A recent National Labor Relations Board (NLRB) ruling may end upeither turning some small business owners into corporate managers,or causing them to lose large numbers of their commercialcustomers.

In recent years, many employers, reluctant to expand theirpayrolls, have turned to using more contractors, subcontractors,and staffing agencies to meet their business needs for services andworkers.

In late August, the NLRB, in a 3-2 decision, ruled thatcompanies can now be held responsible for labor violationscommitted by the contractors and subcontractors they hire to dowork for them, as well as employment/staffing agencies with whomthey contract for employees that they use in their businesses. Ofcourse, while many of these contractors, subcontractors, andstaffing agencies are medium-sized or large businesses, many aresmall businesses.

In the past, companies were only responsible for employees whomthey directly hired and who were, therefore, under their directcontrol. They were not responsible for the employees of thecontractors, subcontractors or staffing agencies with whom theycontracted. For example, companies did not have the power to sethours, wages, benefits, or other employment arrangements for theemployees of the contractors, subcontractors, and staffing agencieswith which they did business.

Now, under the new NLRB ruling, two legally separate companiescan be considered "joint employers" of one employee doing one job,even if one of those companies (the "customer" company) does nothave control over hours, wages, etc. For example, a company thathires a small business janitorial service to clean its facilitieswill now be considered a co-employer of that janitorial service'semployees.

So what is the concern? In the past, many employers have beenable to avoid collective bargaining requirements by using employeeshired by other firms, such as contractors, subcontractors, andstaffing agencies. Now, with the NLRB ruling, companies usingworkers hired by other businesses, such as contractors,subcontractors, and staffing agencies, will now be responsible forlabor violations claimed by the employees of these businesses, andcould be required to bargain with unions that represent thoseemployees. The ruling also allows employees to protest unfairworking conditions.

"This decision has broad implications, as it appears to upenddecades of settled law defining who the employer is under theNational Labor Relations Act," said Randy Johnson, a senior vicepresident with the U.S. Chamber of Commerce.

As a result of the ruling, contractors, subcontractors, andstaffing agencies are now concerned that one or both of two thingswill happen.

One concern is that their customers (the companies for whom theyprovide services and/or employees), will now be more likely to tryto exert more control over how these contractors, subcontractors,and staffing agencies run their businesses and treat theiremployees, including issues such as wages, hours, benefits, etc.The result is that small business owners, once masters of their owndestinies and businesses, will be turned into de facto "managers,"forced to follow the dictates of their commercial customers, ratherthan being able to run their own businesses the way they seefit.

The other concern is that these commercial customers will simplycut ties with the contractors, subcontractors, and staffingagencies with which they have been doing business, because theydon't want to have to be responsible for labor complaints or unionissues coming from employees of those firms. That is, thesecustomers will be more likely to bring these once-outsourced jobsin-house, where they can establish and maintain more control overworking conditions, etc. As such, a small business contractor,subcontractor, or staffing agency that relies on commercialcustomers for its livelihood could actually end up going out ofbusiness, the result of losing large numbers of its customers."Because of the array of obligations and liabilities that attachwith a finding of joint employer status, [the NLRB decision] wouldlead many employers to significantly alter or limit the contractualagreements into which they enter," said Chamber of Commerce'sJohnson.

In sum: "It will make it much harder for self-employedsubcontractors to get jobs," said Beth Milito, senior legal counselfor the National Federation of Independent Business (NFIB)."Subcontractors will come under pressure from their clients tochange their employment policies, or they'll be cut out of thepicture altogether."