Life is good, or so you thought. You're a busy executive with a large and well-respected manufacturer in the automotive industry. You are responsible for several assembly lines within a large complex shared by a variety of business partners who have their own employees working on and around other lines nearby. Sales are meeting forecasts, your shipping costs are down thanks to just-in-time inventory, and your business partners are close at hand when production issues arise. And all those nearby workers your business partners employ? You don't need to worry about them because they can just go to their own employer if they have a complaint or concern, right?
Automotive manufacturers and suppliers are continuing to create closer relationships to improve productivity and save costs. Suppliers are locating on consolidated campuses and are more frequently sharing workers or locating production lines on each other's facilities. In order to retain these benefits and expand the process, automotive manufacturers need to be aware of the risks and protect themselves in advance.
A number of concerns and financial exposure go along with workers sharing the same air space with employees of other companies. These headaches include:
- EEOC charges and litigation filed against your company by the employee of a business partner claiming your company was his "joint employer"
- ERISA claims that your business partners' employees are entitled to share in your company's employee benefits and profit-sharing plans
- "Accretion" of your non-union employees into the bargaining unit of a business partners' employees, leaving your company bound by a collective bargaining agreement you had no role in negotiating
While these are not the only risks, protection from these risks will also provide protections from other employment claims in shared environments. Fortunately, with careful planning and oversight those headaches can be avoided.
The Potential Problems
Two groups have contributed to problems employers face when they share workspace and workers: the plaintiff's bar and unions. Plaintiffs' lawyers are looking for more targets, and unions are seeking to expand their ranks. Each of these groups has been assisted a great deal in recent years by state and federal agencies with regulatory oversight over the workplace, particularly the EEOC, DOL, and NLRB. While each agency has its own motives and mission, one thing they have in common is the habit of targeting multiple companies as the "joint employer" of the workers on whose behalf they are acting.
Equal Employment Claims
The EEOC offers two ways for multiple companies to be targeted by the same employee in a charge of workplace discrimination: the "integrated enterprise" and the joint employer. One method focuses on the overall business, while the other focuses on the degree of control exercised over an employee. If the operations of two employers are too intertwined, the employers will be considered an "integrated enterprise." An employee of either business may seek financial relief from both.
The EEOC and courts consider the totality of the circumstances, but are more likely to find enterprises to be intertwined when operations:
- share management services such as check writing, preparation of mutual policy manuals, contract negotiations, and completion of business licenses
- share managers and personnel
- share use of office space, equipment, and storage
- have common officers and boards of directors
- central of labor relations
- have common ownership or financial control
If two employers are not found to be "integrated enterprises," they may still be at risk as joint employers. The issue is the amount of control each employer asserts over the employee. No one factor is dispositive in determining whether a company has sufficient control to be considered an individual's employer, but the EEOC lists a number of factors it considers helpful to the analysis. See EEOC Enforcement Guidance at (Accessed Sept. 3, 2011). Among them:
* The target company has the right to control when, where, and how the worker performs the job
* The work does not require a high level of skill or expertise
* The work is performed on the target company's premises
* The target company has the right to assign additional projects to the worker
* The target company sets the hours of work and the duration of the job
* The target company provides the worker with benefits such as insurance, leave, or workers' compensation
* The target company can discharge the worker
Merriam-Webster's defines accretion as "the process of growth or enlargement by gradual buildup." In the labor relations world, that innocent definition can take an ominous meaning because it can result in one's employees being "accreted" into a bargaining unit even when the company's employees were not previously organized. In other words, a non-union employer can find itself a union employer by a simple petition filed with the NLRB asking that certain of its employees be recognized as members of another organization's collective bargaining unit.
Fortunately, the NLRB takes a narrower view of which employees should be added to a bargaining unit than the EEOC and IRS do when determining who is an individual's employer. In its words, "Board policy is to permit accretion 'only when the employees sought to be added to an existing bargaining unit have little or no separate identity and share an overwhelming community of interest with the preexisting unit to which they are accreted.'" 355 NLRB No. 164 (Aug. 27, 2010). The NLRB has considered many of the same factors used to find an "integrated enterprise"; however, the NLRB will generally not find union accretion in the absence of employee interchange and common day-to-day supervision.
So what are some steps that can be taken to reduce those risks and get back to reducing costs and increasing efficiency?
Some Proposed Solutions
Set Clear Boundaries by Contract
1.When contracting with your business partner, be clear within the contract itself that your company retains responsibility for controlling the day-to-day work of its own employees and that the business partner remains solely responsible for controlling its own workforce. Contracts that focus on results-e.g. production of a product to certain specifications, as opposed to micromanaging how that product will be built and who will build it-are more likely to be viewed favorably in a challenge to an individual's employment status.
2.Include within the contract responsibility for the provision of workers' compensation insurance and general liability insurance. Require proof of insurance from your business partners to reduce the risk that the other's employees will attempt to make a claim on one or more of your company's policies.
3.Address responsibility for drug testing and background checks, reserving to the respective employers the rights and obligations to test and screen their own employees.
4. Include indemnification provisions that require business partners to hold your company harmless from claims brought by any of their own employees. Also verify with the company's insurance carriers that they will defend the company from claims brought by the employees of your business partners, particularly if the business partner is unwilling or unable to follow through on its indemnity obligations.
Set Clear Boundaries in Practice
1.Avoid "borrowing" employees from business partners. Even then, do so only under an employee leasing arrangement that includes protections similar to those summarized above.
2.Maintain distinct reporting relationships that avoid having a business partner's employee reporting directly or indirectly to a supervisor employed by your company.
3.Maintain separate human resources functions and personnel, including storage of personnel records, leave administration, workplace investigations, and payroll administration.
4.Maintain break rooms and workplace bulletin boards separate from that of your business partners.
5.Where uniforms are worn, require that your company's workforce wear uniforms that are distinct from that of your business partners' employees.
6.Keep job duties distinct where possible. If individuals employed by different companies are performing the same job function, ensure that they are not being supervised by a supervisor from a different company.
The key to minimizing the risk of joint employment and accretion is setting boundaries. While it may not be practical or beneficial to build literal walls between workers in a shared work environment, virtual walls can be built. Maintaining separate lines of supervision is one way to do so. So, too, is avoiding conduct that suggests that your company is directing the day-to-day activities of a business partner's employees rather than simply relying on the business partner to produce a quality work product. And at the end of the day, if an individual still tries to claim the rights of an employee, remind yourself that the key to a successful defense is advance planning. It's never too soon to start.
Stan Graham is a partner and former Chair of the Labor and Employment Group with Waller Lansden Dortch and Davis, LLP, in Nashville, TN. Mike Paslay is a partner at Waller Lansden and practices in the areas of corporate restructuring, creditors rights, commercial litigation and lender liability issues.