Don’t Believe Everything You Read in the Papers

Don’t Believe Everything You Read in the Papers

On Wednesday, November 8, the New York Times published an opinion piece titled “Don’t Let Congress Cheat Workers Out of Basic Rights,” which addresses the effect of the Save Local Business Act (H.R. 3441), a bill advanced in the House. The bill would roll back recent changes to certain “joint employer”  protections for workers employed by companies that do contract work for other businesses. The Times article contains several criticisms of the bill. On some of the criticisms, there is room for debate on both sides.

However, the article leads with three assertions that are just plain false. The author, an employee rights advocate, overstates her case by asserting:

    • For years, when two companies both control the terms and conditions of employment, they are also both considered responsible for workplace violations like wage theft, sexual harassment or safety problems. So if a window washer working for a contractor fell because safety equipment was improperly installed by the company whose building he was cleaning, he could sue both the contractor and the larger company for damages.
    • “But under the bill passed on Tuesday, large corporations that outsource jobs would get virtually full immunity from workplace violations, while the typically smaller, poorly capitalized local businesses that provide the workers would bear all the liability. This could leave these small businesses exposed to bankruptcy, leaving workers in danger of having no remedies at all.

These claims are simply not true.

First, if a worker employed by joint employers fell because safety equipment was improperly installed by the company whose building he was cleaning, that worker likely would not be able to sue either the direct employer (contractor) or indirect employer (larger company) for damages. Instead, the worker would have a workers’ compensation claim against his or her employer(s) for the injuries.

Workers compensation is the exclusive remedy for injuries to employees arising out of and in the course of their employment. In the author’s hypothetical case, if deemed a joint employer, the larger company would enjoy the same tort immunity provided to the direct employer under the applicable state workers’ compensation statute.

On the other hand, if the larger indirect employer was not deemed a joint employer, it would enjoy no such immunity. It would be considered a third party to the employment relationship and the injured employee would have at his or her disposal the full range of damages, including possibly punitive damages, for the injuries cause by the larger company’s negligence.  In this case, from a potential recovery standpoint, the employee would have the best of both worlds.  No-fault recovery from the employer’s workers compensation carrier and the potential recovery in tort from the so-called “large company.”

Second, the small direct employer of the employee, in that situation, would not be exposed to bankruptcy, unless it was in violation of state law mandating workers compensation insurance for its employees. Its exposure would be covered by the workers comp carrier and capped within the applicable policy and state workers comp law limits.

Third, it is more than a little misleading to suggest that the issue addressed in the bill reverses a legal precedent that has been in place “for years.” The precedent, if one considers a 3-2 decision by the NLRB precedent, has been in place for all of 2 years and 3 months.

For the 30 years prior to the August 2015, the joint employer doctrine applied to cases in which a business had “direct control” over another business’s workplace. In Browning-Ferris, the NLRB ruled that two or more entities can be “joint employers” if (1) they are both employers within the meaning of the common law and (2) they share or co-determine 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, however, the Board issued a new standard that took many labor lawyers by surprise.  The Board held as relevant whether an employer exercises or reserves the right to exercise control over the terms and conditions of employment indirectly through an intermediary.

A few months later, the US Department of Labor followed suit, broadening the applicability of the NLRB’s newly expanded standard by adopting a similar test in an administrative guidance for laws enforced by the DOL. (That guidance was withdrawn by the DOL earlier this year).

Fourth, and most important, it is it is not as though the House is attempting abolish the joint employer doctrine from workplace law. The bill simply clarifies that a “joint employer” is a person or entity that “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment.”  This is hardly a radical departure from the actual longstanding precedent, or for that matter, from common sense. It simply codifies what the law was prior to Browning-Ferris.

Lesson Learned: Don’t believe everything you read in the papers.

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Bill Egan

Bill Egan

I have 30+ years of experience representing executives, business owners, private enterprises and small-to-midsize public companies as an advisor, counselor and advocate on matters relating to the employment relationship. Informed by years of experience with both routine and unusual employment relationships and workplace situations, I bring a pragmatic, realistic and results-oriented perspective to issues arising in the workplace. Read Bill's Bio.

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