The End of Subcontracting as We Know It?

This afternoon the National Labor Relations Board ruled that in many cases an employee of a sub-contractor is joint employee of both the sub-contractor and the contracting company.

How do you determine who is joint employee? It would appear that the board is going to use some of the same standards used to determine whether someone is an employee or an independent contractor.

It’s about time.

The practice of sub-contracting janitorial services, etc. has long been a cover for labor abuses. Companies have been using sub-contracting to evade labor laws and avoid the consequences of poor working conditions and sub-standard pay.

Can I document this kind of abuse? How about here, here, here or here?

We’re talking about using sub-contractors to commit fraud in non-profits, government contracts and Medicare. We’re talking about using sub-contracting to create sweat shop conditions while providing deniability to the principal company.

This was long overdue and it is of critical important because this kind of subcontracting is almost an endemic practice by American businesses. It’s about time that an employee of a company employed through what is essentially a shell company is considered an employee of the main company.

James Pilant

From the NLRB web site:

In the decision, the Board applies long-established principles to find that two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors — consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. 

From The Hill:

The National Labor Relations Board on Thursday handed down one of the biggest decisions of the Obama presidency, ruling that companies can be held equally responsible for labor violations committed by their contractors.

At issue is whether waste management firm Browning-Ferris is responsible for the treatment of its contractor’s employees. The Houston-based company hired Leadpoint Business Services to staff a recycling facility in California. 

The labor board determined Browning-Ferris should be considered a joint employer with the Phoenix-based staffing agency. As a result, the company could be pulled into collective bargaining negotiations with those employees and held liable for any labor violations committed against them.

This is a sharp departure from previous labor laws that hold companies responsible only for employees who are under their direct control by setting their hours, wages, or job responsibilities. Companies could avoid those requirements by hiring staffing agencies and subcontractors that deal more closely with the workers.