The majority of companies use contingent workers – subcontractors, independent contractors or consultants, or temporary workers – to perform certain functions, but the types of relationships and arrangements vary. In some cases, a company might hire an independent contractor or consultant because of its specialized expertise. In other cases, a contractor might hire a professional employer organization (PEO), a temp agency, or labor provider to reduce administrative or regulatory burdens, overhead, or liability. And still other cases view temporary workers as a low-risk way to vet potential employees.
Whatever the structure or reason for it, the use of contingent workers has significantly increased over time. In fact, the law has long recognized contingent worker relationships, and numerous tests have been developed to define employer status.
One such test, the joint employer concept, was developed to determine whether two otherwise independent businesses might both be deemed the employer of a worker or group of workers for certain purposes. The joint employer standards have varied over time, but the National Labor Relations Board (NLRB) and the U.S. Department of Labor (DOL) have made recent shifts in how this status is determined.
This article will discuss those developments to help contractors assess the risks and reduce the likelihood of joint employment relationships.
Joint Employment & the NLRB
The NLRB’s recent Browning-Ferris Industries of California, Inc. decision abandoned its previous rule that found a joint employment relationship only if one company actually exercised control over the employees of a second employer. Instead, the NLRB announced that it would find joint employment relationships if one employer merely possesses the ability to exercise control over the employees of the other employer.
As a recent article in CFMA’s Bottom Lines1 pointed out, Browning-Ferris can increase a contractor’s risk of getting drawn into a labor dispute involving employees of a subcontractor, a temp agency, or a PEO.
Obviously, another employer’s labor dispute is something for which most contractors cannot budget or plan. However, a contractor can insulate itself from such issues by taking steps to ensure that a joint employment relationship does not exist.
With traditional contractor/subcontractor relationships, reducing the likelihood of a joint employment relationship may be relatively simple. In contrast, if a contractor uses another employer to supply workers that it directly controls, then the likelihood of joint employment is much greater, and the best approach may be for the contractor to insulate itself from potential liability.