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Wednesday
Jun142017

Franchise Law: Burden of Joint Employer Just Got a Little Lighter

Franchise LawyerChair, Franchise & Distribution Practice Group

 

by Barry Kurtz

818-907-3006

 

 

Direct control, indirect control…these are the employment litigation phrases that had franchisors cowering in duck-and-cover positions over the last few years. But the Department of Labor just issued a statement to breathe new life into the franchise industry.

The dangerous era of joint employer litigation isn’t completely over yet. Franchisors should still take protective measures as they can. Still, there’s a glimmer of hope in the trenches:

Last week the DOL announced a retreat of sorts by withdrawing its interpretation of the Fair Labor Standards Act (FLSA). This January 2016 interpretation was the one that defined an employer as an entity or individual who has “indirect control” over an employee. In the franchise context, it meant courts were looking at whether or not an employee was economically dependent on the franchisor to determine whether that franchisor could be deemed liable for claims as a joint employer. (See our Franchise & Distribution Newsletters for more on Joint Employer Litigation.)

The NLRB was the first agency to take a broad stance on the issue of joint employment, most notably in 2015 in the Browning-Ferris Industries decision. In that case, the NLRB decided entities may be joint employers if:

(1) They are both employers within the meaning of the common law; and

(2) They share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors  consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. 

DOL’s rescinding of guidance on this issue doesn’t necessarily change the law, it simply reflects the current government’s friendlier attitudes towards business.

So franchisors, take a deep breath and relax a little. But not too much, as the war on joint employer liability still wages on.

Barry Kurtz is a State Bar of California Certified Specialist in Franchise & Distribution Law.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Nov232016

Employers: Texas District Court Grants Nationwide Injunction Against DOL's Final Rule

Lawyer for EmployersEmployment Defense

by Tal Burnovski Yeyni

818-907-3224

 

In May we reported the Federal Department of Labor issued its Final Rule regarding the minimum salary level required for the exemption of executive, administrative and professional (EAP) employees.  The final rule was designed to raise the minimum salary required for the exemption from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). 

In an 11th hour ruling,  U.S. District Court Judge Amos L. Mazzant granted a motion for preliminary injunction filed by 21 States that challenged the Minimum Salary Rule and imposed a nationwide injunction against the implementation of the Final Rule that was scheduled to take effect on December 1, 2016.  

In a 20-page decision Judge Mazzant opined the DOL lacked authority to define and delimit a minimum salary threshold for exemption. Per Judge Mazzant, Congress intended for the EAP exemption in the Fair Labor Standards Act (FLSA) to depend on employee’s duties rather than on the employee’s salary.  Accordingly, the DOL’s authority was limited to define and establish the types of duties that might qualify an employee for the exemption:

While this explicit delegation would give the [DOL] significant leeway to establish the types of duties that might qualify an employee for the exemption, nothing in the EAP exemption indicates that Congress intended the Department to define and delimit with respect to a minimum salary level. 

Further, Judge Mazzant held that with the Final Rule, the DOL exceeded its delegated authority and ignored Congress’s intent by raising the minimum salary level “such that it supplants the duties test” and creates a “de facto salary-only test”.

Following the Court’s analysis regarding the DOL’s authority to promulgate the Final Rule and the likelihood of the irreparable harm and balance of hardship between the parties’ the Court decided that a nationwide injunction was proper in this case.

Implications for California Employers

As the Final Rule is currently on hold, California employers are required to comply with the California threshold for EAP exemption, which is at least two times the state’s minimum wage for full time employment (currently, $3,466.67 monthly; $41,600 annually).  Note that with the gradual raise in the State’s minimum wage starting on January 1, 2017, the minimum threshold for exemption will go up as well.

Finally, employers should be advised that the salary threshold test is merely one component of a valid exempt status. To be properly classified as an exempt employee an employee must: 

  • Primarily engage in “exempt duties” and;
  • Earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment.  

While some commentators speculate the DOL will appeal yesterday’s ruling, it still remains to be seen whether the feds will challenge Judge Mazzant’s decision. 

 

Tal Burnovski Yeyni is an attorney in our Employment Practice Group

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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