Businesses often go to great lengths to avoid treating certain workers as “employees.” After all, employees are typically entitled to benefits, minimum wage and overtime, workers’ compensation, and unemployment insurance. They can sue for discrimination or other misdeeds. And they can unionize.
Increasingly, though, the federal government and the courts are saying that more workers should be considered “employees,” whether employers like it or not.
For instance, the U.S. Department of Labor recently issued a new policy guidance warning that large numbers of workers who are treated as independent contractors or consultants are actually employees. The guidance makes clear that workers can’t legally be treated as contractors unless they are truly in business for themselves and are not dependent on the employer.
David Weil, who runs the Department’s Wage and Hour Division, stated that guidance is “fair notice that we intend to use the enforcement tools.” He said the Department is coordinating with the IRS to identify and investigate companies suspected of misclassifying workers. And in its most recent budget request, the Department asked to hire 300 new full-time enforcement officers and staff.
In the past, it’s generally been assumed that companies don’t have to treat workers as employees if they bring them on board via a temp or staffing agency – as long as the agency pays them. In that case, the agency is the real employer.
But that may be changing. For instance, in a recent case, a woman named Brenda Butler signed up with a temp agency in South Carolina. She was assigned to work at an automotive factory, where her supervisor allegedly sexually harassed her.
Brenda complained to both the temp agency and her supervisor’s boss, but neither acted to stop the harassment. In fact, the supervisor’s boss allegedly told the temp agency that the company didn’t need her anymore.
Brenda sued the company for the harassment, and the company argued that it couldn’t be sued because it wasn’t her employer.
But a federal appeals court sided with Brenda. It said that in this case, Brenda might have had two employers – the temp agency and the automotive company.
Specifically, the court noted that Brenda did the same work as some of the automotive company’s regular employees, that she was overseen by one of the company’s regular supervisors, and the company had the ability to “fire” her by telling the agency not to let her return.
Therefore, even though Brenda was a temp, she could sue.
In another case, Browning-Ferris Industries of California hired a staffing agency called Leadpoint Business Services to provide workers to sort materials at a recycling plant. The Teamsters union wanted to represent the 240 workers at the facility, and Browning-Ferris objected that many of the workers were actually employed by Leadpoint.
The issue went to the National Labor Relations Board, which ruled that Browning-Ferris was a “joint employer” along with Leadpoint – which meant the union could go ahead.
The staffing contract required Leadpoint to hire the employees, discipline them, evaluate them, determine their pay, schedule them and provide job training. Leadpoint also employed an on-site manager and several shift supervisors to oversee its employees at the facility.
Nevertheless, the Board said that Browning-Ferris could be an employer if it had the right to control some of the terms and conditions of the workers’ employment. For instance, Browning-Ferris could issue rules for drug tests, shift schedules, and safety and training.
Importantly, it wasn’t even necessary that Browning-Ferris actually control these things – it was enough that it had the right to control them.
The decision could make it easier for unions to organize many franchise operations, such as fast-food outlets, and other businesses.
The bottom line is that if you work or employ workers through a contractor, staffing, temp or franchise arrangement, you might want to have your contracts reviewed to understand your rights and obligations.