JOINT EMPLOYER LIABILITY FOR CONDOMINIUM ASSOCIATIONS AND MANAGEMENT COMPANIES

Published on: March 5, 2018

It is often the case that the law can change as frequently as the weather in New England. Recently, the National Labor Relations Board (“NLRB”), a federal labor law enforcement agency that is charged with enforcing the National Labor Relations Act (“NLRA”), demonstrated this by vacating a decision on joint employer liability that it had made only in December. The change in decision means that it is important for both associations and management companies to review the employment status of not only all of their employees, but also the employment status of those people whom they directly control.

Between 2015 and December 2017, the controlling law on joint employer liability was enunciated in the case of Browning-Ferris Industries, which held that two or more companies are joint employers of a person if they all have the ability to govern the worker’s terms and conditions of employment, meaning that if more than one employer has authority to control things like salary and to direct that person’s work, then they are considered that person’s employer, even if another company also qualifies as an employer of that same person. Importantly, in Browning-Ferris Industries, the NLRB concluded that two companies could be liable under a joint employer theory even if one never exercised action joint control over essential terms and conditions of employment, and that joint employer liability could be imposed based upon the mere existence of “reserved” joint control or based on indirect control that is “limited and routine.”

In December 2017, the NLRB issued its decision in the case of Hy-Brand Industrial Contractors, through which the NLRB overruled the 2015 Browning-Ferris Industries decision, and concluded that a finding of joint employer liability requires proof that: 1) the alleged joint employers have actually exercised joint control over essential employment terms; 2) the control is “direct and immediate;” and 3) the control is not “limited and routine.” The NLRB also announced the Hy-Brand joint employer standard would be applied retroactively to all cases in front of it, as well as all pending cases.

However, in early 2018, the NLRB, determined that one of the voting members of the NLRB should have recused himself from opining on the case of Hy-Brand, due to potential conflicts of interest, and as a result, the NLRB issued an order vacating the NLRB’s decision in Hy-Brand.

The NLRA applies to most private sector employers, including manufacturers, retailers, private universities, and health care facilities.  The NLRA does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act. Accordingly, the reversal of the Hy-Brand decision has significant consequences for most employers, as it is again the conclusion reached in Browning-Ferris that is once again controlling (at least for the time being).

In light of the NLRB’s recent vacation of the Hy-Brand decision, associations and condominium managers should be aware of the possible implications, particularly as it is common practice for management companies to employ people to act as on-site lifeguards, concierge staff, maintenance staff, etc., with the association, and not the management company exercising immediate and/or direct control over such individuals.  While these on-site employees are paid by the management company, the management company is subsequently reimbursed by the association dollar for dollar, including employer required contributions.

The fact that the on-site staff are paid employees of the management company but controlled directly by the association may mean that both the management company and association are subject to liability under the joint employer standard set forth in Browning-Ferris, which seems to be an unjust result if the management company has no “direct and immediate” control over the employee or their “essential employment terms.”

 

While this issue remains unsettled, associations and management companies should consult with counsel to discuss possible liability concerns under this ever evolving area of the law, and associations should also consult with their insurance agents to ensure that they have adequate directors and officer’s liability insurance and they may also consider increasing the limits on the association’s comprehensive general liability insurance as well.

For further information, please contact Stephen M. Marcus (smarcus@meeb.com) or Jennifer L. Barnett (jbarnett@meeb.com).