It hasn’t taken long, and if there was ever any wonder, it’s been put to rest. In the first weeks of the Trump administration we’ve seen wide-reaching philosophical shifts. But how will those shifts impact labor and employment in the automotive industry and, more importantly, what issues should employers continue to be mindful of in 2017?
While we expect to see a shift away from federal oversight and toward a more business-friendly approach to employment regulations, certain states and municipalities have already proposed (or passed) legislation designed to maintain and, in some cases, expand the benefits and protections currently available under federal law. With this in mind, we’ve highlighted four important questions that employers should be asking, along with suggested steps to minimize potential risk.
In today’s post, we’ll take an in-depth look at the first two questions. Please check back on Thursday for the final two questions.
1. Have you evaluated joint employment risks?
If you currently hire contract workers, use staffing agencies to supplement your workforce, or share employees with a parent, subsidiary, affiliate, or other employer, 2016 brought with it an increase in joint employment concerns as the U.S. Department of Labor (DOL) joined the National Labor Relations Board’s (NLRB’s) efforts to move away from the traditional view that joint employment turned on the degree of actual control an entity exercised over a worker and toward a joint employment standard that is “as broad as possible.
Specifically, a 2016 administrative interpretation from the DOL describes “horizontal” and “vertical” employment and outlines a number of factors to be considered when analyzing joint employment liability for each. According to the DOL, horizontal employment exists when an employee has a relationship:
- With two separate but related or associated employers, and
- Those separate entities are sufficiently connected to be deemed joint employers.
- Example: manufacturer and supplier
In contrast, a vertical joint employment relationship exists where:
- Economic realities show that the employee is employed by one employer (the “intermediary employer”),
- But the employee is economically dependent on another employer involved in the work.
- Example: staffing agencies and subcontractors
Previously, the NLRB, in its 2015 Browning-Ferris decision (currently on appeal to the U.S. Court of Appeals for the District of Columbia), concluded that a company may be a joint employer if it exerts “indirect control” over workers, or if it “reserves” control even if it does not exercise that control. This expansive definition of joint employment has significantly expanded the potential liability for employers. The concern, of course is that, when joint employment exists, each employer is jointly responsible for unpaid wages and overtime and may be held liable for any discrimination, retaliation, failure to provide required benefits, or other violations of labor and employment laws.
While President Trump’s stance on many labor and employment issues, including joint employment, remains unclear, recently, he took the first step toward reshaping the NLRB by appointing Philip Miscimarra, the sole Republican member of the NLRB, as the agency’s Acting Chairman. Presently, there are two more vacant NLRB seats awaiting further appointments by President Trump.
Suggested next steps
Although President Trump’s appointees are expected to revisit and revise these broad agency interpretations of joint employment, any change is likely to be a ways off. In the meantime, auto industry employers and others with supply-chain, franchising, subcontracting, or staffing relationships should review any agreements and arrangements with such entities to assess whether a joint employment relationship exists under the current broad definition. If it appears that a joint employment relationship may exist, you should consider whether the relationship makes good business sense, assess the DOL and NLRB factors to minimize joint employment risks, and conduct due diligence on the other entity. At the very least, you’ll want to confirm that the other entity is correctly compensating its employees and is compliant with key labor and employment laws. It is also prudent to consider indemnification provisions to provide an additional line of defense in the event that one or both companies are sued by the shared worker.
2. Do you have any pay equity concerns?
Prior to President Trump taking office, both the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP) identified systemic gender pay discrimination as a key area of focus for 2017. Additionally, Ivanka Trump, who by all accounts is one of the president’s closest advisers, promised that her father would “fight for equal pay for equal work.” Although the Trump administration has not identified pay equity as a current priority, increasing public attention and media focus on issues related to gender discrimination and equal pay mean that employers should take action now to ensure that they are prepared to address any complaints by, or on behalf of employees, as well as any potential agency enforcement efforts in this area.
Employers who are not in compliance with the Equal Pay Act face considerable risk. Under the Equal Pay Act, as well as Title VII, an employee may file a pay discrimination claim alleging he or she is not receiving equal pay for equal work. If, for example, a female employee demonstrates that she was paid differently than a male employee for performing work requiring the same skills, experience, and responsibilities, the employee may be entitled to significant damages, including back pay. If a wage disparity is proven to be due to intentional sex-based pay discrimination, the employee may also be entitled to additional damages equal to the amount of back pay awarded. The potential for class actions alleging pay disparity exponentially expands the potential legal liability.
Suggested next steps
Regulations passed at the end of 2016 could, if implemented, require many employers to publish pay data in their annual EEO-1 reports. Specifically, as of March 31, 2018, federal contractors and other employers that employ more than 100 workers will be required to include information regarding W-2 wages and hours worked with the demographic information already provided in EEO-1 reports. Because EEO-1 reports are available to government agencies, as well as the public, these requirements are designed to provide greater transparency. The EEOC and OFCCP are also hoping that the new data-gathering requirement will encourage employers to voluntarily analyze and address any pay disparities.
Given the burdens associated with the new EEO-1 reports, these reporting requirements are prime targets for rollback or amendment in advance of the 2018 reporting date. However, the EEOC and OFCCP are still likely to investigate and pursue wage discrimination cases even under a Republican administration. In light of these developments, employers should review their current pay systems and conduct a comprehensive pay equity analysis. Any such review should be completed with the assistance of counsel (in order to maintain the attorney-client privilege) and should, at minimum, analyze whether there are gender, race, or ethnicity-based disparities in compensation.
For additional information about these developments and more
Foley’s experienced Automotive Industry Team has prepared a full report, entitled “Top Legal Issues Facing the Automotive Industry in 2017,” that examines the road ahead regarding antitrust, security, labor and employment, M&A, and more. Download it today.