by the editors of Federal Employment Law Insider

Through its administrative and regulatory arms, the National Labor Relations Board (NLRB) is moving to recast the joint employment law, which will have a profound effect on the entire economy. As the economy has continued its shift to being service- and information-based, the use of contractors and temporary workers has rapidly expanded in the tech, franchise, gig, and other businesses that increasingly rely on non-employee labor.

YouTube Workers Recognized as Employees

In a recent and unprecedented move, a regional director of the NLRB recognized a group of workers directly employed by a staffing agency working at a YouTube facility as being employees. YouTube (owned by Google) insisted all it did was establish minimum pay standards. Nonetheless, the Board ruled Google has enough control over the workers to be considered a joint employer.

An election was held while Google’s objections were pending, and the workers unanimously voted to become a union. This will compel Google and its parent company, Alphabet Inc., into contract negotiations with a union for the first time in its history.

Google is challenging every part of the Board’s decisions. The prospect of converting its contractors into employees is an existential issue for the company because over half its workers are not classified as “employees.”

Staffing Now a Function of Regulation?

The Board’s actions at YouTube were unexpected in light of the agency’s current effort to issue a joint-employer regulation this summer. The proposed rule would expand the number of factors used to establish a joint employment relationship and consider an unexercised contractual authority as an element of joint control. Companies would be considered joint employers if they codetermine “essential terms and conditions of employment,” such as scheduling, wages, and benefits. The YouTube ruling is a real-time demonstration of how the Board’s rule would be applied.

Joint employment has been a subject of debate—and changing NLRB interpretations—for decades. But as both franchising and the gig economy have grown, the issue has taken on macroeconomic dimensions. Leaving aside the issue of whether certain contractors wish to be independent (as the AB5 disputes in California have made clear), the changes in the underlying law will have an immediate effect on how employers staff and oversee their businesses.

Employers may choose to distance themselves from the work of their temps and contractors but may learn that (1) the product is suffering or (2) no matter how distant they are, this Board will find them sufficiently enmeshed to be a joint employer, or both! As a result, some employers may be able to change their business model to an employee-based format and acquire the kind of control the Board wishes to impose. Others will continue to oppose the notion that administrative rules are the decisive factor in how a business operates.

Bottom Line

Both the joint employer and independent contractor issues are the subject of current regulatory review. The outcome of the ensuing political and judicial battles will have a significant effect on the future shape of the economy.