The National Labor Relations Board (NLRB) announced a renewed effort to limit liability for companies with workers that are not engaged specifically by the company. A new proposed rule would protect companies from lawsuits by persons hired by contractors or franchisees.
The new proposed rule comes after an earlier attempt to change the policy was vacated after it was determined one of the board members had a conflict of interest with the company involved in the decision. However, the Board is moving forward with the proposal through the new rule. In effect, the rule changes prior policy that held a company liable for labor violations of the company's contractors and franchisees.
Those who supported the prior rule argued it did a better job to reflect the current economy where more labor is being outsourced. However, those supporting the change argue the prior rule upended the current franchise model.
This new rule could potentially go a long way in impacting the number and types of lawsuits brought for labor violations in the future. The new rule would limit the ability of workers to seek compensation from bigger pocket defendants.
For the companies, it allows them more freedom and fewer oversight requirements when they set up franchises or hire contractors. This could allow a decrease in costs for these businesses going forward. Of course, the flip side of this is that the smaller contractor or franchisee may find itself baring more of the responsibility for these violations. For franchisees in particular, they may need to be more cautious going forward and ensure they understand and follow the law with perhaps less guidance from their franchisor.
Whatever the circumstance, it appears likely the potential liabilities companies will face in the future will change. Having an experienced employment lawyer on your side will help you navigate this ever-changing landscape.