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Employment Blog

Contracted Employees: Will You Become a New Employer?

Authored by Dean R. Dietrich
Posted on July 7, 2014
Filed under Employment

Many companies use contracted employees to avoid the cost of human resources services and benefits. Under these arrangements, a company will hire another company to provide the employees that will do all or a portion of the production work for the business. This has become a popular way to manage human resources costs and benefits. The National Labor Relations Board has held that the company contracting with another company is a separate employer and not responsible for issues involving the employees (such as union organizing efforts) provided the company is not actually sharing in the ability to control or determine the essential terms and conditions of employment for these employees (things such as hiring, firing and direct supervision of the employees). The lack of control over the employment conditions for the employees of the contracted company is what gives protection to the contracting company from any requirements of being an employer of those individual employees.

The world as we know it regarding contracted employees may be changing. The National Labor Relations Board and its General Counsel (Richard Griffin, Jr.) are looking to change the criteria for determining whether two companies are considered "joint employers" of these contracted employees. The NLRB is currently considering a case where the Teamsters Union is seeking to organize employees that are directly employed by a sub-contractor. The Union is asserting that the company is a joint employer with the sub-contractor and is seeking to overturn a long-standing precedent of the Board suggesting that it is time to "overhaul its (Board) dated and toothless test of joint-employer status." In this case, the sub-contractor has employees working on the premises of the contracting company. The desire of the NLRB to engage in a review and control of non-union work settings suggest that the Board will undertake a change in the "joint employer" standard and make it easier to organize these types of contracted workers to be considered an employee of the contracting company.

Employers should look very closely at the current contracting arrangements used for obtaining employees that work for a sub-contractor who also do work for the company. There should be an assessment of whether there is a risk of a "joint employer" status and what the impact of that may be on the company operations and employee costs.