Task-Based Building Service Contracts Are Co-Employment Contracts
First of a 2-part article on the impact of a new NLRB standard of co-employment
Your task-based building service specification now means that you are likely a co-employer of your “independent” contractor’s workers — congratulations! That means you are now legally obligated to provide their workers your company benefits, entitlements, and protections.
The National Labor Relations Board (NLRB) has established a new standard of “indirect control” assessment for a co-employer determination. Politico summed up the impact: “A building management company, for example, might now face co-employer liability for the janitorial workers in its building, even if those workers are directly controlled by a subcontractor.”
Could you be next? Perhaps. Looking for a guideline?
NLRB found that the following areas of practice and contract language informed its decision on co-employment:
In hiring, firing, and discipline:
• Retained the right to require contractor’s employees pass productivity tests done on the buyer’s equipment in order for them to be hired.
• Required specific drug testing of the contractor employees.
• Cited ineligibility requirements for contractor employees.
• Retained the right to reject any employee for “any or no reason”
• Retained the right “to discontinue the use of any personnel”
Supervision, direction of work, and hours:
• Exercised control over the processes that shape the day-to-day work of the petitioned-for employees — effectively controlled the productivity of the workers.
• Assigned specific tasks that needed to be completed and where these workers were to be positioned, and had near constant oversight of their work.
• Communicated detailed work directions to the workers.
• Held meetings with workers to address customer complaints and business objectives.
• Disseminated preferred work practices, and assigned to the workers tasks that take precedence over any work assigned by their contractor managers.
• Specified the number of workers that it requires and dictated the timing of workers’ shifts.
• Required workers to obtain the signature of an authorized representative attesting to their “hours of services rendered” each week; failure to do so allowed the buyer to refuse payment to the contractor.
In the area of wages determination:
• Specifically prevented the contractor from paying workers more than the buyer employees performing comparable work — effectively put a ceiling on the wages the contractor could pay workers.
• Had a cost-plus contract — under which the buyer is required to reimburse contractor for labor costs plus a specified percentage markup.
If you check your practices and contracts and you have none of the above, congratulations — you are less likely to be ruled a co-employer. But remember the list is not exhaustive.
If some of the above items sounds familiar, then you may want to revisit your contract and look to eliminate some risky language and practices.
Where to start?
One of the most common elements of janitorial contracts is the detailed citing of tasks and frequency specifications. Also, many contracts specify equipment and supplies to be used and are cost-plus in practice.
Facility managers should consider eliminating task and frequency contract specification and directives for equipment and supplies and entering into a performance-based contract. For those not familiar the difference, a primer can be found here.
In short, a performance-based contract focuses on the result you expect, not the tasks or equipment used to get there. By moving the indicators of co-employment over to the other side of the scale you can reduce your exposure to a co-employment judgment.
And it so happens that by providing a service provider level profit incentive and a risk of deduction, you may also avoid a common-law or IRS indicator of employee relationship in that the contractor actually has a risk of profit in the performance of its work.
Vince Elliott is CEO of Elliott Affiliates, Ltd., and is founder and president of the Chemical Free Cleaning Network. He has represented buyers across the country in writing, modifying or updating over 530 performance-based building service contracts with an estimated market value of over a quarter of a billion dollars in contracted services. For more information on the NLRB ruling, go to: http://www.ealtd.com/blog/nlrb-ruling.