When contractors and subcontractors work side-by-side on a job site, it can be difficult for companies to distinguish their responsibilities under joint employer rules. Construction industry groups were pleased when the National Labor Relations Board (NLRB) issued its new final rule in February 2020. However, despite clarity from the federal agency, the myriad of changes over the last five years means companies should evaluate their current procedures to ensure they comply with the complex regulations.

The Cause of Concern

Construction projects naturally involve collaboration among contractors and subcontractors, but the amount of control contractors actually exercise over their subcontractors’ employees can vary. If regulators decide a contractor is actually a “joint employer,” both companies could be jointly liable for compliance with various labor regulations including collective bargaining obligations.

For years, the NLRB had held that to be considered a joint employer a company had to exercise “direct and immediate” control over another company’s workers. In deciding a 2015 case, however, the NLRB expanded the joint employer rule and applied it to entities that have only limited or indirect control over the other company’s employees.

The 2015 case involved one company’s use of a temporary staffing agency, but the NLRB’s shift in position raised questions about other contractual relationships, such as franchisor-franchisee operations and the contractor-subcontractor relationship in the construction industry.

The New NLRB Standard

The NLRB recognized that its decision in the 2015 case unsettled the law in this area, so it set out to clarify things.

The new rule says that a company is considered to be a joint employer of another company’s employees only if the two companies share control over the “essential terms and conditions of employment.” It defines these terms and conditions as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

It goes on to state specifically that to be considered a joint employer a company must possess and exercise “substantial direct and immediate control” over one or more of these essential terms. Indirect control, or control that is allowed by a contract but never actually exercised, does not by itself qualify a company as a joint employer.

Other Agencies’ Standards

Because the NLRB is an independent agency, its new rule applies only to cases it enforces, which involve collective bargaining agreements, strike activity, or related labor practices. Other regulatory agencies define joint employers in completely different terms.

For example, after several conflicting federal appeals court rulings following the NLRB’s 2015 shift, the Department of Labor (DOL) produced its own version of the joint employer rule under the Fair Labor Standards Act. The new DOL rule, which went into effect in March 2020, says a company is considered a joint employer if it exercises the power to:

• Hire or fire the employee
• Supervise and control the employee’s work schedule or conditions of employment
• Determine the employee’s rate of pay and method of payment
• Maintain the employee’s employment records

Although the new DOL rule applies to various laws the department enforces, such as the Family and Medical Leave Act and the Americans with Disabilities Act, it is not altogether clear how it will affect other aspects of employment law such as discrimination claims handled by the Justice Department or workers compensation cases that are handled at the state level.

Meanwhile, the Occupational Health and Safety Administration (OSHA) takes a somewhat different approach, recognizing that responsibility for worker safety quite often involves multiple employers. OSHA therefore classifies an employer as:

• Controlling employer – the company with general supervisory authority and power to either correct hazards or direct others to do so
• Creating employer – the company that creates the hazard
• Exposing employer – the company whose employees are exposed to the hazard
• Correcting employer – the company responsible for correcting the hazard

Most OSHA multi-employer citations are issued to the controlling employer, typically a general contractor or facility owner, but in some circumstances, all four types of employers could be cited for the same violation.

Construction contractors have struggled with the many iterations of the joint employer rule and it’s important that current contract language reflects February’s adoption of the new final rule.

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Dembo Jones’ team of construction industry specialists can examine your contracts and procedures and bring clarity to your understanding of the joint employer rule.