The Obama administration is redefining what it means to be an employer.  The National Labor Relations Board (NLRB) on August 27 handed down one of its biggest decisions, ruling that companies can be held responsible for labor violations committed by their contractors.  While the NLRB ruling specifically deals with the waste management firm Browning-Ferris, the so-called "joint employer" decision could have broad repercussions for the business world, particularly for franchise companies and businesses that use contract workers and other temporary employees.

This decision has extensive implications, as it upends decades of settled law defining who the employer is under the National Labor Relations Act.  At issue in the case was whether Browning-Ferris was responsible for the treatment of contracted employees. The Houston-based company hired Leadpoint Business Services to staff a recycling facility in California. The labor board determined Browning-Ferris should be considered a "joint employer" with the Phoenix-based staffing agency. As a result, the company can be pulled into collective bargaining negotiations with those employees and held liable for any labor violations committed against them.

The NLRB ruling is a sharp departure from previous decisions that stated companies were only responsible for employees who were under their direct control. Without the power to set hours, wages or job responsibilities, the earlier rulings held, companies could not be held responsible for the labor practices of the contractors.

But the NLRB charted a new course with its recent ruling, saying the old standard is "increasingly out of step with changing economic circumstances."  The NLRB is seeking to end that situation by holding that both companies are responsible as joint employers when they "share or co-determine those matters governing the essential terms and conditions of employment."  Under the board's new standard, the test is whether a company has the potential to exercise control over a worker's wages and working conditions, regardless of whether that control is used. That potential can be based on the economic power in the relationship.

The NLRB ruling will detrimentally affect the growing number of temporary workers and independent contractors.  Rather than hiring their own employees, many companies have grown accustomed to turning to staffing agencies to supply temporary workers or contract with other companies to complete tasks.  The NLRB's joint employer ruling now places those arrangements at-risk by creating a situation where employers can be sued more readily because they share liability for an employee's actions.  The NLRB's proposed joint-employer standard would force major employers to bring more services in-house, leaving small business with fewer opportunities.

On Labor Day, President Obama signed an executive order forcing companies who contract with the federal government to provide paid sick leave to their employees.  The announcement comes after a set of similar orders requiring federal contractors to expand overtime compensation and raise workers' minimum wage.  Under the executive order, businesses receiving government contracts will be required to provide an hour of paid sick leave for every thirty hours an employee works, up to seven paid sick days per year.  The new rules would affect government contracts beginning in 2017.