New Joint Employer Rules Impact Businesses with Temps, Independent Contractors

The implications of new joint employer rules recently written into the standards that the National Labor Relations Board will apply to rulings going forward make it more likely that a business using independent contractors, temporary employment or staffing agencies will be viewed as a “joint employer” and could be held accountable in legal proceedings or made to fulfill other responsibilities of an employer.

The decision was pass 3-2 in a case involving Browning-Ferris Industries of California in order to “better effectuate the purposes of the Act in the current economic landscape.” The board held that “the joint employer standard that had previously been in place has failed to keep pace with changes in the workplace and economic circumstances.”

What are joint employers?

The revised standard finds that two more parties will be defined as “joint employers” as two or more parties of a single workforce 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.

The old standard said an entity would be viewed as a joint employer if they exercised direct control over workers’ daily tasks, scheduling, hiring, firing, etc.  The new standard is much broader. An entity doesn’t have to exercise control but simply has the authority to exercise control over working conditions, hiring, firing, etc.

Who is impacted by joint employer rules?

This decision directly impacts companies that employ temporary workers or engage in temp-to-hire relationships with staffing and recruiting agencies, as well as those that work with independent contractors. It may also impact franchisors as well, depending on what rights and responsibilities their franchise agreements have on oversight of the working conditions, hiring and firing of franchise location staff.

The new rules provide inroads for unions, who would have stronger grounds to encourage workers to organize unions that would represent workers at both joint employers. Workers would have the ability to bargain with either or all entities. Roger S. Kaplan, writing on JacksonLewis.com, explains that this is a controversial ruling which “has swept many more businesses under the “joint employer” umbrella and increased labor union bargaining power…. The NLRB ruling overturned three decades of precedent and is expected to immediately affect independent staffing services, subcontractors, distributors, and franchisees.”

The ruling doesn’t just affect companies that use temporary workers or contractors.

Organizations that outsource to companies that have unions in place could also be pulled in under these “joint employer” rules for collective bargaining, grievances and other union-related activities, since the workers they place there would be considered to be jointly-employed by the client, and thus covered under the union, depending on their function within the client’s organization.

Both parties can also be pulled in to actions where there is no union, since the ruling falls under the National Labor Relations Act (NLRA), which applies to most private sector employees. “If, for instance, an employee of a staffing company, where there is no union files an unfair labor charge against its employer, it may also choose to file that charge against the outsourcer as a ‘joint employer’ under this decision,” says Amanda L. Van Hoose, an employment law attorney in the New York offices of McCarter & English in an article on CIO.com.

Could joint employer rules extend to other industries?

The new rules could easily be extended to industries like the beauty industry, where in some states the hair salon business model is as high as 90% booth renter model. Since booth renter contracts vary widely, those salons that want more control over how booth renters perform services and have the ability to terminate their contracts, effectively “firing” them, could be held to the standards applied to regular employers vs. contracted relationship or landlord.

3 Ways to Ensure Compliance or Respond to the New Joint Employer Rules

1. Contact your U.S. house and senate representatives and let them know how you feel about this issue. The new standard could be overturned and the standard revert to its previous language; in fact, within weeks of the ruling, the House and Senate labor committees had introduced a bill that would undo the changes (it’s still pending in Congress). Until or unless that occurs, business owners need to be aware that this is the standard they will be held to and they should follow the advice and look for updates from the NLRB.

• Directory of U.S. Representatives
• List of U.S. Senators by State

2. Examine the contracts and agreements you use to manage temporary workers, contracted employees, distributors and franchisees.
3. In the case of outsourced workers, determine whether you are truly using them as a temporary staffing solution and consider whether some should be hired as regular employees. Generally, workers placed by temporary employment or staffing agencies should only be employed for a limited period of time and their functions should be specifically defined.

No official statements have been issued to date by the U.S. Department of Labor or the Occupational Safety and Health Administration (OSHA); however, the new standard as defined by the NLRB could be adopted by either or both of these government organizations. If this occurs, major changes to labor and employment law could follow.