under Internal Revenue Code Sec. 137, which specifies that an adoption assistance program must be a separate written plan of the employer that meets certain requirements.
Under an employer-provided program, Sec. 137 excludes from an employee’s gross income amounts furnished by the employer for adoption assistance purposes. Sec. 137 allows an employer to provide up to $14,080 in 2019 per child on an aggregate, not annual, basis for “qualified adoption expenses.” Adoptive parents’ adjusted gross income (AGI) determines the amount of the adoption expense limit that applies to them. In 2019, the credit begins to phase out at an AGI of $211,160 and is completely phased out at $251,160.
While Sec. 137 requires a written plan, it does not specify that the plan follows a particular format. At a minimum, the written plan should define the group of employees eligible to receive benefits, and describe the specific benefits offered under the program and any applicable limitations. Participation in the plan may be limited to a classification of employees determined by the employer, but the plan may not discriminate in favor of officers, shareholders, or the highly compensated or their dependents. Finally, reasonable notification of the terms and conditions of the plan must be provided to eligible employees.
Source: Internal Revenue Code Sec. 137.