President Biden’s administration has its target set on business-friendly laws and regulations enacted under the Trump administration with a stated goal of becoming more employee and union friendly.
Among the regulations targeted, the National Labor Relations Board (NLRB) under the Biden administration is eyeing changes to its joint employer standard and its independent contractor standard. The NLRB has also entered into a partnership with the Department of Labor (DOL) to share information and conduct joint investigations and enforcement activities against employers, including independent contractor misclassification issues and other areas where the two agencies’ jurisdictions overlap.
Joint employer standard
The NLRB announced in December 2021 that it will reexamine its joint employer standard. The NLRB’s joint employer analysis has significant implications for employers, as it determines when one entity jointly employs another entity’s workers for purposes of the National Labor Relations Act (NLRA). Among other results, a joint employer finding makes both entities liable for each other’s unfair labor practices. The Trump-era NLRB instituted a business-friendly standard that required that an entity have direct and immediate control over employee terms and conditions of work to be considered a joint employer. Biden’s NLRB is likely to restore the standard applied during the Obama-era or issue a similar rule. The Obama-era standard found joint employment status where one of the entities exercised only indirect control over another’s employees or had the unexercised right of control over such employees.
Independent contractor standard
In December 2021, the NLRB sought public input on its analysis of independent contractor status under the NLRA. Many companies, including many of our readers, use independent contractors to supplement their workforce. Independent contractors are exempt from coverage of most relevant federal employment laws, including the NLRA, because such workers are not “employees.” Therefore, independent contractors are not covered by the NLRA, including the right to unionize under the statute. The Trump-era NLRB overruled the prior Obama-era standard for determining when a worker is an independent contractor and returned to a more business-friendly standard. The current standard takes into account various factors when evaluating whether a worker is an independent contractor, such as the amount of control a company exercises over a worker, level of skill needed for the job, and manner of payment. This standard makes it easier for employers to classify workers as independent contractors under the NLRA. It is highly likely the Biden NLRB will modify the current standard and adopt a more difficult test that restricts when a company can classify someone as an independent contractor, such as the ABC test, for example. It is likely that the new standard will significantly increase the potential likelihood of “employee” status.
Department of Labor and NLRB partnership
Lastly, the DOL and the NLRB released a Memo of Understanding (MOU) announcing that the two agencies will be collaborating “to strengthen the agencies’ partnership through greater coordination in information sharing, joint investigations and enforcement activity, training, education, and outreach.” The MOU took effect in early December and will remain in effect for five years. The MOU states that the DOL and NLRB “may share, … any information or data that supports each agency’s enforcement mandates, whether obtained in the course of an investigation or through any other sources to the extent permitted by law.” The agencies plan to share information regarding unlawful compensation practices, retaliation based on the exercise of rights under the NLRA or laws enforced by the DOL, discriminatory failure to hire, and the issues of joint employer, alter ego, independent contractor misclassification, and business models designed to evade legal accountability.
The agencies have agreed to advise employees when they have reason to believe that there may be “unlawful conduct that falls within the jurisdiction” of the other agency. Simply, if in the course of an investigation of an employer, one agency uncovers conduct that it believes may violate the other agencies laws, the investigating agency will advise employees that an opportunity may exist to pursue that conduct with the other agency.
The DOL also recently announced that it will be hiring 100 new investigators to boost enforcement efforts. The DOL’s hiring surge, as well as the partnership between the DOL and NLRB, are part of a broader push to promote President Biden’s pro-labor mandate. The impact will likely result in more enforcement actions by each agency and related increased legal challenges for employers in the years ahead.
Takeaway
Presently, the existing NLRB and DOL standards for joint employer status and independent contractor status remain the status quo. The future of these current standards is certainly in play, however. It is likely the NLRB will issue standards that are more employee and union friendly. Employers who have independent contractors should take notice that determining whether workers are employees or independent contractors may get more difficult under the NLRA in the near future. In the meantime, the DOL and NLRB’s partnership will likely result in a renewed interest in investigation and enforcement activity from both the DOL and NLRB. Wage and Hour audits may now come with the additional risk factor of an unfair labor practice charge, or a union campaign could produce an investigation or lawsuit for employee misclassification. Employers should be mindful of how these developments and potential changes in existing standards may have an impact on their workforce.
Mindful awareness of such changes and timely, appropriate proactive steps to minimize potential adverse consequences of potential new standards are prudent actions to consider. Remember the old sailing adage: “You may not be able to control the force and direction of the wind, but you can adjust your sails.”
R. Eddie Wayland is a partner with the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at rew@kingballow.com. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.