The NLRB is likely to bring back micro units, a narrower definition of independent contractor and a broader definition of joint employer
The pro-union majority of the National Labor Relations Board appears intent on delivering on President Joe Biden’s campaign promises to make it easier for unions to organize employees and to increase the number of employees who can be represented by a union. The NLRB’s positions on micro-units, definitions of “independent contractor” and “joint employment” are under review and are almost certain to change…again.
A micro-unit is a small subset of a larger group that shares a community of interest. Micro units can be as small as a single classification or employees who share the same job title. Generally, unions find it easier to organize a micro-unit than a large group of employees, even if the large group shares the same community of interest. The question of whether the Council should allow micro-units has been a pendulum.
In 2011, the Obama-era board overturned decades of precedent by Specialized health care and not only said it would allow micro-units, but also broadened its application to all industries, not just healthcare. In 2017, the Trump-era board toppled Speciality in CPC Structures and The Boeing Company. Micro-unit eligibility has been reinstated in law as it was before Speciality. The current Board, on December 7, 2021, signaled that it would revert to the matter and requested submissions from interested parties by January 21, 2022. Based on public statements, it is likely that the Board will approve the micro- units for trading, return to Speciality or a variation thereof.
The standard under Speciality was that if a petitioned unit was made up of employees who, as a group, were easily identifiable and shared an internal community of interest, it was presumed appropriate for union representation. Whether the larger unit shared a community of interest with the employees of the unit being petitioned should not be considered unless the employer could prove that the largest unit had a crushing community of interest with the employees of the petitioned unit―an almost impossible burden of proof for an employer. It is likely that this standard or something similar will become Commission law again.
Micro-units could make managing a workforce extremely difficult as employers could be forced to deal with multiple unions, each representing a separate job classification. Employers susceptible to this type of union organization must plan and implement measures that will make the fragmentation of their workforce difficult, if not impossible.
Classification of independent contractors
Whether a worker is an independent contractor or an employee is a matter of great importance to employers, government agencies, plaintiffs’ attorneys and unions. Independent contractors are not entitled to the benefits and protections of many laws, such as unemployment compensation, workers’ compensation, anti-discrimination, wage and hour, and representation by a syndicate. Independent contractors are also required to pay full social security tax. Expanding the definition of “employee” by narrowing the criteria of who an independent contractor is will have a significant negative impact on employers who use independent contractors. For this reason, employers have a significant stake in the criteria used by government agencies and courts to decide whether a worker is classified as an employee or an independent contractor.
Although there are variations in each, three tests are currently used by policy makers: the common law test, the economic reality test, and the ABC test. The criteria used by the Council has changed, depending on which party occupies the White House. For decades before 2014, the Commission used the common law test. This test had 10 factors that needed to be assessed, with no single factor being determinative. However, by 2014, the significant entrepreneurial opportunity factor had become vital in determining status. In 2014, the Obama-era board dismissed the importance of the entrepreneurial factor and said it would only give “weight to real entrepreneurial opportunities, not just theoretical ones.” The Commission relied heavily on the extent to which an employer restricted workers in exercising their entrepreneurial opportunity. In addition, the Board added a new factor to the common law analysis by saying that the person had to be working in an independent business.
Predictably, in 2019 the Trump-era board, in SuperShuttle DFW, rejected the 2014 decision and concluded that the Board would use the common law test seen through the prism of the economic reality of entrepreneurial opportunity. Now the Biden-era council is reconsidering Supershuttle and we can again expect a change. From all appearances, the Commission will probably adopt the ABC test. In one form or another, more than 30 states have adopted the ABC test, and the current House of Representatives has passed a bill that would require the Council to use it. Since the future of the House bill is uncertain, Council has taken the initiative and is taking advantage of the reconsideration of Supershuttle to make legislative change unnecessary.
The ABC test has three conditions that an employer must meet to grant the worker independent contractor status:
- The worker must be free from the employer’s control over the performance of the work, both in theory and in fact;
- The worker must perform work that is outside the normal scope of the employer’s business; and
- The worker must practice a recognized trade, occupation or business of the same type as the work he performs for the employer.
Employers using independent contractors who are concerned about their liability for misclassification and whether the worker, as an employee, will be covered by the National Labor Relations Act are advised that the ABC test can not only be used by the Commission, but can also become the test used by all federal agencies.
Many employers use workers provided by another employer (for example, a staffing company) to supplement their regular employees during peak periods or as temps for hire. Often these workers do the same things, have the same supervisors, have the same working conditions and, although paid by the placement company, their wages are significantly affected by the employer’s financial arrangement with the company. shift. In all or some of these cases, are the workers jointly employed by the host employer and the placement company? If the host employer is a joint employer with a staffing company, both the host and the supplier will be responsible for compliance with employee-related laws, such as anti-discrimination, wage and hour, immigration, security and the right to be represented by a union.
The test used to determine whether a host employer is a joint employer has also been subject to the vagaries of the composition of the Board, which, in turn, is determined by the policy of the occupant of the White House.
Prior to 2015, the host employer had to have direct and immediate control over the terms and conditions of the worker’s employment in a more than limited and routine way to be a joint employer with the placement firm. In 2015, the Obama-era board changed the rule to Browning Ferris Industries. In this case, the Board found that a host employer who only had the authority controlling significant aspects of a worker’s employment would be a joint employer with the worker’s supplier, whether or not the host employer exercised this power.
On February 26, 2020, the Trump-era council exercised its rule-making power and issued a rule that essentially reverted council law to what it was before. Browning Ferris. The new rule, which is the current Commission law, requires the host employer to have and exercise “substantial direct and immediate control” over one or more of the essential terms and conditions of employment of employees of another employer, such that the host employer “significantly affects matters relating to the employment of such employees”.
Then, on December 10, 2021, the current board announced that it was preparing to pass a rule that would overthrow the Trump-era board. To date, this rule has not been published. There is a good chance that the law of the Commission will return to the rule in Browning Ferris.
What this means for employers
Micro-units, the application of the ABC test to your independent contractors and a relaxation of the definition of “co-employer” are certainly on the way. It is better to prepare now. Integrate the employees you want to be into a larger appropriate unit so that any small subset of the larger group does not have its own identity. Analyze your documents and the relationship you have with your independent contractors, making adjustments to fit the three elements of the ABC test, if necessary. Review your arrangement with your recruiting firm and the extent of your retained authority and effective exercise of control over the recruiting firm’s workers to ensure that you have not retained authority to assign and fail to determine an important aspect of the worker’s employment.