Wine businesses can’t outsource liability for labor practices

Companies in the wine industry should make sure they understand the potential liability they face when they rely on staffing agencies to provide seasonal and contingent workers. Staffing company arrangements are popular in the wine industry. They allow businesses to increase staff as needed and avoid the administrative burden of hiring and laying off employees based on seasonal needs. Often, only a handful of winery employees are full-time, year-round employees.

Outsourcing is not simply a cost-cutting measure - it allows businesses to focus on what they do best. In the last decade, the use of contingent workers has become far more commonplace in many industries. Many U.S. workers have flexible workplace arrangements, as temps, freelancers and contractors. As the so-called “gig” economy develops and evolves, the laws are changing to protect these workers.

Those who use staffing agencies should take particular note of recent trends in joint-employer liability. Federal law has long held that two separate companies may be treated as joint employers if they jointly handle important aspects of the employer-employee relationship for their workers. If a joint-employer relationship is established, either intentionally or unintentionally, both entities are liable for wrongdoing. For example, both companies may be found jointly liable in a lawsuit or administrative proceeding regarding the jointly employed workers’ wages, hours and working conditions.

JOINT-EMPLOYER RULES TIGHTEN

Until recently, administrative agencies and courts generally found that a company must exercise actual, direct and substantial control over workers to be considered a joint employer. But over the past year, laws have changed so that far less control is required.

In its recent Browning-Ferris decision, the National Labor Relations Board (NLRB) considered whether two separate companies in Northern California were joint employers of staffing agency workers. The board stated that it was revisiting its former standard because of changing economic circumstances.

“[T]he diversity of workplace arrangements in today’s economy has significantly expanded,” the three-member majority wrote in the decision Aug. 27, 2015.

They relied on a Bureau of Labor Statistics report and explained that “the number of jobs in the employment services industry, which includes employment placement agencies and temporary help services, will increase to almost 4 million by 2022, making it ‘one of the largest and fastest growing [industries] in terms of employment.’ ”

The NLRB announced a new standard in Browning-Ferris, indicating that a company may qualify as a joint employer if it exercises indirect control over working conditions or if it has reserved authority to do so. This decision has created uncertainty because a joint employer finding requires a fact-specific, case-by-case analysis of the arrangement.

A recent NLRB decision following Browning-Ferris gave businesses some comfort, because it held that the staffing agency involved maintained control over the terms and conditions of employment. But in another case in August of this year, Rtro Environmental, the NLRB found that two companies were joint employers, even though they had no current projects together and no bids for future projects. The board considered whether:

The user company would continue to dictate the number of workers supplied by the staffing company.

It would continue to impose training and qualification requirements on the staffing company.

It would continue to retain the right to request a replacement employee from the staffing company.

The U.S. Department of Labor has joined the NLRB in making joint employment an enforcement priority. It recently clarified its joint-employer definition under the federal Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). When a worker has an employment relationship with one employer, such as a staffing agency, and the economic realities show that the worker is economically dependent on another company, both companies may be considered joint employers under a “vertical” joint-employment theory.

Based on seven factors in MSPA regulation for determining dependence, a company could be a vertical joint employer if it:

Controls the work performed, directly or indirectly.

Controls employment conditions such as the power to hire or fire the workers.

Maintains a long-term relationship with the workers.

Hires workers to perform repetitive and unskilled work.

Hires workers to perform work that is integral to the business

Requires work to be performed on its premises.

Performs administrative functions for workers, such as payroll.

CALIFORNIA EXPANDS LIABILITY

California has also followed this trend over the past few years, enacting state legislation that makes certain companies liable for their contractors’ violations without requiring a joint-employer relationship. In a report to the California Senate Judiciary Committee, Assembly Bill 1897 author Roger Hernández argued that a change in law was needed because labor contractors are increasingly recruiting immigrant workers and other vulnerable temporary workers:

“It offers workers a clear path to accountability for workplace violations, and it offers employers a clear path to compliance.”

In California, when a company uses a staffing agency to obtain workers and the arrangement meets certain criteria, Labor Code Section 2810.3 exposes the company to liability for the staffing agency’s wage and hour violations. User companies are required to share liability with supplier companies for wages, workers’ compensation insurance, and workplace safety provisions.

Labor Code Section 2810 also prohibits a company from entering into an arrangement to obtain certain types of workers, such as farmworkers, when it “knows or should know” that the contract does not provide sufficient funds to permit the contractor to comply with local, state and federal labor regulations. California businesses - wine industry companies, in particular - should be careful they do not knowingly hire unauthorized workers through an outsourcing arrangement, as they may be held responsible for a staffing company’s noncompliance with federal immigration laws.

CLARIFY AND AUDIT

Seeking counsel to review current employment practices to minimize or avoid potential liability is recommended. Companies should make sure any contingent workforce arrangements are in writing and provide clear guidance on which company will control the workforce. And they should review existing staffing company contracts to determine whether they can reduce or eliminate any factors that may lead to a joint-employer finding. Companies should also consider auditing their staffing agencies to ensure they are compliant with the law.

Ian R. Macdonald (macdonaldi@gtlaw.com) is an Atlanta-based shareholder and Jamie R. Adams (adamsj@gtlaw.com) a San Francisco-based associate with Greenberg Traurig LLP (gtlaw.com).

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