This summer, the National Labor Relations Board significantly expanded risk for companies that subcontract employees to be considered a “joint employer” of its contractors. The risk involves liability for injuries, taxes, contract breaches and other third-party claims. This can affect residential construction constituents who market “installed sales” to the extent that any of the installation is subcontracted.
In its decision involving Browning-Ferris Industries, the NLRB effectively abandoned a 30-plus year interpretation of what constitutes a “joint employer.” The ruling was in favor of a standard that focuses less on whether there is direct control over employees, and more on the economic ability to control employees. The Board believed prior interpretations were “out of step with changing economic circumstances.”
Perhaps coincidentally, in July 2015, the Department of Labor issued a new Administrator’s Interpretation regarding the classification of employees as independent contractors. This interpretation similarly suggested that employment should be determined in a less mechanical fashion with a focus on the “broader concept of economic dependence.”
What emerged is a new “economic dependence” measuring stick that imposes employer liability over non-employees. The implications range from potential collective bargaining exposure as a joint-employer, to serious tax penalties that may arise due to misclassifying employees as independent contractors. This move away from established practices that determine joint-employers and classify employees places business in a position of uncertainty.
Not surprisingly, success in the construction industry includes building continuity with valued, non-employee service providers. It is a given that, within the relationship, “contractors” may have economic dependence on your company, which can be beneficial to all. But now there must be heightened attention to staffing relationships and independent contractors because of the government’s shift in how it will evaluate these classifications.
Outside staffing agreements for services like accounting, manufacturing, or even janitorial work should be evaluated to ensure that the ties and controls between the hiring and staffing companies are managed. Contracts or practices that suggest both companies control essential terms and conditions of employment can risk a determination of joint-employer status.
Moreover, the closer an independent contractor comes to complete dependence on the hiring company for profitability and performance, the less “independence” will be found, making it more likely that he or she could be found to be an employee. Keep an eye on this one.
Paul R. Gary is the prinicipal of The Gary Law Group, a law firm based in Portland, Oregon, emphasizing legal issues facing manufacturers of windows and doors. He can be reached at 503/227-8424 or email@example.com.
The opinions expressed here are those of the individual author and do not necessarily reflect those of the National Glass Association, Glass Magazine editors, or other glassblog contributors.