(LABOR) (IN THE COURTS) Employees of a Subcontractor May Sue the General Contractor on Construction Projects as if they are their employer. This decision potentially impacts all employers that engage in the “Labor Broker” model of business.

GMCS, the recognized expert in Industry & Labor Relations, www.gregorymcs.com:

Many Philadelphia commercial construction employers engage in the use of a “Labor Broker” to utilize members of other building trades on projects; this is usually done to avoid signing additional collective bargaining agreements and assuming the short and long term liabilities associated with these collective bargaining relationships.  Specifically, and as it relates to this case, there are many similarities to recent past projects in our region in terms of the GC/subcontractor relationships and case specifics.  This appellate decision could potentially have broad-reaching implications for those employers that utilize this method of employment with subcontracted employees, independent contractors and all employers that engage in the “Labor Broker” model of business.

On December 10, 2013, the United States Court of Appeals for the Sixth Circuit reversed the District Court’s decision in the case of the Equal Employment Opportunity Commission (EEOC)’s lawsuit against Skanska USA Building, Inc.  In its reversal, the court held that Skanska USA Building, Inc. was the de facto employer for the subcontracted employees. 

Skanksa USA Building, Inc. was the general contractor for a construction site in Memphis. A Skanska subcontractor, C-1, hired Maurice Knox and several other African-American men to operate a temporary elevator at the site. Under the terms of C-1’s subcontract with Skanska, C-1’s owner, Neely, would supervise the temporary elevator operators, but Skanska could remove an operator from the site if the employee was “incompetent, disorderly, or otherwise unsatisfactory.   During their employment with C-1 on Skanska’s project, these men were subjected to extensive harassment based on their race. The Equal Employment Opportunity Commission and Knox thereafter sued Skanska, alleging racial discrimination and retaliation in violation of Title VII, the plaintiffs argue that Skanksa acted as his joint employer. The district court disagreed and granted summary judgment to Skanska.

Entities are joint employers if they “share or co-determine those matters governing essential terms and conditions of employment.”  “To determine whether an entity is the plaintiff’s joint employer, they looked to the entity’s ability to hire, fire or discipline employees, affect their compensation and benefits, and direct and supervise their performance. Id. Here, Skanska supervised and controlled the operators’ day-to-day activities without any oversight from Neely. As a general matter, Skanska routinely exercised its ability to direct and supervise the operators’ performance. Skanska set the operators’ hours and daily assignments. Skanska assigned the operators’ supervisors. When the operators complained about the conditions on site, Skanska handled their complaints. When the operators had disagreements with their supervisors, Skanska arranged a meeting to discuss the situation. Moreover, Skanska did not consult with Neely about the operators’ complaints or their conflicts with Skanska’s supervisors. And when the operators called Neely to ask him to improve conditions at the site, Neely did nothing.”

C-1 had minimal oversight over the operators. Their daily responsibilities and assignments were “directed by Skanska.” Skanska set their hours, collected their time sheets, taught them how to use the hoist, and required them to attend safety training.  Moreover, contrary to the terms of its contract with Skanska, C-1 did not employ anyone to supervise the operators on-site. Instead, Skanska employees supervised them.

Neely came to the site only a few times. Skanska did not tell Neely “anything that [went] on with the hoist[,]” Skanska also carried workers’ compensation and liability insurance for C-1’s employees.

When Skanska removed an operator from the job site, C-1 generally fired the worker without

requiring Skanska to provide an explanation for the removal.  Removal from the site typically ended an operator’s employment with C-1, because C-1’s contracts with its laborers were job-specific.

The court found that “particular incidents likewise demonstrate Skanska’s control over the operators.”  “The reality is that C-1 was a nonentity on the construction site.”  “The record here is enough to support a determination Skanska jointly employed the operators.”

The district court’s judgment was reversed, and the case has been remanded for further proceedings consistent with the opinion.

This case has potentially broad implications for organizations that use temporary, contract workers, subcontracted workers, independent contractors and for those that operate under the “Labor Broker” model of business.  This practice is very common in the construction industry as well as some sectors of our region’s hospitality industry as well.  All employers should be aware of the potential liabilities associated with these relationships and take proactive steps to reduce their exposure to risk.  If the employer / employee relationship looks and feels like one, despite what your contract language may state, the organization could be held liable as a joint employer for discrimination and other EEOC, employment related cases.

The Appellate Decision from the U.S. Sixth Circuit Court of Appeals may be found here….

GMCS provides a comprehensive umbrella of protection and support to the region’s many contractors and facility owners.  This is accomplished through having an in-depth understanding of the region’s many collective bargaining agreements, current labor leadership and an established national network of industry professionals and stakeholders.  Additionally, GMCS relies on a comprehensive in-house library of regional & national collective bargaining agreements and a detailed knowledge base documenting 100’s of regional labor disputes, implemented resolutions and industry trends.  GMCS is continually working to protect its clients by providing accurate and timely information to resolve any project or contractual dispute.  One jurisdictional claim could cost your organization 100’s of thousands of dollars, one illegal work stoppage could cost your project days of lost productivity, forced placement of non-productive personnel could result in excessive payroll and benefits.  GMCS provides multiple tiers of contracted service products and hourly rates that will fit any budgetary and administrative requirement to help your organization stay focused on its mission and on budget.   With contracted services starting as low as $170.00 a month, GMCS has contracted labor & industry relations solutions that meet most any organization’s needs.

From Association Management & Executive Leadership services, Owner Representation, Government Affairs and Labor & Industry Relations, let GMCS provide your association or organization with a better solution.  Contact Wayne Gregory via e-mail at wegregory@gregorymcs.com or go to www.gregorymcs.com for more information on GMCS contracted services and support.  Trust, experience and relationships matter, GMCS’s success was built on that foundation. Trust the recognized Labor and Industry Relations’ professional in the Philadelphia region since 2005, Wayne Gregory of GMCS.