NLRB Drops a Worker Classification and Contingent Workforce Bombshell – What You Can Do About Co-Employment Risk

contingent workforce

In a potentially landmark decision for the contingent workforce and what we might term “multi-tier” suppliers and their contractors, the National Labor Relations Board ruled Thursday that businesses share equal responsibility for their contingent workforce supplier’s labor violations.

The case ruled on by the NLRB involved the waste management company Browning-Ferris and the staffing firm Leadpoint Business Services, which supplied contingent workers to Browning-Ferris. The NLRB found that Browning-Ferris should bear equal responsibility for unfair treatment of Leadpoint’s employees, who were deployed as temporary workers to Browning-Ferris’ recycling plants. In addition, as a co-employer, Browning-Ferris may now be required to engage in collective bargaining negotiations with these workers.

By setting a legal precedent, the NLRB ruling may undermine the common practice of businesses relying on suppliers – temp agencies and other suppliers of contingent workers – to shield themselves from co-employment risk. From a procurement standpoint, the ruling could significantly impact the established contingent workforce supply chain, potentially leading businesses to re-evaluate and possibly modify their use of supplier-provided contingent workforce.

The ruling is being described as the most significant of a series of policy changes by the Obama administration that support employees and businesses’ responsibilities toward them. Earlier this summer, a Department of Labor memo clarified the rules determining whether a worker’s relationship to a business should be considered that of an employee or an independent contractor. The clarification of the rules is considered to have tightened the criteria for a worker to claim the status of independent contractor and made it much more likely that a worker would be classified as an employee of the business.

Whether by government action or in the courts, 2015 is shaping up to be year of shifting sands in the area of worker classification – developments that should be carefully monitored by contingent workforce procurement practitioners.

How can companies take action? Spend Matters recommends:

  • Evaluating the plausibility of transitioning staffing/hourly staffing spend to statement of work (SOW) type models. An increasing number of organizations are creating services procurement shields against classification issues by pursuing this strategy.
  • Work with a technology provider or managed services provider (MSP) that will indemnify and insure your organization against any classification-related lawsuits or costs, based on their onboarding and supplier management processes.
  • Consider the broad spectrum of the contingent workforce, including independent contractors and freelancers. This ruling suggests this rapidly growing group of non-staffing workers could be as low – or even lower risk – in certain cases, provided they go through a sufficient vetting and onboarding program.

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