Viny Panchal, of ProSight, sees more court cases coming to define who are deemed employees and who are considered contract laborers
The National Labor Relations Board (NLRB) in a 3-2 decision last August changed the standard for testing whether two independent companies are joint employers. The case involved Browning-Ferris Industries of California (BFI), which contracted with a separate company to provide workers at a recycling plant. While BFI did not directly supervise those workers, the NLRB deemed that it was a joint employer because the company reserved the right to control the scheduling, overtime, and work assignments of temporary workers. Proponents contend that the ruling can be a remedy for many workers misclassified as independent contractors. Others, such as the National Association of Home Builders, argue that the ruling could subject builders to potential liability for unfair labor practices, breaches of collective-bargaining agreements, and picket lines over issues involving their subcontractors. Viny Panchal has been underwriting construction insurance for eight years and shares his take on how the labor law could impact builders and liability concerns.
Q: Did the Department of Labor change the rule or did it change the interpretation of what is an independent contractor?
A: What the NLRB has said is that it wants to be front and center in guiding the discussion, but it stopped short of saying that any one area should take precedence. More so, the NLRB is saying that it wants to rely on the facts of each individual case. The idea of economic dependence would be the guiding factor when taking an overall look.
Q: How does the definition of economic dependence come into play?
A: The Department of Labor uses the economic realities test by applying the idea of economic dependence to see if the worker is truly operating a business of his or her own, in which case he could be deemed an independent contractor, or if he, as a worker, is economically dependent on the employer. The test is applied in a manner in which one is evaluating the realities of the working relationship, not solely on titles assigned by employers.
Some questions that have been highlighted by the Department of Labor and could be useful in determining the relationship would be: 1. How integral is the work performed to the employer’s business? 2. How does the worker’s relative investment compare with the employer’s investment? 3. Will the work require special skills or initiative? I think that as these and other questions are tested in the courts, we will start to be able to use a more definitive method of applying the economic realities test.
Q: Does the decision have any impact on home builders’ liability or relationship with their subcontractors—particularly for those builders that have trade councils or even fund training for their trades?
A: We’re probably going to be able to figure out the impact in the next couple of years as issues get tested in the courts. What this decision shows is the Labor Department effectively saying, “This is what we think, but let’s see if it works.” Builders who are already doing certain things, such as providing training and including their subs on trade councils, I think those builders are ahead of the game a little bit. In terms of what deems you to be an independent contractor or an employee, you’ll have to look at the facts of every situation and at the broader scope of economic dependence. Contractors that focus on specifically outlining responsibilities and staying on top of signed contracts with proper indemnification agreements would be best prepared to deal with any potential legal action. No longer are you going to be an independent contractor because you bring your tools to the site. You have to have a skill and your mission is to say, “I’m thinking about things that are really going to affect how I do business in the future.” PB