Seeking Common Ground on Contract Work Protections

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Peg Seminario, safety and health director at the AFL-CIO, and Baruch Fellner, an active retired partner at Gibson, Dunn & Crutcher LLP, have worked on safety and health issues dating back to the 1980s—often on opposite sides of an issue—including ergonomics, safety and health programs and record keeping. They recently sat down with Bloomberg BNA reporter Stephen Lee to talk about the evolving world of contract work and how, or if, it should be regulated.

Peg Seminario:

Clearly, employment relationships are changing, work is changing and the workplace is changing. There are a lot of challenges that we face in these changing structures and relationships in protecting workers on the job. We have a lot of information showing that people who are working in shorter term jobs and people who, when they show up at work, haven't been working there very long, are at higher risk. That's just a fact. We have data showing that, in some of the more hazardous industries, temporary workers face twice the risk.

So it's really necessary to look at, in this time of changing employment relationships and changing work arrangements, how do we now protect people? I don't think we throw out the model that we have. But we have to look at how to apply it and how to adjust it. I don't think it's a question of balancing protecting workers against business's need to be flexible. It's really a question of, in these changing times, how do we make sure that workers are protected? Because everyone believes that workers should be protected.

Baruch Fellner:

It is a complex and evolving economy. Indeed, when you talk about the gig economy or the economy on demand, or expanding that notion to issues involving temporary employees—whether they are the product of temp agencies or whether they are temporary employees who either fancy themselves or in fact are independent contractors, we're dealing with an extraordinarily complex area.

It's complex in at least two ways. One, insofar as the employee complement is concerned, it spans the spectrum from those who have very specialized talent and expertise—I think in terms of the IT specialists, for example. It is an area of very specialized expertise. They bring their own tools to the task. So it ranges from that area of specialization to—and I don't mean this to denigrate, but rather to describe the fungibility of the other end of the spectrum—a housekeeper in the hospitality industry.

And two, the employer spectrum is equally complex, whether one is talking about temporary agencies or platforms involving Uber or Lyft or any of the others, ranging from that to the classic example of employers which require temporary employees, some of whom work right alongside regular employees under the control of the host employers and others who do not.

So I want to put on the table the spectrum of employees and their expertise, and the spectrum of employers and their respective needs and relationships with independent contractors in order to begin to describe how complicated this issue is.

Seminario:

I think, rather than focusing on the complexity—not to disagree that it's complex—we should focus on providing these basic protections in this changing and complex environment.

In a changing economy, what should the rules of the road be and who should be responsible? The difficulty here is that, if you move to fragmented work relationships, they are complex, but you still want people to be protected on the job. So how do we deal with that? How do we structure both the legal obligations and, at a practical level, make sure that these protections are afforded?

Take the auto industry, for example. There are some auto plants where the vast majority of people working are temporary employees, and they've worked there for years, but they're in a temporary status. Those workers still need to be protected. We have a lot of other workplaces where you have temp workers coming in for a short period of time. They may be employed by a temporary staffing agency, and they're going from job to job. The concern we have is that, if people are working, they have basic wage protections, they have basic safety and health protections. We need to make sure that those workers are protected.

And OSHA has done a lot of work. They've been working closely with the American Staffing Association trying to put in place, very clearly, a model for temporary staffing agencies and host employers. We need to roll up our sleeves and figure it out.

Fellner:

Peg has put her finger on the central issue. I entirely agree. It is safe to say that both of us are in fundamental agreement with respect to the notion that the protection of employees in this new, emerging, organic economy should not be neglected and should be affirmatively assured. And where there are multiple employers involved, I think OSHA has many tools already, starting with multi-employer work-site policies, which I was responsible for developing during OSHA's first decade. That was an attempt to ascertain who is the creating employer with respect to workplace hazards and who is the controlling employer. They may be different with respect to abating workplace hazards.

The question is, how can we adapt those existing notions, as well as ample case law, using what is referred to as the Darden factors—the Supreme Court's leading decision with respect to who controls the workplace and who controls the ability to correct workplace hazards—to the emerging economy? That would be the approach that I would advocate in terms of being responsive to the franchisor/franchisee, the temp agency or a variety of the other emerging parts of the economy that we're beginning to see. We should find the appropriate mechanisms in the framework that already exists as opposed to creating new regulatory solutions.

Seminario:

I don't entirely disagree. And OSHA has better tools than some of the other agencies that deal with employment.

I serve as a member of NACOSH [the National Advisory Committee on Occupational Safety and Health], and the major charge we were given over this last year by [OSHA chief] David Michaels was to deal with temporary employment situations in the context of a safety and health program. It's no secret that over decades, every assistant secretary wanted to issue a safety and health program rule. And for decades, none of them have been able to do it, whether it was John Pendergrass, Jerry Scannell, Joe Deere, Charles Jeffress or David Michaels. Doing it on a regulatory basis can prove to be difficult.

One of the issues is how you deal with multi-employer work situations in the context of a safety and health program. Who's got responsibility in hazard identification? Who's got responsibility for various control measures and training? We don't have the framework for how that coordination can best take place. Some employers definitely figure it out, and others don't. ACCSH [the Advisory Committee on Construction Safety and Health] is coming up with specific recommendations for how you do that in construction. Those kinds of approaches are really helpful, because it is complicated and we need some clarity about who is responsible in these areas as a general matter. And then there are going to be specific applications. This model and this approach is going to become more common. We have to figure it out.

Fellner:

Again, Peg makes excellent points. The notion that OSHA would be examining certain kinds of guidelines in the distribution of responsibilities, it seems to me, makes a lot of sense.

Let me give you an example of how OSHA has done this. It occurs to me that in the powered industrial truck training revisions, OSHA tackled the issue of what the host employer is supposed to be doing with regard to appropriate training for powered industrial truck drivers and what agencies that distribute those drivers might be. The line that OSHA drew was that, when it comes to training employees with respect to the specific hazards in the workplace, there may be certain nooks, crannies, corners, exits, whatever it might be, that are peculiar to that workplace. There's no question that, whether it's a permanent powered industrial truck driver who works for XYZ Company, or whether it's an on-loan driver. Under any and all of those circumstances, you're talking about hazards that are in the workplace itself and known best to the host employer. Of course the host employer should be on the hook for the purposes of training. If you're talking about generic training about how to drive a powered industrial truck, that probably ought to be the responsibility of the temp agency.

So there are paradigms out there—both in a regulatory framework and in the framework of guidelines—that we can begin to tackle certain kinds of issues that may be hazard-specific. We can certainly make sure that employees don't fall through the cracks.

Seminario:

And I think that's the direction OSHA is moving in. For all of the rules that they are coming out with, they need to be thinking about their rules as they are being issued as applying in this current economy, with these relationships and the changing nature of work and workers. They need to look at those and say, “Do we need to lay out here, in a clear way, who has responsibility?” Because we can't assume that it’s just going to be the host employer, that people are going to be working there forever. They have to start tailoring their rules so they actually have practical applications.

Fellner:

I couldn't agree with you more. What I am focusing on, in this discussion, is the notion of tailoring to the specific rules and specific hazards. Here's what concerns me, and maybe where we begin to part ways. I'm thinking in terms of the leaked solicitors' office memo with regard to inspections of franchisor/franchisee relationships undertaken by compliance officers. The litany of the kinds of questions that are posed—yes, there is a very short paragraph of the multi-page memorandum that deals with classic safety and health issues, but it is dwarfed by questions about the kinds of financial relationships, contractual relationships, what the fees are that are paid from one to the other, the kinds of economic interrelationships between franchisors and franchisees. Those are the kinds of issues which I think send OSHA too far afield.

And when one starts with the multi-employer work-site paradigm—who's the controlling employer, who's the employer best able to abate those workplace hazards—and we adapt it to the discussion we've had so far with respect to specific workplace hazards, that’s fine.

But where I think it's a bridge too far is where OSHA attempts to attach responsibilities based upon economic relationships, which are extraordinarily complex and may or may not have any real relationship to whether or not a franchisor can control every one of its restaurants with respect to splattering oil and grease. That's the area which is a third rail.

Seminario:

Again, I think there are certain things that McDonald's can control and certain things that they can't. Clearly, we've also got a change in the economy in terms of the concentration of some really big employers with a franchise relationship or contracting relationship, where those entities have incredible power to bring about change in the way that work is conducted. They can decide to use that power in one way or not. For those of us in the labor community, what we look at is the economic power relationships and who has control over workplaces. How do you actually end up affecting and having those entities exercise some responsibility when it comes to worker safety and health?

Last fall, McDonald's came up with a press report that they were taking action to make sure that its suppliers only provided eggs that came from cage-free chickens. They wanted to do this so the animals would be looked after properly and treated humanely. They exercised their buying power to dictate that. So in the labor community we said, “All right, you've got a lot of power. You've got a lot of rules that you put on your franchisees about what kind of equipment to use. You tell them how to do this, how to do that. You can certainly tell them what kind of safety and health program to have. You can certainly tell them that their equipment should be brought up to code.” They should be using their economic power just as strongly when it comes to protecting their workers as they do about the chickens and the suppliers for the eggs.

That, from the perspective of representing workers and bringing about a change in behavior, particularly corporate behavior, that's how we look at the world. That's why we focus on an employer like McDonald's. Is there a way here, morally or under any legal obligation, to use that influence to make sure workers in those stores are protected? We think that makes sense. Whether or not that exists currently under the legal structure, I don't know. But that's the thinking that is behind this.

Fellner:

Understood. But again, the extent to which a franchisor exercises control over workplace conditions is always an extraordinarily difficult tight wire to walk. And that is because franchisors and general contractors in construction understand that the more deeply they are involved in the day-to-day activities, the more they get involved in the nitty-gritty of safety and health, the more responsible they become—and frankly, the more they relieve the subcontractors of their own safety and health responsibility.

So there is both a legal question about trying to get too deeply involved in these kinds of issues, because to become involved with these issues leads to enforcement consequences that these large employers do not want to have. They would just as soon make certain that the appropriate franchisee or subcontractor assumes responsibility, since generals and franchisors can't be in the workplace of each franchisee all the time. Whether we're talking about training or making sure the oil isn't too hot or that employees are wearing PPE [personal protecting equipment] and all the rest, that's not something a franchiser can assume responsibility for in any way, shape or form. And yet he will, simply by virtue of the extension of the relationship. So this is awfully complex.

Seminario:

But I don't think we're talking about relieving the franchisee of responsibility. It’s about how you use the influence of the parent and, in some cases, direct legal power because of their relationships. It's something that we need to be looking at going forward. Do we need to move to a new model to make sure that there is responsibility as you have these fractured relationships? And there are a lot of folks who ask whether we need a different model. The model for many employers—let me get away from franchisees now—is that the way you deal with all this is to just make everybody an independent contractor and now we have no responsibility. We think that's absolutely the wrong way to go.

One of the problems with the current statute is that independent contractors and people who are self-employed aren't covered. I was looking at some of the fatality data and we have a fatality rate on self-employed workers that is five times the rate of wage employees. And it's going up. So it's a problem and it's actually getting worse. We also see that the injuries and injury rates of people who are newly employed are very high. So if you are having this churning going on in the economy, if you have people working in different capacities, we have to make sure that they're protected. In all of this, the answer is not to say, “Everybody's out on their own and you guys figure it out.” We need to look at how the legal structure and policies need to be modified to deal with the threats of the present economy.

Fellner:

I'm thinking in terms of sustainability objectives, which are being embraced by large employers left, right and center, probably because (a) it's the right thing to do, and (b) they're getting kudos from the public, from employees, from vendors, for embracing sustainability. One wonders whether they can be a nonmandatory, nonenforceable structure whereby franchisers receive some kind of appropriate recognition—an award, etc.—for involving themselves in precisely the kinds of issues which you have described. Not the day-to-day nitty-gritty of what goes on in a franchisee's workplace, but making sure that appropriate training is done without being subject to a citation if the appropriate training is not done. Making sure the relationship between franchisor and franchisee is explicit with regard to the safety and health objectives of employees in the individual workplaces—again, without the Sword of Damocles hanging over them, or OSHA's enforcement dragnet. That may be a direction in which to go. It's perhaps more creative than the usual enforcement model, which serves as a discouraging element in terms of involving employers in safety and health.

Seminario:

That's not a bad thing to do, but I don't think it solves the problem. It goes back to what your responsibility should be. There's probably a mix of regulations, enforcement and certainly outreach. What are the rules of the road? Some of the tools exist, and we have to figure out how they apply here, in this context. And do we need some new tools? Do we need some tweaks and changes in the law to deal with the relationships we have now? That's the approach OSHA has been trying to take.

Fellner:

I think the issue in the context of temporary employees and independent contractors is easier than most folks consider it to be. There are existing tools out there, certainly in the context of who controls the work and who controls the hazards, to cite the appropriate employer for a failure to protect independent contractors or temporary employees. Those are easier issues to contend with on a case-by-case basis. If it requires some reiteration of existing policy in terms of the control and correction of workplace hazards then, by all means, that ought to be done.

The classic gig economy presents more difficult issues. Take the IT person coming for a day or week or month and working on IT issues and being exposed to electrical hazards. That's a relatively easy issue. But if it's a hazard that only the IT person knows about, it's a harder issue, and it's one that is not subject easily to regulatory or statutory reform. Another example that always comes to mind: Take a hospitality worker working for XYZ Hotel on a particular day and their back hurts. They've worked for five hotels that year as a temporary employee. It's cumulative trauma. The question I would pose to you, Peg, is which hotel is going to record that as a workplace injury?

Seminario:

It's a great question. But it's not so different than the issues that we're facing in dealing with occupational diseases, where workers with multiple employers have cumulative exposures and conditions that result from those exposures. There's definitely some shared responsibility. We haven't figured this out, but we need to. I'm now serving on an NAS [National Academy of Sciences] committee on setting up a 21st century surveillance system for occupational injuries and illnesses. We’ve made some improvements, but the core issues are the same. They're just getting more complex with work changing, and when you’re trying to establish work relationships when it comes to injuries and illnesses, all of that becomes more complicated. But that just means we have to work harder to figure it out.

To contact the reporter on this story: Stephen Lee in Washington at stephen.lee@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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