Have You Unknowingly Become a Joint Employer? The Potential Perils of Using Temporary Workers in the Automotive and Manufacturing Industries

For years, companies in the automotive and manufacturing industries have utilized temporary workers as a means of supplementing their regular workforce, particularly with regard to hourly staff. One of the primary reasons behind this approach is that it allows companies to more easily adjust their workforce in response to the ebbs and flows of business that so often plague employers in the automotive and manufacturing industries. While this added flexibility serves a legitimate need, it often comes with a false sense of security that the company does not bear employment-related liability in connection with the temporary workers. Due to the fact that government agencies and the courts continue to expand the circumstances under which joint employment will be found, nothing could be farther from the truth.

A prime example of this is the notice of proposed rulemaking that was issued by the National Labor Relations Board in September 2022. Under the proposed rule, which is still pending review, the entity utilizing temporary workers need not actually exert control over the temporary workers’ working conditions in order to be deemed a joint employer with the staffing company. Rather, in order to confer joint employer status, the entity utilizing the temporary workers need only have indirect control over working conditions or, even more troubling, have authority to control working conditions, even if that authority is not exercised. Under the proposed rule, which is essentially the same rule that existed under the Obama administration, joint employment would be found in virtually every situation where an automotive or manufacturing company utilizes temporary staff.

While the NLRB’s proposed rulemaking may be the most liberal standard for finding joint employment, by no means is the NLRB the only governmental agency seeking to make it easier to find joint employer status. In July 2021, the Department of Labor rescinded the rule promulgated during the Trump administration for determining joint employer status under the Fair Labor Standards Act. The DOL’s explanation for rescinding the Trump-era rule was that the rule focused exclusively “on the actual exercise of control” and “excluded factors that were not indicative of a potential joint employer’s control.”  Similar to the NLRB’s proposed rulemaking, the DOL will consider an entity’s potential to exercise control over terms and conditions of employment when determining whether joint employer status exists.

So what does this mean for companies in the automotive and manufacturing industries? It means there is a strong likelihood they would be deemed a joint employer of the temporary workers they utilize, which, in turn, means they would likely be subject to the same potential liability that they have to their W-2 employees. It also means these companies should take steps to limit their potential liability as much as possible. This can be accomplished, in part, by ensuring that the agreement with the staffing company or other third-party provider (i) clearly defines the parties’ responsibilities, (ii) requires the staffing company/third-party provider to comply with applicable EEO and wage and hour laws, (iii) contains applicable representations and warranties from staffing company/third-party provider, and (iv) has a strong indemnification provision should the staffing company/third-party provider fail to meet its obligations under the agreement. While taking these steps will not eliminate all liability related to temporary workers, it should significantly reduce the company’s potential liability.

Our team, particularly those attorneys in our Automotive & Manufacturing Group, are well-versed in issues related to joint employment. We welcome the opportunity to assist you with navigating through this legal minefield.

The views and opinions expressed in the article represent the view of the authors and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is it intended to be a substitute for professional legal advice.