4 Critical Updates in North American Co-Employment Laws & Regulations

The regulatory landscape across the globe has gone through various changes in the past quarter, driven by changes in immigration, major elections, and other factors. Organizations that are looking to be informed on the latest shifts in co-employment laws and to be prepared for upcoming changes can utilize Magnit’s Q4 Regulatory Newsletter, which provides insights from experts across HR, Contractor Compliance Services, Immigration, Legal and more.

In this blog post we are going to cover four important updates that are impacting co-employment compliance in North America over the past quarter.

NLRB Drops Appeal of Joint Employer Rule

The National Labor Relations Board (NLRB) has dropped its appeal of a Texas federal judge's order striking down its joint employer rule published in October of last year. Due to this, the joint employment standard now reverts to the previous administration’s rule finalized in February 2020 (commonly referred to as the “2020 Rule”).

The “2020 Rule” states that one or more employers may be considered joint employers when they “possess AND exercise substantial direct and immediate control over one or more of the essential terms and conditions of employment.” Essential terms and conditions of employment include, but are not limited to:

• wages
• benefits
• hours of work
• hiring
• discharge
• discipline
• supervision
• direction

Magnit recommends that employers revisit the “2020 Rule” with their legal counsel to ensure compliance within their contingent workforce programs.

Illinois Updates Day & Temporary Laborer Services Act

The Illinois Day and Temporary Laborer Services Act (DTLSA) has gone through several changes over the past year. On August 9, 2024, the state, once again, amended the DTLSA taking effect immediately. It is important to note that the DTLSA explicitly states it does not apply to professional or clerical work. The recent amendments build on the portion of the DTLSA requiring temporary help agencies to provide the same pay and benefits as those working a substantially similar role at a client. The new amendments change the eligibility provisions from 90 calendar days to more than 720 hours of work within a 12-month period at one client. This new standard applies to all hours worked going back to April 1, 2024.

The amendments also provide for a new method to calculate equal pay. Agencies may now use statistics provided by the Bureau of Labor Statistics (BLS) to determine pay rates based on the same or substantially similar job classification in the same metropolitan area of Illinois. Equal pay can still be based on the internal employee data provided by clients to agencies. However, clients have a right to require agencies to use the BLS method to determine pay rates. Clients are still required to provide agencies with all information needed in order to comply with the DTLSA when requested by agencies and only after an employee has met the 720-hour threshold.

Finally, the amendments create a new requirement for agencies to provide an “application receipt” to applicants seeking day or temporary labor work but were not selected for work. The amendments require agencies to use a form approved by the Illinois Department of Labor. At the time of writing, an approved form has not been issued.

Magnit recommends that Illinois employers with populations covered by the DTLSA should review their current processes and work with their temporary help agencies to ensure ongoing compliance with the law.

NLRB and Michigan AG Sign MOU Targeting Misclassification

This August, the National Labor Relations Board’s (NLRB) Regional office partnered with the Michigan Attorney General’s Office and signed a Memorandum of Understanding (MOU).1 The MOU allows for inter-agency partnering to enhance enforcement of the laws related to the misclassification of workers. The agreement lays out a preliminary meeting and training schedule, sets forth the information handling and security requirements necessary to protect the information shared between agencies, and details procedures for the referral of potential statutory violations between the parties.

This MOU takes effect from August 5, 2024, through August 5, 2025. Employers who operate in, or have contractors in, Michigan and the surrounding area should take note of these heightened enforcement activities and ensure compliance with all classification standards covered under the Fair Labor Standards Act.

City of Los Angeles Issues Model Contract for Freelancers

On August 7, 2024, the City of Los Angeles unveiled its “Model Contract” under the Freelance Workers Protections Ordinance (FWPO). The FWPO, which took effect on July 1, 2023, was designed to bolster protections for freelance workers in Los Angeles. As a reminder, the FWPO requires written contracts for all agreements valued at $600 or more, and requires full payment to be made by the specified date in the contract, or within 30 days after work completion if no date is specified.

Recently, a Model Contract was published by the City and serves as a basic template to help businesses and freelancers comply with the FWPO. While not legally required, it provides a framework for drafting contracts that meet the ordinance’s requirements. The Model Contract includes essential elements such as:

• Scope of Work: Clearly defines the services to be provided, including deliverables, timelines, and locations of the work; and
• Payment Terms: Outlines payment amounts, schedules, and ensures compliance with the ordinance’s 30-day payment rule.

This template will assist employers to comply with the FWPO and avoid costly fines. If a hiring party violates the FWPO, a court may award the freelance worker damages, including twice the unpaid amount, attorney’s fees, and other remedies.

Additionally, if the hiring party fails to provide a requested written contract, the freelancer may receive an extra $250. In addition to complying with the local city ordinance, entities operating in California, including in Los Angeles, must also ensure compliance with California Labor Code Section 2775 et seq., which governs the classification of workers as independent contractors. The City also issued a FWPO fact sheet for further clarification.

Navigating the Regulatory Landscape with Confidence

Organizations that heavily rely on the extended workforce and are looking to stay ahead of the latest developments in regulatory shifts can partner with a leading contingent Employer of Record (EOR). This partnership can offer organizations several advantages, including improved mitigation of risks to the business, cost savings by avoiding agency markups, enhanced ability to abide by regulations across regions, and more.

Interested in gaining insights on choosing the best EOR partner for your organization? Grab our “Ultimate Guide to Selecting a Contingent EOR.”