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NLRB's joint-employer decision opens worker benefits to potential changes

NLRB's joint-employer decision opens worker benefits to potential changes

The National Labor Relations Board's controversial decision to expand the definition of “joint employer” could have costly implications for employers when it comes to the health and retirement benefits they provide, benefits lawyers say.

It's a “huge decision and (there are) implications for benefits and every aspect of employer-employee relationships,” said Ricki Roer, New York-based partner and national chair of the employment and labor team with law firm Wilson Elser Moskowitz Edelman & Dicker L.L.P. “Nothing is going to be off the table” for collective bargaining, she said.

In a 3-2 decision on Aug. 27, the NLRB ruled that Browning-Ferris Industries of California Inc. is a joint employer with Leadpoint Business Services, a staffing agency hired to supply workers for one of its recycling plants. The Teamsters union had filed a petition to represent the Leadpoint workers and sought the right to collectively bargain with Browning-Ferris rather than Leadpoint, arguing that the two are joint employers.

In its ruling, the NLRB changed the standard for how it determines joint employers by considering whether a company exerts control indirectly through an intermediary over matters of employment. Historically, the NLRB has considered a company to be a joint employer if it exercises “direct and immediate control” over employees, according to the decision.

The new standard is “to better effectuate the purposes of the (National Labor Relations) Act in the current economic landscape,” the NLRB said in a statement accompanying its ruling.

But the new standard potentially opens up any employer that hires contract employees for services to a host of liabilities, experts say.

“Employers now are exposed to contributing a lot more money to benefits if they are jointly employing,” said James Sconzo, a shareholder at law firm Carlton Fields Jorden Burt in Hartford, Connecticut. Because the definition of joint employer is “ill-defined,” he said, there's a “cascade of, I think, unintended consequences.”

Contract workers for small and large companies, including franchise workers, could now theoretically unionize to bargain for benefits and other terms of employment, he said. Of course, there would be an expensive legal fight before that happens, he said.

“This is going to open the door for collective bargaining for employee benefits and so much more,” Ms. Roer agreed.

Browning-Ferris could appeal the NLRB's decision, but the ruling is “a clear indication that this is a path we're moving in,” Ms. Roer said. There's a trend of employers increasingly seen as responsible for individuals rendering work for the organization, regardless of “whose name appears on the paystub,” she said.

The decision “can lead down the road to benefit implications,” said Ben Conley, Chicago-based employee benefits attorney with Seyfarth Shaw L.L.P. However, “I don't think we're there yet,” he said.

While the U.S. Department of Labor and now the NLRB have taken a more expansive view on who the employer is, “the last shoe to drop will be the IRS,” Mr. Conley said, because the Internal Revenue Service drives most benefits considerations.

“If the IRS starts broadening the scope of who they consider to be your employees, then it's really going to change the landscape,” he said, because if parent companies are required to offer contract workers benefits “regardless of whether you hire them from a temporary staffing agency or not,” there is less of a reason to use a “middleman.”

That could cause “people to revisit … what their hiring practices are,” he said.

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