To share or not to share?
As the Michigan weather begins to turn, finding skilled workers is critical for road commission employers. When faced with these challenges employers may start to explore creative arrangements to meet labor needs.
Consider Alex, a small landscape business owner. Alex employs a small group of employees with commercial drivers licenses (CDLs). He knows he will need to lay off employees once business slows down for the winter. Alex is frustrated by the costs inherent in rehiring, on-boarding, and training employees once the winter ends. In a recent discussion with his local county road commission, Alex proposes the road commission "share" his current employees over the winter. The road commission is excited about the prospect and plans to meet with Alex soon, but first, they want to clarify the risks.
The road commission is right to proceed with caution anytime it takes on a new employment arrangement. Generally, sharing is a positive thing, but when it comes to employees performing safety sensitive responsibilities, using employees of an outside third-party, without proper risk mitigation could result in a high level of exposure for a road commission.
When considering how to proceed, the road commission should start with a review of any applicable collective bargaining agreement, employer policies, procedures, and work rules. When reviewing a collective bargaining agreement, watch for language on the road commission's right to subcontract. This may limit a road commission's ability to bring in outside labor.
The road commission will also need to consider both state and federal law on "joint employment." If Alex and the road commission are found to be "joint employers," they both may face significant liability for any violations of the National Labor Relations Act, the Fair Labor Standards Act, the Family Medical Leave Act, Workers' Compensation Acts, and other statutory schemes, including the Michigan Elliott Larsen Civil Rights Act. The standards and guidance on what constitutes joint employment currently vary and leave employers unclear as to what tests the courts will apply to conduct a "joint employment" analysis.
For example, under what is known as the "economic realities" test, courts may use a number of factors to determine whether Alex's employees are "economically dependent," on the road commission. This means a road commission who directs, controls, and supervises the work performed, controls the employment conditions such as hiring, rate of pay, assigns work that is integral to its business, such as winter snow plow work, has the work performed on its premises, and takes on administrative functions commonly performed by an employer could think it is sharing or subcontracting, but in reality be standing in the shoes of the actual employer.
It is important to remember the decision to enter into an employment relationship like Alex proposed is like any other business decision, it should be considered based on a sound analysis of the risks and benefits, including the potential legal exposure faced by the road commission. Before proceeding, it's always a good idea to consult with your employment and labor counsel who can not only help you understand the risks you face, but craft solutions to meet your business needs and protect your interests and the public you serve.
Action Items:
Perform sufficient pre-contract diligence to confirm any potential third-party employer is reputable and will meet its employer obligations to the workers involved.
Use a written agreement with indemnification provisions and clearly drafted terms to minimize joint employment exposure to the extent feasible under state and federal law.
Require any potential third-party employer to provide certificates of insurance, including workers' compensation coverage.