Federal Contractors: Paid Sick Leave, Pay Secrecy, Posters; NLRB Decision On Joint-Employer Status for Union and Non-Union Employers

By: Lawrence P. Postol, Vice President For Legislative AffairsLpostol@seyfarth.comFederal Contractors: Paid Sick Leave, Pay Secrecy, PostersThis year continues to be an active one for employers who are federal contractors or subcontractors. Most recently, on September 7, President Obama continued the trend of using Executive Orders, where legislative solutions have stalled, by ordering federal contractors to grant up to seven days of paid sick leave to some employees. President Obama also announced that the final pay secrecy regulations, which were issued in proposed form a year ago, are expected this week. Separately, the Office of Federal Contract Compliance Programs (OFCCP) issued a compliance checklist and model posters related to Section 503 and VEVRAA, though you should proceed with caution before adopting their use. Finally, as you may have seen, the OFCCP has issued a survey seeking feedback about contractors experiences in audits. Labor Day Surprise: Paid Sick Leave for Some Employees of Federal Contractors President Obama on Labor Day signed an Executive Order that would require federal contractors to offer up to seven days of paid sick leave per year to some of their employees. This Executive Order did not put paid leave on a fast track; President Obama called for the Secretary of Labor to issue final regulations by September 30, 2016; if implemented, the rules -- and leave requirements -- will apply only to new federal contracts signed after January 1, 2017.

The Executive Order would: Permit covered employees to be eligible for up to seven days of paid sick leave each year. Covered employees will be eligible to earn up to one hour of paid sick leave for every 30 hours of qualifying work, capped at no less than 56 hours. Allow covered employees to use the paid leave to take care of themselves, a family member (including a child, parent, spouse, domestic partner, or other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship) or for absences resulting from domestic violence, sexual assault, or stalking. Permit carry-over of sick leave, including reinstatement of leave for employees rehired within 12 months after a job separation. Apply only to employees working in the performance of the contract or any subcontract. It is too soon to tell how the regulations will define in the performance of the contract, or how broadly coverage will extend. The Obama Administration suggested that it will have limited reach, noting that it will impact, at most, 300,000 employees. Similar language was used in the Minimum Wage Executive Order, however, and the regulations issued for that Executive Order (and the minimum wage) applied beyond only those employees who work directly on federal contracts or subcontracts. Employees working on or in connection with covered Federal contracts are generally entitled to receive the minimum wage for all time spent performing on or in connection with covered Federal contracts. More information about the Minimum Wage Executive Order is available here. The Order would not permit contractors to receive credit toward their prevailing wage or fringe benefit obligations under the Service Contract Act or the Davis-Bacon Act for any paid sick leave required by this Order. If a contractor's existing paid leave policy made paid sick leave available to all covered employees, however, the Executive Order states that this would satisfy its requirements, assuming that that paid leave was at or above the minimums required by the Order.The Department of Labor and FAR Council will now begin the process of preparing proposed regulations to implement the Executive Order. Pay Secrecy Final Rule Expected This WeekPresident Obama also announced yesterday that the Department of Labors OFCCP will publish the final rule prohibiting federal contractors from taking adverse action against applicants and employees who discuss compensation. The proposed regulations, issued in September 2014 following President Obamas April 2014 Executive Order, covered: Both applicants and employees of federal contractors and subcontractors; Managers and supervisors; Activity that may not be considered to be concerted under the NLRA; and Information about the amount and type of pay and decisions, statements, and actions related to setting or altering employee compensation. The regulations, if adopted in their proposed form, would give legal redress to applicants and employees under Executive Order 11246 who can demonstrate that discussing, or disclosing compensation information was a motivating factor in their termination or other adverse employment action. In addition, if adopted in their current form, the regulations would amend the existing Equal Opportunity Clause of Executive Order 11246 to require that all Federal contracts and subcontracts include language prohibiting discrimination against employees and applicants who disclose or discuss compensation, and require that covered employers incorporate this prohibition into employee manuals or handbooks and disseminate the nondiscrimination provision to employees and job applicants. The OFCCP also sought public comment on a proposal that could require training on these new retaliation requirements for managers during routine new manager training, or subsequent manager meetings. The OFCCP is Listening: Voluntary Checklist and Posters, Plus MoreLast month, the OFCCP issued the following resources related to the disability and veterans affirmative action regulations.:Section 503 Checklist: The OFCCPs 14-page Checklist for Compliance with Section 503 of the Rehabilitation Act of 1973, asks contractors yes/no questions about practices and policies related to persons with disabilities, and according to the OFCCP is designed to help contractors assess their compliance with the Section 503 requirements. The Section 503 Checklist is optional and we caution against using it as other than as a mental checklist, and then only at the direction of legal counsel. The Checklist suggests that some clearly optional regulatory requirements are mandatory. For example, the Checklist asks whether the contractor lists the identity of the official assigned responsibility for implementation of the contractor's affirmative action activities on all internal and external communications regarding the company's affirmative action program -- an activity which is only suggested but not required by the regulations. The Checklist also asks whether the contractor has developed recruitment literature that can be provided during formal briefing sessions with representatives from recruiting sources, which is again not a required activity. These are just two of the many examples of why caution is warranted. OFCCP Outreach Poster: The OFCCPs Outreach Poster was intended to increase public awareness of OFCCP and its mission. The poster highlights employers non-discrimination obligations and encourages individuals who believe they may have experienced discrimination to contact OFCCP. This is not a legally required poster and federal contractors are cautioned to speak with their legal counsel before deciding whether to post it. It would, however, be a good opportunity to double check that the legally required EEO is the Law Poster is posted on company bulletin boards, on your company intranet, and on your careers page or other application materials. Protected Veteran Infographic: OFCCP has also published a new Infographic intended to help applicants and employees determine whether they are a protected veteran under the Vietnam Era Veteran Readjustment Assistance Act (VEVRAA). Under VEVRAA, a veteran may be classified as a disabled veteran, recently separated veteran, active duty wartime or campaign badge veteran, or Armed Forces service medal veteran and many people have questions about whether they are considered a protected veteran. The one-page poster was developed in response to requests from the veteran community to clarify who falls within the protected veteran categories under the statute.NLRB Decision On Joint-Employer Status for Union and Non-Union EmployersIn a ruling that will affect most business relationships and extends far beyond either labor law or the concept of employment generally, the National Labor Relations Board (NLRB or Board) on August 27, 2015 issued a much awaited decision, Browning-Ferris Industries of California (Browning-Ferris), 362 NLRB No. 186 (August 27, 2015), that expansively broadens the definition of who is a joint employer -- an otherwise unrelated entity that does not hire, fire, supervise or determine the wages and benefits of another employers employees but that nevertheless bears responsibilities to those employees under the National Labor Relations Act (NLRA or the Act). Under the Boards newly expanded test, a 3-2 majority (Chairman Mark Gaston Pearce and Members Kent Hirozawa and Lauren McFerran) held two or more otherwise unrelated employers may be found to be a joint employer of the same employees under the NLRA if they share or codetermine those matters governing the essential terms and conditions of employment. In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees essential terms and conditions of employment to permit meaningful collective bargaining. Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the decision has broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OSHA. Case BackgroundThis case arose after the International Brotherhood of Teamsters, Local 350 (the Union) filed a representation petition seeking to represent sorters, housekeepers and screen cleaners employed by Leadpoint, a subcontractor performing sorting, screen cleaning, and housekeeping work. The Unions petition claimed that Browning-Ferris, a waste and recycling services company, was a joint employer with Leadpoint because it contracted with Leadpoint to obtain temporary labor to sort materials, clean the screens on the sorting equipment, and otherwise clean the recyclery. After a hearing, the Regional Director for NLRB Region 32 issued a decision and direction of election holding that -- under established law and agency principles -- Leadpoint was the sole employer because, among other things, it alone recruited, hired, counseled, disciplined, reviewed, evaluated, and terminated its employees. As a result, an election was held to determine whether Leadpoints employees wanted to be represented by the Union. The ballots, however, were impounded after the election because the Union filed a request for review of the Regional Directors decision that Browning-Ferris and Leadpoint were not joint employers. The Board granted the petition for review on April 30, 2014, and issued its decision today.

The Boards Established Joint-Employer DoctrineUntil this decision, the Boards joint employer doctrine had comported with the law of agency: a putative employer was found to be a joint employer if there was a showing that the putative employer meaningfully affect[ed] matters relating to the employment relationship, such as hiring, firing, discipline, supervision and direction. Laerco, 269 NLRB 324, 325 (1987). Thus, two or more entities were joint employers if they share[d] or codetermine[d] those matters governing the essential terms and conditions of employment. Id. No single fact was dispositive in determining control over employees terms and conditions of employment. Rather, the question of joint employer status needed to be assessed based on the totality of the facts of the particular case. Southern California Gas Co., 302 NLRB 456, 461 (1991).The Boards HoldingThe three Member Board majority opined that it decided to restate the Boards legal standard for joint-employer determinations and make clear how that standard is to be applied going forward. The majoritys new test purports to return to the traditional test used by the Board The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may share control over terms and conditions of employment or codetermine them [.]Importantly, however, the Board will no longer require that a joint employer not only possess the authority to control employees terms and conditions of employment, but must also exercise that authority, and do so directly, immediately, and not in a limited and routine manner. Accordingly, we overrule Laerco, TLI, A&M Property, and Airborne Express, supra, and other Board decisions, to the extent that they are inconsistent with our decision today. The right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect.In dissent, Board Members Philip Miscimarra and Harry Johnson found the majority decision to be contrary to Congressional intent, common law understandings of co-employment relationships, and Board and court precedent. Perhaps most significantly, the dissent argues that the majority opinion impermissibly resurrects an economic realities test specifically rejected by Congress in enacting the 1947 Taft-Hartley amendments to the NLRA. Moreover, in practical terms, the dissent believes that the majoritys new test is impermissibly vague and overbroad and will have substantial adverse consequences to employers, putative contractors, and employees alike. Implications of the NLRBs RulingThe NLRBs decision vastly expands the types and number of entities that can be held responsible for unfair labor practice violations and who may be held to have collective bargaining obligations regarding employees of a totally separate, independent employer. Notwithstanding what the Board claims to be accomplishing, in actuality it is recasting the joint employer test from one based upon a close reading of actual relationships between the alleged joint employers; and, instead, considering what their relationship might be expanded to encompass. Then, based upon that speculation, the Boards decision bootstraps such possible relationships into a concrete joint employer finding.

Every industry sector and business is potentially affected by todays decision, including those who -- in reliance on Supreme Court precedent and over 30 years of settled NLRB law -- have structured their business arrangements with the understanding that absent the direct control necessary for a true employer-employee relationship, the entity will not be a joint employer under the NLRA. For example, todays decision potentially affects, among others, the following: Any business that regularly uses contractors, such as a cleaning or janitorial services, maintenance services, caterers, or a management company to staff and operates its business; Investors, real estate holding companies and general contractors; Any entity that outsources some of the non-core work integral to its business model, such as a manufacturer that contracts with a trucking company for shipping; Any entity that uses a staffing agency to obtain additional or temporary help; Any franchisor that contracts with others via franchise agreements; and Any entity with a relationship to a subsidiary or other corporate entity.In addition, the NLRBs decision may be a precursor to the approach taken by other government agencies: The NLRBs expanded concept of a joint employer parallels recent efforts by the U.S. Department of Labor, Wage and Hour Division (WHD). With a particular focus on franchisors, contractors, and businesses in the restaurant, construction, staffing, agricultural, janitorial and hotel industries, WHD is seeking to hold large companies responsible for wage and hour compliance as to individuals whose services they benefit from--regardless of whether a direct employment relationship exists. Guidance this summer from the WHD on how to distinguish employees from independent contractors reflects a similarly sweeping view of what counts as an employment relationship. The WHDs theory--if the courts accept it--could support a dramatically expanded joint employer doctrine that might require businesses to defend wage and hour claims by individuals whom they have never considered their employees. In its amicus brief, the Equal Employment Opportunity Commission (EEOC) urged the Board to abandon its prior standard and adopt the common law agency test used by the EEOC under Title VII. While the EEOCs test is broader than the previous NLRB standard, both tests focus on actual control of the essential terms and conditions of employment. Since the Board has now removed this critical counterweight in favor of a new standard based on potential or unexercised control over the employment relationship, the EEOC will almost certainly see it as an opportunity to expand its own definition of joint-employment and to take a more aggressive enforcement stance against potential joint employers -- both at the administrative level and in litigation. This would translate to significant expansion of existing and future investigations, including broad and expensive requests for information and potentially even subpoenas for information that is not readily accessible by most employers. It could also mean new EEOC-initiated and class/collective actions against employers that exercise little or no control over their contingent workforce. The Office of Federal Contract Compliance Programs (OFCCP) will use the decision to bolster the five-factor single entity analysis it uses to exercise jurisdiction over businesses that do not hold federal contracts. Specifically, the NLRBs ruling will have implications for the following factors: 1) whether one entity has de facto day-to-day control over the other through policies, management or supervision of the entitys operations; 2) whether the personnel policies of the entities emanate from a common or centralized source; and 3) whether the operations of the entities are dependent on each other (e.g., services are provided principally for the benefit of one entity by another or the entities share management, offices, or other services). We have seen an increase in litigation alleging that various entities are joint employers under ERISA, thereby arguably entitling various excluded individuals to benefits under plans. While language in many benefit plans may address this risk, it is unclear whether this new standard announced in Browning-Ferris will change this analysis, or at the very least motivate excluded employees to pursue claims for additional benefits in litigation. Whether in this or another case, the federal appellate courts and the Supreme Court will likely eventually review todays approach by the NLRB and any eventual similar decisions by other government agencies.Actions to TakeIn response to the NLRBs decision, every business should assess the risk of joint employer liability with its suppliers, vendors, contractors, franchisees, service providers or others. There is no single or simple solution to the issue; each relationship will need to be considered in light of -- as the NLRB puts it -- the industrial realities to develop the most effective responses. In the meantime, businesses that want to respond proactively and attempt to protect themselves from todays decision, may want to take several steps: Review and modify service agreements with third parties; Ensure that third parties establish separate terms and conditions of employment, employment policies and employee handbooks; Distinguish the work performed by your employees from the work performed by the other entities employees; Where possible, establish payment structures for service providers not based on wage rates and hours of work rendered by non-employees; and Consider broad indemnification agreements with third parties.While each situation will be unique and require a thoughtful analysis of the facts, relationships with third parties and business needs, steps can be taken to reduce the risk of a joint employer determination.ConclusionThe NLRBs decision has significant implications for the economy and the ways that organizations structure their business operations. Businesses should prepare now for the potential that they must defend against organizing drives and unfair labor practice charges filed not only by their own employees, but against similar claims naming them their contractors, subcontractors, franchisees, vendors and other entities who contract with them. 2015 by Lawrence PostolMr. Postol is the Vice President for Legislative Affairs on the NOVA SHRM Board, and a partner in the Washington, D.C. office of Seyfarth Shaw LLP. If you have any questions about the information in this article, you may e-mail Mr. Postol at Lpostol@seyfarth.com or call him at 202-828-5385.Disclaimer: This newsletter does not provide legal or other professional services. This newsletter is made available by the lawyer publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By reading this newsletter you understand that there is no attorney-client relationship between you and the newsletter publisher. The newsletter should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

15149141v.3415149141v.341315149141v.34