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Contract Labor Isn’t What It Used To Be

By Jon A. Bierman

On August 27, 2015, the National Labor Relations Board, according to its own press release, “refined its standard for determining joint employer status” in the Browning-Ferris Industries of California decision.  In reality, the NLRB did far more than “refine its standard.”  The NLRB has, in fact, completely overhauled its joint employer test to the detriment of businesses that contract with third parties for the provision of labor. 

Under the new standard, a provider of contract labor and its customer will be considered joint employers even if the customer does not actually exercise control over the terms and conditions of the contract laborers’ employment, but only reserves to itself the right to exercise such control.  Although avoiding such a determination under the National Labor Relations Act should be sufficient motivation for companies that utilize contract laborers to take steps to avoid a joint employer determination, it is likely that other government agencies and plaintiffs’ attorneys will attempt to generalize the Browning-Ferris test to other statutory schemes—including the Fair Labor Standards Act and its state equivalents.  

There are several practical steps that customers of providers of contract labor can take to reduce the likelihood of a finding of joint employer status:

  • Review their written agreements to determine whether those agreements contain provisions that expressly reserve to the customer the right to exercise control over the terms and conditions of the contract laborers’ employment.
  • If possible, renegotiate their agreements to include terms that expressly disavow any such reservation of rights.  Irrespective of the contents of their contract labor agreements, contract labor customers should review the policies under which contract laborers perform services in their facilities.
  • Perhaps most importantly, conduct an audit on the implementation of those policies to ensure that their employees are not engaging in conduct with respect to the supervision of contract laborers that could contribute to the potential for a finding of joint employer status.   

In addition to these steps, businesses that utilize contract laborers should continuously reevaluate, based upon developments such as the Browning-Ferris holding, whether the benefits of utilizing contract laborers outweigh the potential risks.