An Ohio court of appeals last week confirmed that a primary benefit of using staffing companies – the staffing company’s payment of workers’ compensation premiums covering the loaned employees – shields both the staffing company and its customer from workplace negligence claims.

Ohio’s Eighth District Court of Appeals, in Thomas v. PSC Metals, 2018-Ohio-1630 (8th Dist. Ct. App., Apr. 26, 2018), found that an employee who was on loan to PSC Metals from a staffing company could not sue PSC for negligence because the employee was covered by the workers’ compensation insurance policy obtained by the staffing company. (The employee had originally sued the staffing company as well, but dismissed those claims.) The employee argued that because he was an employee of the staffing company, and the staffing company (not PSC) had paid the premiums for the workers’ compensation insurance policy, only the staffing company was shielded from negligence claims under Ohio’s workers’ compensation immunity statute. The court of appeals disagreed, affirming summary judgment in favor of PSC.

The court first found that, even though the employee was on the staffing company’s payroll, he was also an employee of PSC because an “employee may have more than one employer for purposes of workers’ compensation immunity.” Even though the staffing contract specified that PSC was not the employer, PSC’s right of control over the manner and means of the employee’s work made it an employer for purposes of immunity.

Second, the court found that PSC had complied with its obligations to provide workers’ compensation coverage to the employee by virtue of the policy purchased by the staffing company. The court rejected the employee’s argument that only the staffing company had immunity because it – not PSC – had paid the policy premiums. It found that, for purposes of immunity, it does not matter whether the staffing company or customer pays the premiums, as long as someone does so. Further, it noted that PSC did pay the premiums, indirectly, through the fees it paid to the staffing company.

This case highlights the advantages provided by the increased use of staffing companies, and the importance of ensuring that the contract between the staffing company and its customer adequately manages the risks and potential liability of the parties. For more information on how to manage these issues, please contact one of Frantz Ward LLP’s Staffing Industry attorneys.

In 2015, the National Labor Relations Board (NLRB) expanded the joint employer doctrine through its controversial decision in Browning-Ferris Industries of California. The House of Representatives will vote today on the “Save Local Business Act” (SLBA), a recent effort advanced in Congress to re-define the concept of “joint employers” for collective bargaining purposes as well as wage-and-hour, safety, and other employment liability.  If passed, the bill would effectively undo Browning-Ferris.

The Browning-Ferris decision broadened the standard used in evaluating joint employment beyond the “direct and immediate” control over the essential terms and conditions of employment.  Instead, it created a two-part “indirect control” test for determining “employer” status that examined whether a common law relationship exists with the employee(s) in question and whether the potential employer “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.” That broadened standard drew significant criticism and caused concern across a variety of industries, as companies that merely had “potential” or “reserved control” to hire, terminate, discipline, supervise, and direct an affiliated company’s employees – but who did not actually exercise that right – could now be liable for various employment claims and collective bargaining requirements.

If passed by Congress and signed into law, the SLBA would limit the extent to which affiliated businesses are considered to be “joint employers” under the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA).  Under the SLBA’s proposed terms, a person could be considered a joint employer under the NLRA only where it “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment” over an employee.  The definition of “employer” under the FLSA would also be amended to include a reference to the NLRA’s definition, which is consistent with the Department of Labor’s decision in June 2017 to withdraw prior guidance that applied the broadened joint employer definition to the FLSA.

After the Browning-Ferris decision, franchisees, which typically get standardized training and employment manuals from franchisors, and staffing agencies, which recruit temporary workers for their client companies, feared increased liability under the new joint employer standard.  Unsurprisingly, then, the U.S. Chamber of Commerce, National Retail Federation, and the International Franchise Association all support the bill. Opponents argue, however, that the bill would enable wage theft by immunizing unscrupulous employers and would reduce collective bargaining rights of employees.

Until the SLBA becomes law, companies, including those using franchise models and staffing agencies, should be aware of potential liability not only for their own actions, but also for those of any other entity with which they can be determined to be a joint employer.  For more information on how to manage these liabilities, please contact one of Frantz Ward LLP’s Staffing Industry attorneys.

In a win for organized labor, the National Labor Relations Board (“NLRB”) reinstated a union-friendly standard under which both temporary and permanent employees may collectively bargain as a single unit without employer consent. On July 11, 2016, the NLRB’s 3-1 decision in Miller & Anderson, Inc., 364 NLRB No. 39 (2016), made it easier to combine workers who are temporarily employed by a staffing agency’s client company with workers permanently employed by that client company to form a union.

Under the new standard, if a staffing agency and its client company are deemed to be joint employers of the temporary workers, the temporary workers may join forces with the client company’s permanent workers, provided that they satisfy the “community of interest” factors demonstrating that it is appropriate to treat them as a single unit. Some of the factors used to determine whether a proposed unit of workers share a community of interest are whether the employees are subject to the same working conditions, are subject to common supervision, and have similar wages and benefit packages.

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