Compliance Corner: Changes to Labor Rules Will Affect NATSO Members

The National Labor Relations Board has revised the so-called “joint employer” standard significantly to expand the scope of determining “co-employment” under the National Labor Relations Act. Specifically, the NLRB decided that a company could be considered a “joint employer” if it possesses the right to control various terms and conditions of employment, regardless of whether that company actually exercises such control. In addition, the Department of Labor has released “guidance” that has the effect of limiting employers’ ability to classify workers as “independent contractors” rather than employees. Both moves will have a direct affect on NATSO members as the franchisor-franchisee business model is ubiquitous throughout the truckstop and travel plaza industry and many NATSO members utilize independent contractors.
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The National Labor Relations Board has revised the so-called “joint employer” standard significantly to expand the scope of determining “co-employment” under the National Labor Relations Act. Specifically, the NLRB decided that a company could be considered a “joint employer” if it possesses the right to control various terms and conditions of employment, regardless of whether that company actually exercises such control. 

In addition, the Department of Labor has released “guidance” that has the effect of limiting employers’ ability to classify workers as “independent contractors” rather than employees. Both moves will have a direct affect on NATSO members as the franchisor-franchisee business model is ubiquitous throughout the truckstop and travel plaza industry and many NATSO members utilize independent contractors.

The Joint Employer Standard
Broadening the joint employer standard will expose more companies to legal liability for how their subcontractors, staffing agencies and franchisees treat their employees. The ruling also makes businesses more susceptible to workforce unionization by imposing new collective bargaining obligations and allowing unions the ability to strike or picket a large corporate entity rather than the individual location where there is a dispute.

Previously, to find joint employer status, the NLRB required that an employer not only possess the authority to control essential terms and conditions of employment, but also actually exercise that authority. Under the new approach, the mere right to control – along with the actual direct or indirect exercise of control – informs the joint employer analysis.

As a practical matter, the new joint employer standard means that more employers can be held liable for unfair labor practices. The standard also makes businesses more susceptible to workforce unionization by imposing new collective bargaining obligations and allowing unions the ability to strike or picket a large corporate entity (such as McDonald’s or Subway) rather than the individual location where there is a dispute.

As a best practice, businesses should give greater scrutiny to the employment practices of subcontractors, franchisees, and staffing agencies. NATSO members are advised to closely scrutinize existing relationships with contract workers, such as equipment inspectors, delivery personnel and janitorial staff, to determine whether there is a vulnerability to findings of joint employer status. NATSO members should expect that plaintiffs’ lawyers will more vigorously pursue joint employer claims as well.

NATSO members that are franchisees are advised to contact their franchisor to discuss the new joint employer standard’s implications for their arrangements. NATSO members that are franchisors are advised to closely audit their franchise agreements to ensure they appropriately allocate decision-making authority in light of the evolving nature of the NLRB’s joint employment regime.

Independent Contractors
The DOL’s guidance on independent contractors is a potentially critical development in labor law. The rules remain largely ambiguous, but the guidance delineates six factors that should be used to make independent contractor assessments:

They are:

  • Are the worker’s contributions an “integral part” of the employer’s business?
  • Is the worker’s opportunity for profit or loss based on or affected by the worker’s managerial skill? 
  • How do the relative investments of the employer and the worker in the worker’s business compare?
  • Do the worker’s job duties require advanced skills?
  • What is the degree of permanency in the work relationship?
  • What is the nature and degree of control exercised and retained by the employer? 

The DOL’s guidance indicates that the federal government is likely to increase its independent contractor enforcement efforts. It also means that plaintiffs’ lawyers can be more aggressive in asserting claims against employers when purported independent contractors suffer labor grievances. The status of a worker as an employee vs. an independent contractor can have implications in a variety of areas, such as an employer’s obligations to pay overtime benefits, offer healthcare coverage under the Affordable Care Act and be liable for workplace injuries.

As a best practice,
 NATSO members should audit their independent contractor relationships to ensure that they comport with the Department of Labor’s guidance. 

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// NATSO Members: Get the Full Regulatory Toolkit. NATSO has prepared a document outlining these issues and more. The full document is available to NATSO members here.

(The regulatory toolkit is available for NATSO Members only. If you need any assistance logging in, please contact NATSO Member Services at (703) 549-2100 between the hours of 9:00 a.m. and 5:00 p.m. EST, Monday through Friday, or e-mail us at membership@natso.com.)

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