Many employers choose to utilize the services of “non-employees” (e.g., temporary workers, independent contractors) as a means of efficiently managing their businesses. Unfortunately, the current administration and the agencies charged with enforcing federal labor and employment laws have taken aim at these arrangements and have significantly broadened the definition of employee. Employers need to pay attention to these changes and prepare for the potential that their “temps” and “1099s” are now considered to be employees—with all that that entails.
In particular, in January 2016, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued an Administrator’s Interpretation with new guidelines defining joint employers under the Fair Labor Standards Act (FLSA). The WHD believes employers are regularly part of joint employment relationships with their vendors and business partners. While not a binding authority, there can be no doubt that the WHD intends to take more aggressive enforcement positions against those it deems “joint employers,” which will likely include an effort to expand FLSA statutory coverage to smaller businesses and hold larger employers responsible for unpaid back wages and overtime obligations.
Similarly, last August, the National Labor Relations Board (NLRB or the board) announced a broad new standard for determining whether two businesses are “joint employers” for purposes of collective bargaining in a case called Browning- Ferris Industries of California, Inc. Under this new standard, joint employment now exists even where one company only has the right to exert indirect or potential control over the terms and conditions of another company’s employees.
Previously, for the past 30 years, the NLRB had held that two companies would only be considered joint employers if they share or codetermine those matters governing the essential terms and conditions of employment: an employer would only be held to be jointly employing workers if they actually exercised the right to control. Moreover, under the old standard, the exercise of such control must have been direct, immediate, and not limited and routine.
Under the new Browning Ferris standard, the NLRB eliminated the requirement that the employer actually exercise control. Instead, the business need only retain the contractual right to control—even if it has never exercised it. Further, the board rejected the direct, immediate, and not limited and routine criteria, holding instead that indirect control (e.g., control through an intermediary) is now sufficient.
But that was just the first step. On July 11, 2016, the NLRB dropped the proverbial other shoe when it resurrected a union friendly standard making it easier for unions to combine jointly employed temporary workers with an employer’s existing workforce to form a union. For over a decade, employers had enjoyed a standard which permitted them to block such a combined pairing by refusing to provide consent. Further demonstrating the NLRB’s predisposition toward the interests of organized labor, the board scrapped that standard in Miller & Anderson, Inc.
In support of its decision, the NLRB pointed out that the most recent Bureau of Labor Statistics survey indicated that contingent workers comprised over 4 percent of the national workforce, close to six million workers, but that these numbers were probably even greater than that at present time. Further, temporary employment has expanded in the last decade to include a much wider range of occupations, and is recognized as one of the largest and fastest growing industries in terms of employment.
As an employer, you should carefully review your contracts with temporary service providers and independent contractors. Scrutinize the parameters within your written service agreements and your underlying practices for reference to right to control. This includes an analysis of pre-employment qualification and hiring standards, assignment and retention of individual temporary employees, shift schedules, workload and pace of work, and wages and benefits.
No doubt that the complete elimination of many of these factors may be impractical in many cases. But to the extent that their presence can be minimized, the parties can at least develop and preserve viable arguments against imposition of joint employer status.
LORI ARMSTRONG HALBER AND RICK GRIMALDI represent employers in all aspects of workplace law as partners in the law firm of Fisher Phillips, recognized by US News & World Report as a 2016 Law Firm of the Year. Follow them on Twitter at @EmployerChrncls and look for their podcast “The Employer Chronicles” at TheEmployerChronicles.com.
Published (and copyrighted) in Philly Biz, Volume 1, Issue 8 (July, 2016).
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