Whether two entities are “joint employers” is an important question under the National Labor Relations Act.  Consider Company A, which contracts with Company B, a staffing company, to provide maintenance or other services at Company A’s facility.  The maintenance workers are employed directly by Company B.  While working at Company A’s facility, Company B’s employees file unfair labor practice charges against Company B and also vote to form a union.  Can Company A be held liable for the unfair labor practices committed by Company B?  Can Company A be ordered to bargain with the union, alongside Company B?

On September 6, 2022, the National Labor Relations Board issued a Notice of Proposed Rulemaking, which would drastically alter the test used for determining joint-employer status under the NLRA (“2022 Proposed Rule”).  The 2022 Proposed Rule would rescind the joint-employer rule very recently issued in 2020 and replace it with a union-friendly test that would expand the circumstances in which Company A could be deemed a “joint employer” of Company B’s employees, and therefore be subject to liability and bargaining obligations under the NLRA.

Background

The Board’s standard for determining joint-employer status has shifted over the past seven years with each new presidential administration.  For at least thirty years prior to 2015, the Board’s longstanding rule was that an employer could be considered a joint employer of a separate employer’s employees only if it exercised “direct and immediate” control over those employees’ essential terms and conditions of employment (e.g., wages, benefits, hours of work, hiring, discharge).  Indirect control or a reserved but unexercised right to control, was insufficient.

In a 2015 decision, the Obama-era Board overruled this precedent and announced a new joint-employer test.  See Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 (2015) (“BFI”).  Under BFI, the Board no longer required that the joint employer’s control over terms and condition of employment be exercised directly and immediately.  Rather, one company could be deemed the joint employer of another company’s employees based solely on either indirect control or a contractually reserved but never exercised right to control such terms and conditions.  Another way to say this is “theoretical” control.

In February 2020, the Trump Board issued a rule that reinstated and clarified the joint-employer standard that was in place prior to BFI.  See 29 C.F.R. § 103.40 (“2020 Rule”).  The 2020 Rule makes it clear that an employer can be a joint employer of a separate employer’s employees only if it possesses and actually exercises substantial direct and immediate control over one or more essential terms or conditions of their employment.  Evidence of indirect control, or contractually reserved but never exercised control, is probative of joint-employer status, but only to the extent it supplements and reinforces evidence of possession or exercise of direct and immediate control.  The 2020 Rule also provides an exhaustive list of “essential terms and conditions of employment” and defines “direct and immediate control” with respect to each listed term or condition of employment.

2022 Proposed Rule

The 2022 Proposed Rule, which has been issued by the Biden Board, would rescind the 2020 Rule and replace it with a new rule incorporating the BFI standard.  The 2022 Proposed Rule would provide as follows:

  • An “employer” is an employer of particular “employees” (as those terms are defined in the NLRA) if the employer has an employment relationship with those employees under common-law agency principles.
  • For all purposes of the NLRA (i.e., union elections and unfair labor practices), two or more employers of the same group of employees are joint employers of those employees if the employers “share or codetermine those matters governing employees’ essential terms and conditions of employment.”
  • To “share or codetermine those matters governing employees’ essential terms and conditions of employment,” an employer must either possess the authority to control (directly, indirectly, or both) or exercise the power to control (directly, indirectly, or both) one or more essential terms and conditions of employment.
  • Indirect control, control exercised through an intermediary, or a contractually reserved but never exercised right to control, is sufficient to establish joint-employer status. Thus, like the BFI standard, the 2022 Proposed Rule eliminates the requirement that control be exercised directly and immediately.
  • “Essential terms and conditions of employment” are defined generally to include, “but are not limited to: wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance” [emphasis added]. Notably, unlike the 2020 Rule, this list is not exhaustive, and the Board contemplates that what are “essential” terms and conditions could change over time, as well as vary from industry to industry or occupation to occupation.  The 2022 Proposed Rule also does not define what it means to “possess the authority to control” or “exercise the power to control” with respect to any particular essential term or condition of employment.
  • Evidence of an employer’s control over matters that are immaterial to the existence of an employment relationship, or that do not bear on the employees’ essential terms and conditions of employment, is not relevant to joint-employer status.
  • The party asserting that an employer is a joint employer has the burden to prove by a preponderance of the evidence that the entity is a joint employer under the requirements of the 2022 Proposed Rule.

Not surprisingly, the Board was divided 3-2 over the decision to issue the 2022 Proposed Rule.  Chairman McFerran and Members Wilcox and Prouty were in favor of the proposed rule, while Members Kaplan and Ring – who were on the Board in 2020 – dissented.  In their dissenting statement, Members Kaplan and Ring argued that there was no valid justification to engage in another joint-employer rulemaking a mere two-and-a-half years after the 2020 Rule was promulgated.  They also argued that the 2022 Proposed Rule is contrary to the common law, inconsistent with the policies of the NLRA, arbitrary and capricious, and fails to provide any meaningful guidance to regulated parties.

What’s Next?

The 2022 Proposed Rule is subject to a public comment period that ends on November 7, 2022.  The public then has another 14 days, or until November 21, 2022, to file comments in response to comments submitted during the initial comment period.  The Board must then consider the public comments before issuing a final rule.  If the Board does issue a final rule, we anticipate that it will be substantially similar to the 2022 Proposed Rule, although possibly modified to incorporate some of the public comments.  We also anticipate, however, that any final rule will be subject to legal challenges for the reasons articulated by Members Kaplan and Ring in their dissenting statement.

As such, whether the 2022 Proposed Rule becomes law remains to be seen.  Nevertheless, it would be prudent for businesses like Company A, which contract for services from third parties, to review their contracts and evaluate whether their relationships potentially could be subject to the 2022 Proposed Rule.  Organizations in franchisor-franchisee relationships should also carefully consider the potential impact of the 2022 Proposed Rule.

We will keep you posted on the status of the 2022 Proposed Rule.  In the meantime, if you have any questions about the 2022 Proposed Rule, or about joint-employer status generally under the NLRA or other labor and employment laws, please contact a member of the McNees’ Labor and Employment Group.

No, your eyes aren’t playing tricks on you.  You read that correctly.  The U.S. Court of Appeals for the D.C. Circuit recently affirmed a ruling by the NLRB which found an employer violated the National Labor Relations Act when it fired an employee who wrote a vulgar phrase on an overtime sign-up sheet.  But, the decision isn’t all bad news for employers. Examination of the facts underlying the ruling suggests that crass graffiti isn’t always protected activity.

In Constellium Rolled Products Ravenswood v. NLRB, the employer posted overtime sign-up sheets so that employees could volunteer for overtime shifts.  One employee apparently took exception to the practice and wrote the words “whore board” on the sign-up sheets.  After investigating the incident, the Company determined that the graffiti violated its anti-discrimination policy (among other policy violations).  The Company fired the perpetrator.

The terminated employee complained to the NLRB that his graffiti was protected under Section 7 of the NLRA because he wrote it in protest of the Company’s overtime practices.  The employer argued that the content of the graffiti was gender-based profanity that violated Company policy as well as anti-harassment laws.  The Board rejected the employer’s argument, pointing to evidence that the Company routinely allowed employees to use vulgar, profane, and crass language at work.  The evidence also showed that the Company did not discipline workers for writing graffiti on other Company property.

On review, the D.C. Circuit agreed with the Board.  It held that the employer’s tolerance of “extensive” vulgarity, profanity, and graffiti in the workplace rendered its defense ineffective.  The Company’s willingness to disregard such misconduct until it related to the overtime sheet supported the Board’s and the D.C. Circuit’s conclusions that the termination was based on the employee’s protest of overtime practices, and not his vulgarity.

Constellium puts a new spin on an age-old employment law axiom.  Employers must interpret, apply, and enforce their work rules consistently.  Selective application of workplace policies will often be used as evidence that other (sometimes unlawful) motives are at play.

We recently wrote about the Equal Employment Opportunity Commission’s Guidance on the use of Artificial Intelligence in the hiring process.  AI is exploding.  It is being put to use in many different industries and toward many different applications, including in various human resources related functions.  As we previously discussed, the use of AI can be extremely helpful to employers, if done properly.

Recently, New York City became one of the first jurisdictions to address the proliferation of AI tools in the employment context.  NYC passed a local ordinance prohibiting employers from using AI tools, which it calls Automated Employment Decision Tools, unless the employer takes certain steps to “vet” and disclose use of the tool.

The local law goes into effect on January 1, 2023 and will apply to employers operating in New York City that target NYC residents.  It will require that employers subject the AI screening tool to a validation test.  The ordinance calls the test a bias audit.  The bias audit must be conducted by an impartial auditor and will require evaluation of the tool’s potential disparate impact on protected traits.  In addition, the employer must post a summary of the bias audit on the employer’s web site.

Employers using Automated Employment Decision Tools will also need to provide certain notices to applicants.  Employers will need to notify applicants at least 10 days in advance that the AI tool will be used and must allow the applicant to request a different testing/screening method.  The employer must also give notice of the characteristics that the AI tool will assess, the types of information that will be collected, and how that information will be retained by the employer.

This approach seeks to directly address two of the most significant concerns with the use of AI tools in the screening process: (1) the potential to accidently or unintentionally screen out applicants based on a protected trait (disparate impact); and (2) potential disability-related accommodation obligations in the hiring process.  Recall that we took a close look at these risks in our previous post.  The ordinance also goes further to address applicant privacy concerns as well.

Like many new developments, employers relying on tried-and-true HR best practices will be ahead of the curve.  That’s because it has long been a best practice to require any pre-employment screening tool to be properly validated to protect against disparate impact concerns.  Organizational Psychologists have been talking about this type of validation for years. Many reputable third-party service providers who offer such applicant screening tools have already conducted similar validation tests or bias audits.

While this may be the first, we certainly do not think that the NYC ordinance is the last local or state law to address the use of AI in the hiring process.  Employers adopting these tools will need to be ready to comply with this changing legal landscape, as the AI tools themselves continue to develop and increase in popularity.

On August 11, 2022, the CDC issued new guidance regarding isolation and masking for individuals exposed to COVID-19. According to the CDC, high levels of immunity and the availability of COVID-19 prevention and management tools have reduced the risk for medically significant illness. While employers still must traverse through the complicated web of COVID-19 mitigation regulations, the CDC’s new relaxed guidance may signal a light at the end of the tunnel.

Prior to this update, individuals exposed to COVID-19 were instructed to quarantine for 5 days. This presented difficult operational challenges for employers, who were expected to monitor and trace COVID-19 exposures throughout their workforce and instruct exposed employees to quarantine, often at times when companies were already understaffed. Now, however, the CDC recommends that individuals exposed to COVID-19 wear a mask for ten days around others while monitoring for symptoms, eliminating the precautionary quarantine period. Additionally, exposed persons should test for COVID-19 five days after their exposure. If the test is positive, the CDC recommends isolating for either five days or 24 hours after symptoms cease, whichever is later.

This change in the CDC’s guidance should help to alleviate some of the staffing challenges employers are facing this year. Greta Massetti of the CDC stated, “We…have a better understanding of how to protect people from being exposed to the virus, like wearing high-quality masks, testing, and improved ventilation. This guidance acknowledges that the pandemic is not over, but also helps us move to a point where COVID-19 no longer severely disrupts our daily lives.” If an employee is exposed to COVID-19, even in the workplace, they are no longer expected to isolate and miss time from work. Instead, exposed employees must simply wear a mask for ten days and test for the virus after five days.

 

For more information, or if you have questions, please contact any member of the McNees Labor and Employment Group.

In an important decision for employers and unions alike, the Third Circuit Court of Appeals, the federal appeals court with jurisdiction over Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands, held that a union could be liable under the federal Racketeering Influenced and Corrupt Organizations (RICO) Act.  The decision opens a new avenue for unionized employers to seek to address inappropriate conduct during labor disputes, and no doubt will influence the tactics of organized labor during such periods of conflict.

In Care One Mgmt. LLC v. United Healthcare Workers East, the court was asked to consider an employer’s appeal of the trial court’s decision denying its RICO Act claims against the United Healthcare Workers East SEIU 1199, New England Health Care Employees Union, and the Service Employees International Union.  Although the RICO Act is a criminal statute, individuals and entities can also bring civil claims under RICO.   Essentially, in such cases, the plaintiff must establish that the defendant is conducting a pattern of racketeering activity through certain criminal predicate acts.  In Care One, the employer alleged that the unions engaged in a pattern of racketeering through mail and wire fraud as well as extortion.

Specifically, the employer alleged that, when negotiations for a new collective bargaining agreement failed, the unions called for a strike at various impacted facilities.  The employer alleged that the evening before strike was to start, the facilities were vandalized by union members. The employer also alleged that the unions publicly attacked the employer and that such attacks were false and fraudulent.  In addition, the employer alleged that the unions asked elected officials to initiate a government investigation into the employer’s labor and business practices.

The district court granted the union’s motion for summary judgment and dismissed the RICO claims.  The district court concluded that there was not sufficient evidence to establish that the union had authorized or directed the alleged inappropriate and criminal conduct.

However, the Third Circuit disagreed and reversed.  The Third Circuit found that there was at least enough evidence that a jury could find that the union’s members had committed the vandalism at the employer’s facilities and that the union had authorized such conduct given the timing of the incidents (the night before the strike).   The court also found there was a question about whether the request for the government to investigate the employer was inappropriate and unlawful.  The Third Circuit remanded the case for further proceedings.

There is no doubt that labor disputes can get ugly and, when they do, one side may be looking for a remedy.  From the employer’s perspective, although Care One sets a high bar, the decision has certainly opened the door to another possible remedy to address a labor union’s conduct during a labor dispute.  It is likely that unions will also take heed of the Care One decision when considering what conduct to employ during a labor dispute.

McNees recently announced the creation of HR Influenced, a human resource management consulting firm offering a variety of HR solutions.  Led by Kristen Evans, a dynamic HR professional with decades of experience, HR Influenced will offer clients a full array of professional services including: recruiting, leadership coaching, compensation and benefits analysis and support, employee recognition program development, employee training, succession planning and more.

We are excited for the launch of HR Influenced!  You can learn more here.

Maryland and Delaware recently joined the growing list of states that have enacted legislation requiring employers to offer paid family and medical leave.  Both states are still working on implementing regulations for the new laws; but, in the meantime, below is a brief summary of what you need to know about these laws and when they will take effect.

Maryland

Maryland’s new law will cover all employers with at least one employee in the state.  To be eligible for the leave, employees must have worked at least 680 hours over the 12-month period before the leave begins.  Employees also must exhaust all voluntarily provided paid leave before taking paid leave under this law.

Beginning on January 1, 2025, all eligible employees may take up to 12 weeks of job-protected leave in an application year for the following reasons:

  • To care for a child in the first year following a birth, adoption, or foster care placement;
  • For an employee’s own serious health condition;
  • To care for a family member with a serious health condition;
  • To care for a service member with a serious health condition who is the employee’s next of kin; or
  • For a qualifying exigency relating to a family member on active duty.

Employees may also be eligible for an additional 12 weeks per year for their own serious health condition if the initial 12 weeks of leave was taken to care for a new child, and vice versa.

The paid leave will be funded by employee wage deductions and, for employers with 15 or more employees, employer contributions or the establishment of self-funded private employer plans to provide paid leave.  The benefit amount will be determined by the state average weekly wage and the employee’s current rate of pay, with the maximum benefit for 2025 being $1,000 per week and the minimum amount being $50 per week.  The amount of the benefit will be adjusted annually based on the consumer price index.

Delaware

Delaware’s new law creates a statewide insurance program for paid parental, family caregiving, and medical leave funded through employer and employee contributions.  Employers with at least 25 employees in Delaware during the prior 12-month period must provide eligible employees with a maximum of 12 weeks of job-protected leave.  Employers with 10 to 24 employees only need to offer parental leave.  Employer contributions begin on January 1, 2025, and eligible employees will be permitted to take leave beginning on January 1, 2026.

Similar to the federal FMLA, employees are eligible for this leave if they have worked 1,250 hours during the previous 12-month period and have worked for a covered employer for at least one year.  Eligible employees will be able to take leave for the following reasons:

  • To address their own serious health condition;
  • To care for a family member with a serious health condition;
  • To bond and care for a child during the first year following birth, adoption, or foster placement; or
  • To address a family member’s military deployment.

Employees can take up to 12 weeks in an application year for parental reasons and 6 weeks in a two-year period for their own health condition, to care for a family member, or for a family member’s military deployment.  Employers may require employees to use accrued paid time off to substitute for paid leave.

Eligible employees will receive 80% of their average weekly wage, with a minimum weekly benefit of $100 and a maximum weekly benefit of $900 for 2026 and 2027.  For each year thereafter, the state will adjust the contribution rate based on consumer price index.  The benefits are funded by employer contributions, but employers may deduct up to 50% of the premiums from employees’ wages.

Employers have some time to prepare for these new requirements, and now is a good time to start reviewing your existing policies to prepare for these changes.  For more information, or for assistance with policy drafting and training, please contact any member of the McNees Labor and Employment Group.

At our 31st Annual Labor and Employment Law Seminar, there was a panel discussion regarding the War for Talent.  As part of that presentation, we reviewed some of the new and creative application processes that employers are adopting to help attract, screen and onboard employees more effectively and efficiently. We also discussed the use of Artificial Intelligence, AI, in the applicant review process.

AI is being used to solve a number of problems for organizations of every size. More and more, AI is being used in Human Resources settings, and there is no doubt that we will continue to see a proliferation of AI tools.  These are great tools, so it’s all good, right?

Well, if AI perpetuates some of the same biases that have long been problematic for regular human intelligence, then employers will continue to face disparate treatment and disparate impact claims.  These are exactly the concerns that were recently noted by the Equal Employment Opportunity Commission.  On May 12, 2022, the EEOC issued guidance regarding the Americans with Disabilities Act and the use of software, algorithms and artificial intelligence to assess job applicants and employees.

The EEOC’s guidance outlines three areas where AI could potentially violate the ADA:

  1. The employer does not provide a reasonable accommodation to allow an applicant to be rated fairly by AI;
  2. The employer relies on AI that screens out qualified applicants with a disability, intentionally or unintentionally; or
  3. The employer utilizes an AI tool that makes an unlawful disability-related medical inquiry.

Employers adopting AI in the hiring process need to be aware of these risks and must be sure to discuss how they will be addressed with the vendors offering these products and services.

This same topic was discussed at a recent Employment Law Alliance conference, where Keith Sonderling of the EEOC offered some helpful insights.  Mr. Sonderling emphasized that the EEOC is trying to be proactive in providing guidance regarding the use of AI in this setting, noting that there are already thousands of AI tools available for use at every stage of employee life cycle and compliance is the goal for so many employers and service providers. Understanding the legal issues and how employers can work to ensure compliance on the front end is a better outcome for all involved.

Keep in mind that state laws may also impact your organization’s use of automated decision tools as well. We will be sure to keep you up to date as additional guidance is issued and as the use of AI in the hiring process continues to develop.

And, if you have any questions about rolling out AI to help some humans in Human Resources, please do not hesitate to give us a call.

Despite our best attempts to suppress the memory, we all remember it well.  Just over two years ago, the pandemic triggered state-ordered shutdowns.  Our economy obviously slowed to a crawl, and employers everywhere immediately found themselves with surplus workers.  The result was mass layoffs, flooding the labor market with available employees.  To get employees back to work, Congress passed the CARES Act to assist employers with wages and to encourage the rehiring of America’s workforce.  The ARPA followed in an attempt to stimulate a static economy.  The injection of this cash into the economy – along with our adjustment to living with the pandemic and the availability of vaccines – created high demand for goods and services.

The only problem was that during employees’ time in unemployed isolation, something happened.  People reevaluated their lives – particularly their work lives.  For myriad reasons (and reasons we have yet to fully understand), many chose to temporarily remain outside of the workforce or to exit the workforce permanently. As a result, despite the propellant applied to the economy, there remained a hole where the American workforce once was, and employers found themselves in need of labor, fast.

And so, the war for talent was born.  Employers have been competing with each other to secure the limited pool of available workers with ever-increasing and creative incentives.  They have tried everything from increases in pay, signing bonuses, remote work, increases in time off, tuition assistance, free food, and many, many other employer-specific perks.  For a great number of employers, the war for talent has been long, frustrating, and fruitless.  Just ask any entity looking for drivers with a commercial driver’s license.  Or a healthcare facility looking for registered nurses. Or a manufacturer looking for a factory worker. (All to say nothing of the skilled trades; they are in a league all of their own).

As employers are fully engaged on the battlefield for talent, they are also starting to notice a[nother] storm cloud on the horizon.  In November 2021, and again in January this year, investment strategist Jeremy Grantham was the first to sound the alarm that the economy was likely in a super bubble (three to be exact), and the economy was starting to show all the signs that the bubbles were about to pop (or at least deflate).  All that was unknown was the catalyst.  In February, Russia invaded Ukraine.  Last week, the first bank (Deutsche) warned that a major recession is coming.  Netflix’s share price dropped by a third.  Amazon reported a $4 billion loss.  On Friday, we learned that the economy shrank in Q1.

It certainly remains to be seen whether we will see a recession, and if so, how bad.  But it begs the question: could it be that employers are in a war to secure talent they will ultimately be unable to keep if the predictions of recession come true?  Should employers really be evaluating the affordability of the hiring incentives they are offering based on today’s demand?  Should employers be engaging in the war for talent at all?  The answer for each employer will be different. At a minimum, employers should reevaluate how they wage the battle.  They should reevaluate their plan, including the long-term sustainability of the incentives offered to prospective employees (i.e., are they recession proof).  My colleagues Adam Santucci and Bill Boak will be speaking about the war on talent at our upcoming seminar on May 13.  You can register here.

In January, we wrote about Allegheny County’s paid sick leave regulations that took effect in December 2021.  Now, we write to tell you that the regulations have changed.  The change will affect only one key industry – construction.

When the Allegheny County Board of Health drafted its paid sick leave regulations, it clearly modeled them after Pittsburgh City’s Paid Sick Leave Act.  Except for the number of employees that trigger the sick leave requirement, Allegheny County’s draft regulations were nearly identical to the City’s.  Ostensibly, the County drafted its regulations so similarly to the City’s to allow for ease of administration.  With nearly identical ordinances, employers did not need to try to administer two materially different ordinances depending on whether their employees were working in the City or the County.  But, when Allegheny County enacted the final version of its regulations, it had one significant difference compared to the City’s Act – the definition of “employee.”

The City’s definition of employee explicitly excludes any member of a construction union covered by a collective bargaining agreement.  The County’s regulations left out that explicit exclusion.

Almost immediately, there was surprise and pushback in the construction industry in Allegheny County.  On the heels of that pushback came rumors that the omission was an oversight, and that the County was going to amend its regulations to exclude construction unions, too.  Those rumors proved to be true.

At its March meeting, the County’s Board of Health unanimously approved an amendment to the definition of “employee” within the paid sick regulations.  The County’s paid sick leave now excludes any member of a construction labor union covered by a collective bargaining agreement.  The amendment goes one step further and defines “construction labor union.”  That is defined as “a labor union that represents, for purposes of collective bargaining, employees involved in the work of construction, reconstruction, demolition, alteration, custom fabrication or repair work and who are enrolled or have graduated from a registered apprenticeship program.”

With this revision, unionized construction employers should review the language and scope of their paid sick leave policies.  Such policies should be tailored to cover only non-unionized employees.