Another Economic Reality: Single, Rational Test Needed for Who Is an “Employer”

DOLNLRBEarlier this month, in An Economic Reality: Uniform Regulatory Definition Needed for Who Is an “Employee”, we argued that a standardized, control-based test for legally categorizing workers would benefit both employers and employees. In this commentary, we explain why similar uniformity is urgently needed in how regulatory agencies and courts define “employer.”

The legal definition of “employer” is critical because employers are responsible for compliance with federal and state labor laws and can be held vicariously liable for the actions of their employees. It is most relevant, and controversial, in situations where businesses outsource or subcontract certain work responsibilities, and in franchise arrangements. Too broad a definition of employer could force businesses that outsource, subcontract, or franchise to act as “joint employers” for employees of entirely separate businesses. Continue reading

An Economic Reality: Uniform Regulatory Definition Needed for Who Is an “Employee”

DOLLast month, the Department of Labor (DOL) announced that its was withdrawing controversial policies that reflected how its Wage and Hour Division defined the terms “employer” and “employee” when enforcing the Fair Labor Standards Act (FLSA). DOL merited the applause its action received from regulated entities, but it is merely one small step in the direction of what franchisors, franchisees, “gig” economy participants, independent contractors, and other businesses desperately need: clear, uniform, and reliable standards that put an end to the “gotcha” game regulators and lawyers have been playing in recent years.

This part will focus here on standards for the term “employee”; a future post will address the need for uniformity in what constitutes an “employer.” Continue reading