Employers must beware as the U.S. Department of Labor (“DOL”) cracks down on what it perceives as rampant misclassifying employees as contractors and shirking other responsibilities, such as safety training, because a worker is supplied by another employer. With more and more unique employment relationships and multi-employer worksites, it is crucial to understand the complexities of how the DOL and its various enforcement agencies define the employment relationship and/or assign liability in these contexts.
It has long been a priority of the Obama Administration to treat more workers as actual employees of host employers in order to provide them with a litany of labor protections and benefits, even when these workers are not hired directly, may not stay long, and may not even consider themselves to be employees. This enforcement philosophy affects businesses in numerous areas – such as wage and hour law and OSHA compliance – even when employers thought staffing through an agency or on an independent contract basis relieved them of many of these DOL burdens and liabilities. Not only does this increase the cost of many temporary, contract and multi-employer arrangements, it also puts employers at great risk of costly DOL enforcement actions if they do not understand when they have the responsibility (as opposed to another employer) to satisfy certain terms of labor law compliance.
First and foremost to keep in mind, although an employer may classify a worker as an independent contractor or as a non-employee temporary worker, and their maybe contract documents that express that classification, that does not mean DOL takes the same view. Indeed, as DOL sees it, most workers should be treated as employees. Also, employers may have certain employment law and OSHA-related obligations and potential liability even for non-employees depending on the employers’ roles at multi-employer worksites or in joint-employer situations.
New ‘Joint Employer’ Standard
Outsourcing to a temporary or contract worker can be a great way for a company to take care of some tasks and may make more sense for the business, rather than hiring full-time workers to fill those gaps. However, if the DOL finds under one of various legal tests that the business is a joint-employer of that worker with another company, then numerous legal obligations kick in vis-a-vis these shared employees (such as collective bargaining and mandatory dispute resolution) as well as significant exposure for your organization under various labor laws.
In the past few years, both state and federal agencies have been expanding the joint-employer definition. Previously, entities were only considered a joint-employer if they shared the ability to control or co-determine matters governing essential terms and conditions of employment, such as hiring, firing, discipline, wages, supervision and direction. Control had to be actual, direct, and substantial – not simply theoretical or possible.
But under a new standard birthed in the NLRB’s hotly disputed Browning-Ferris decision from last year, an employer could be considered a joint-employer if:
- there is a common-law employment relationship with the employees in question; and
- the putative joint employer possesses “sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.”
Stated another way, under the Board’s new joint employer test, an entity may be deemed a joint employer if:
- it does not actually exercise any control over employees’ terms and conditions of employment, but (based on a contract or otherwise) theoretically could at some point); or
- it does not directly exercise any control, but rather exercises control through a third party, such as telling a manager at the third-party staffing firm that a particular worker should be disciplined.
A more recent decision, Miller & Anderson, bolsters the impact of Browning-Ferris by making it easier for temporary employees to unionize. Unlike in the past, a union now does not need employer consent to attempt to organize a bargaining unit that mixes direct employees with joint employees. Rather, the union can simply use temporary employees to organize the direct employer’s employees. Thus, Browning Ferris has made it easier for an employer to be considered a joint employer, while Miller & Anderson has made it easier for unions to organize employees once that joint employer relationship has been established.
Independent Contractor … or Employee?
Over the past few years, one would be hard pressed to find any goal set by the DOL with higher priority than its stated goal of cutting down the number of alleged misclassifications of independent contractors.
While use of independent contractors can be quite beneficial to a business, the reality is that the DOL believes that most workers are employees, and thus there is a real risk that your independent contractors will be found by DOL to be misclassified. When that happens, the purportedly misclassified workers likely could claim significant lost wages as well as other damages – and such claims, particularly when there is more than one worker, has the potential to be quite costly for an employer.
The DOL has a long-running misclassification initiative, in which it and the Internal Revenue Service work together and share information to reduce the incidence of misclassification. At this point, 32 state agencies have agreed with the DOL to cooperate in this effort. These states will be allocated $10 million in funding to improve their own efforts, pursuant to the fiscal 2017 budget.
While there are various factors and tests available to determine independent contractor status (e.g., the employer’s nature and degree of control over the worker, the permanency of the relationship, the worker’s opportunity for profit and loss, etc.), the factor that is most determinative is whether the worker is in business for himself or whether the worker is economically dependent on the employer. If the worker is (or appears to be) economically dependent on the employer, that person is likely to be classified by DOL as an employee, not a contractor. While memorializing the terms and conditions of an independent contractor relationship in an agreement is important, that alone does not bestow independent contractor status on a worker who otherwise would be considered an employee.
Recommendations for compliance include the following:
- Establish policies to limit direct control over the work of independent contractors.
- Establish a fixed, limited-duration employment relationship.
- Limit interaction between employees and independent contractors.
- Review policies to make sure they do not cover independent contractors.
Employer Responsibility under OSHA’s Temporary Worker Initiative
Although the new joint employer standard and its more expansive test could have implications in the Occupational Safety and Health Administration (“OSHA”) realm as well, the immediate concern for employers from the OSHA perspective is the Agency’s Temporary Worker Initiative. OSHA has rolled out this initiative in an effort to address the division of responsibility (or lack of responsibility by any employer) over the safety and health of temporary workers between host employers and staffing agencies.
OSHA implemented its Temporary Worker Initiative because it believes temporary workers are:
- Used by host employers to skirt OSHA obligations (i.e., used in lieu of the employer’s own employees because the worker’s own employer will address any related OSH Act obligations);
- Are often placed in the most hazardous jobs;
- Are more vulnerable to workplace hazards and retaliation (e.g., because of the tenuous work relationship, the fear of replacement may discourage temps from speaking up about unsafe conditions); and
- Not provided adequate training, explanations of temporary workers’ duties, or site specific hazard recognition.
OSHA has explained that, as a result, there are higher rates of fatalities and serious injuries among temporary workers on “day one” of a job. Additionally, the impact and relevance of this initiative is only likely to increase as temporary workers grow as a percentage of the overall workforce in the wake of health care reform.
Three years into OSHA’s Temporary Worker Initiative, OSHA’s goals for the program are clear, as is the fact that this initiative will not conclude any time soon, particularly in light of the renewed focus on the employer-employee relationship by the DOL and NLRB. There has already been a fair amount of enforcement by OSHA, including targeted inspections. Using these initial enforcement efforts and the information gathered by OSHA under this program, it seems a likely possibility that OSHA will use the data to craft a National Emphasis Enforcement Program targeting industries that rely heavily on temporary labor in the next couple of years.
To facilitate enforcement related to temporary workers, OSHA has provided specific instruction to its compliance officers that whenever they are conducting any inspection at a worksite, they must:
- Determine whether any workers are, in fact, temporary workers supplied by a staffing agency;
- Assess whether any temporary workers are exposed to violative conditions;
- Evaluate training provided to temporary workers;
- Document the name of the staffing agency, its location, and supervising structure, as OSHA may follow up with the staffing agency if it determines that the host employer is not meeting its obligations under the OSH Act; and
- Determine whether the temporary workers are really employees of the host employer.
To make this final determination, OSHA and the OSH Review Commission apply a multi-factor test that is very similar to that used by the DOL in evaluating independent contractor status. At its core, the analysis is about a single question — Does the host employer have the right to control the manner and means by which work is accomplished? To answer that question, and determine whether the temp worker is really the host’s employee, the Review Commission weighs the following:
- Skills required;
- Location of the work;
- Duration of the employment relationship;
- Source of instrumentalities and tools;
- Whether the host employer has the right to assign additional projects; and
- Other criteria related to treatment of the worker.
Although the host employer would have more extensive health and safety responsibilities to the temporary worker if OSHA decides the worker is actually an employee, the host employer has a number of important obligations to temporary workers even if they are not found to be the host’s employees.
The main thrust of almost every educational tool OSHA has produced regarding the treatment of temporary workers is joint responsibility between the host employer and the staffing agency. In its guidance, OSHA has specifically addressed the division of responsibility in the areas of training; Hazard Communication (“HazCom”), and Recordkeeping.
For training, OSHA generally expects the host employer to provide site-specific training as the entity most familiar with the unique hazards of its worksite and the tasks the temp worker will be asked to perform. The staffing agency is, however, likely to be responsible for basic health and safety training, as well as making efforts to ensure the host provides adequate training on site. Similarly, the host employer is responsible for the site-specific aspects of a HazCom program; namely, it must identify and communicate site-specific hazards, and provide site-specific PPE and training equivalent to that provided to its permanent employees. The staffing agency has the duty to provide generic HazCom training (e.g., what is and how to read a Safety Data Sheet), and verify that adequate site-specific training/notification has been provided. Finally, the injury and illness recordkeeping and reporting obligations belong to the employer that supervises temporary workers on a day-to-day basis. In most cases this will be the host employer, but will entail communication between the two entities to ensure the record is accurate. This division of responsibility can be altered somewhat pursuant to the agreement between the host employer and the staffing agency, but neither can contract away their ultimate responsibilities to ensure the safety and health of temporary workers.
To ensure safety and health obligations are met and avoid a potential enforcement action under OSHA’s Temporary Worker Initiative, here are some best practices employers can implement:
- The contract between the host employer and staffing agency should include language that specifies each company’s respective OSHA-related responsibilities. As stated above, contract language will not abdicate either entity’s obligation to protect the safety and health of the temporary workers, but it can clearly lay out expectations and be used by the two companies to hold each other accountable.
- Host employers should establish and maintain open communication with temporary workers and the staffing agencies.
- Hosts should ensure safety training programs and policies are in place to train temporary employees before they begin work.
- Host employers should also periodically assess the employment status of temporary workers to determine whether they could be deemed employees.
OSHA Enforcement at Multi-Employer Work Sites
Beyond a specific type of employment relationship, OSHA guidance also makes clear that employers have certain responsibilities toward non-employees working at the same jobsite. Specifically, OSHA’s Multi-Employer Worksite Enforcement Policy permits OSHA to hold certain types of employers liable if workers are exposed to hazards, even if the workers are not actually their own employees, based on the employer’s role at the worksite.
As the description makes clear, a multi-employer worksite has two or more employers working at the same location toward a common goal. If OSHA inspects such a worksite, more than one employer may be cited for the same hazardous condition. In determining which employer(s) to cite, OSHA considers the role of each employer at the site and whether the employers met their obligations based on the specific roles. The Agency uses four categories to establish the role employers fulfill at multi-employer sites, each with its own level of safety and health responsibility:
- Creating employer – may be cited by OSHA for creating a hazard if any workers are exposed (even if none of that employer’s own employees are among those exposed to the hazard).
- Exposing employer – may be cited if it has knowledge of a hazard to which its employees are exposed and does not: (a) act within its authority to address the hazard; (b) ask the creating or controlling employer to correct it; or (c) inform its employees.
- Correcting employer – may be cited if it did not exercise reasonable care to discover and repair hazardous conditions.
- Controlling employer – may be cited if it does not exercise reasonable care in preventing and detecting hazards on worksites that it has controlling authority (usually the general contractor).
An employer may fill multiple roles on a worksite, and thus, may have multiple obligations towards its own and other employees. Therefore, employers must understand their duties on a jobsite and closely monitor the conditions of the site to prevent exposure to hazards. This is made easier through open and consistent communication with the other employers on the worksite. Otherwise, an employer may easily be cited for having contributed in one way or another to a violative condition or incident, even if its own employees were never exposed.
Considering the myriad issues created by both federal and state agencies’ increasingly broad view of the employer-employee relationship and modern working environments, it is essential for employers to carefully evaluate the employment relationship and their own individual function in multi-employer contexts.