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Both HomeJoy and Browning-Ferris Industries (“BFI”) have felt sharp sting of the NLRB decision on co-employment related to the classification of workers. For HomeJoy the sting was fatal and put the company out of business. For BFI the costs are still being tallied. Those decisions hold lessons for facility managers.
HomeJoy was said to have provided “training” to independent contractors to clean homes. Why is this so bad?
A recent Inc. article profiled the reason for HomeJoy’s demise and the threat to the booming “sharing economy.” The article notes that “IRS considers teaching a worker to perform a job in a particular method or manner a key sign that the worker is an employee, not an independent contractor.”
Such a classification, according to Inc., could raise the cost of employing those workers as much as 30 percent. If your margin is 29 percent (which is not bad by the way) you are out of business, as HomeJoy’s swift exit indicates.
The sting to BFI came in August of this year where NLRB ruled the company was a co-employer with LeadPoint, their contractor. What is this so bad about this change?
As the dissenting opinion in the ruling states: “This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing.”
For BFI and other similar companies (perhaps you?) the NLRB ruling was a shock. This is because the ruling looked passed about 30 years of previous rulings that contract language and practices were crafted with a more direct test for co-employment:
• Requiring evidence of direct and immediate control over employees;
• Looking only to the actual practice of the parties rather than their contract; and
• Requiring an employer’s control to be substantial and not “limited and routine.”
The current ruling rejected this standard and turned to not only the actions taken by BFI but what they had a right to do as evidenced by their contract.
For HomeJoy, the cost of compliance with the law proved too costly. For BFI the costs and litigation continued until NLRB ruled that BFI was a co-employer. It is best to get ahead of the curve now and move as many indicators of co-employment out of your contracts and practices.
Now, more than ever, it would be prudent to consider a performance-based approach over a task-and-frequency/cost-plus contract. You will reduce your co-employment exposure and potentially gain real benefits at the same time.
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.
Task-Based Building Service Contracts Are Co-Employment Contracts
NLRB Decisions On Co-Employment Hold Lessons For Facility Managers