by Michelle Ferber and Ben McDonald
The summer of 2015 has seen sweeping changes in the law and the perception of the employer/employee relationship. On August 28, the National Labor Relations Board (NLRB) continued this summer’s trend when it issued a landmark decision that will have dramatic impacts on the employment landscape.
In a 3-2 decision, the NLRB adopted a new test to determine whether two entities are joint employers of a common workforce. The board held that two or more entities are joint employers of a single workforce if: 1) the entities are both employers within the meaning of the common law; and 2) the entities share or codetermine the matters that govern the essential terms and conditions of the employment of the workforce. The new test attempts to examine whether the employer exercises any control over the terms and conditions of employment of workers. If the employer has any control, indirect or otherwise, over the terms and conditions of employment of a worker employed by or as an independent contractor, or has even just reserved the right to do so, the employer may be liable for and to the worker.
Whom does this decision have the most effect on? Franchisors and businesses that use independent contractors. This new test will result in more franchisors being held liable for the activities of franchisees, and more employers being held liable for the actions of independent contractors. A scenario that most are familiar with, a business using a “temp” agency for a supply of workers provides a good example of how this new test changes the landscape. In that scenario, the business contracts with an outside company to supply workers for the business. Prior to the new ruling, since the workers are technically employed by the agency, which directly controls the essential terms and conditions of the workers’ employment rather than the business, the business may have little to no liability in regard to the workers. Under the new ruling, the employer and the temp agency will likely be considered joint employers of the workers and therefore the employer may be held liable, alongside the temp agency, for and to the workers. For example, if a temporary worker assigned by his agency to a business has a work-related grievance, that business may now be on the hook alongside the temp agency.
While this ruling does not completely destroy the legal buffer between an entity and an independent contractor, it certainly has a dramatic effect on how such relationships will be analyzed. Franchisors, franchisees, employers, employees, and independent contractors are all affected by this ruling and are encouraged to examine their employment relationships to ensure that they are aware of the liabilities they may be exposed to. The National Labor Relations Act (NLRA) is a federal law that provides employees with certain rights to work together to improve working conditions and wages for union and non-union employment activities. The NLRB is the agency which ensures compliance and investigates alleged violations of the NLRA. The NLRB only has power over private sector employers who have at least two employees and whose business exceeds a minimal level of interstate commerce. “Interstate commerce” is interpreted very broadly so that the NRLB likely applies to all but purely local enterprises. For retailers engaging in interstate commerce, the threshold is $500,000 and for non-retailers, the threshold is $50,000 of services either sent out of state or purchased from out of state. These particular threshold standards are only two of many, and there are several specific categories.
In general, however, as the bar is set relatively low, many employers and businesses will fall under the purview of the NLRA. Ferber law is well-versed in a wide variety of employment issues and is ready to provide assistance with matters such as this, as well as any other employment matters.
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.