3 Models To Balance The Labor Market Amid The Pandemic

By Ian Schaefer, Nathaniel Glasser and Steven Swirsky
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Law360 (April 22, 2020, 11:54 AM EDT) --
Ian Schaefer
Ian Schaefer
Nathaniel Glasser
Nathaniel Glasser
Steven Swirsky
Steven Swirsky
The COVID-19 pandemic has profoundly transformed the national employment landscape in a matter of weeks and in innumerable ways. After decades of sustained job growth,[1] the last month has seen the U.S. shed millions of jobs. And with social distancing, stay-at-home and other orders being extended, further workforce reductions and disruptions can be expected.

The pandemic has also created a paradoxical and unique labor market imbalance and has the potential to shift the balance of power between employers and employees.

While travel, hospitality and traditional retail businesses have been devastated through furloughs (the temporary layoff of workers that is expected to last no longer than six months and with an expectation to return) and permanent layoffs, e-commerce and other essential industries have found themselves with significant needs for labor on an emergent basis, often calling for employees to work under increasingly challenging working conditions.

This unique imbalance fosters an equally unique opportunity for all parties — the public sector, private sector and organized labor — to be creative for the sake of their employees, their businesses and the U.S. economy more broadly.

This article considers three models for addressing the imbalanced supply of labor from the scores of businesses who have furloughed or permanently laid off workers, with the spiking demand for expedited labor in those essential service businesses, and the legal issues attendant with each model.

1. Direct Hire to Meet Just-in-Time Labor Needs by Leveraging Technology Platforms

The traditional direct-hire model is well known and relatively uncontroversial from a legal perspective. And today, while leveraging online job postings and job boards through platforms such as LinkedIn and Indeed to match supply with demand is neither revolutionary nor novel, the crises has given rise to an augmentation of the available technologies to meet just-in-time labor demand — directly matching furloughed workers with businesses seeking to rapidly expand their workforces with the goal of expedited redeployment.

The sophistication for such platforms to date has run the gamut. But perhaps the most noteworthy are those organized, strategic initiatives and collaborations among employers on both ends of the labor market spectrum to expedite the hiring process and leverage the prior screening procedures, training and talent of like organizations. For example, such laudable initiatives have resulted in parings between companies in the retail and hospitality industries, on the one hand, and grocers, pharmacies, e-commerce and other essential services, on the other.

And these efforts are not limited to the private sector. In Tennessee, the state's Department of Labor and Workforce Development has partnered with the Tennessee Grocers & Convenience Store Association, the Tennessee Retail Association, and Hospitality TN to create the Tennessee Talent Exchange.[2] Using the talent exchange, Tennessee job seekers can fill out a few simple questions and be connected to nearby hiring companies in the grocery, retail and logistics industries.

Key Legal Considerations

A benefit of this direct-hire model is that the legal issues raised are generally well known. In the direct-hire model, the hiring entity becomes the employer of the hired workers, an arrangement that comes with all the attendant labor and employment obligations of an employee-employer relationship.

Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the National Labor Relations Act and state and local equivalents still apply, even when rushing to meet COVID-19-related demand. These extraordinary circumstances do not excuse discriminatory hiring practices.

Moreover, employers hiring workers through these platforms should take care not to make classification errors, especially if the employer hires workers only to service the temporary surge in demand caused by COVID-19. Finally, employers using these platforms may choose to expedite the hiring process by relying on background checks from the previous employer, but there are inherent risks in failing to update a background check.

Meanwhile, workers will want to understand how the particular part-time or temporary employment offered may affect any health benefits they may be continuing to receive from their previous employer, as well as their ability to receive benefits under the recently-enacted Coronavirus Aid, Relief and Economic Security, or CARES, Act and local unemployment insurance laws. 

However, there are some potential drawbacks. In addition to any costs associated with the development and maintenance of the platform, employers may permanently lose workers who opt to remain in their new jobs even after the crisis abates. 

Employers who have furloughed employees likely intend a short-term cessation of employment, like a leave of absence, with the expectation that the furloughed workers can easily and rapidly be recalled to work once businesses are permitted to reopen or their circumstances improve. But if furloughed employees are hired directly by another company during the pandemic, they may be less likely to return to their original employer.

2. Rethinking of Third-Party Staffing Agencies

During this period of flux, it is challenging (if not impossible) for companies to realistically predict the short- and long-term demands for labor on the furloughing and hiring side. 

Given this reality, employers may look to offload this type of decision entirely by engaging third parties and staffing agencies. This is a particularly compelling time to revisit third-party models given the uncertainty of the nature and duration of these on-demand hires.

Perhaps now more than ever, many companies are looking to fill the void to connect unmet demand and to utilize talent, without taking on the full employee liability, making staffing agencies (who are also utilizing technology platforms) well positioned to fill a crucial role in rebalancing the market.

There are several iterations of this model, ranging from staffing agencies utilizing videoconferencing to meet and match workers with new opportunities, to staffing technology services companies that have developed job aggregators and job boards for individuals looking for COVID-19 jobs.

Additionally, various staffing companies have developed online platforms to support employer needs to quickly identify potential candidates and worker availability, as certain industries ramp up their workforce needs. Staffing companies can and have historically been an extremely useful way for employers to increase their workforce, especially in retail and distribution center environments.

Companies are able to bring as many workers as needed for the temporary demand of the day, subject to legal and operational considerations — scaling up or down with greater flexibility as market conditions dictate.

Key Legal Considerations

Under the third-party method, staffing agencies employ the workers and cover the placement, new-hire process, payroll and benefits during temporary periods of employment. 

Companies that rely on staffing agencies, however, must be mindful of the potential risks associated with this model. Questions of co-employment persist with these arrangements, and thus companies using a staffing agency must be sure the appropriate contractual provisions are in place, including indemnification.

When utilizing contract staff, employers should monitor their length of service. These arrangements are meant to be temporary, and the longer contract staff remain with the same employer, the more it appears that an employment relationship has formed.

3. Employee Sharing: Secondments and Assignments

In contrast to a job-sharing model — programs developed largely through state regulation to minimize the reduction on headcount by enabling two or more employees to share work and collect partial unemployment benefits — contemplates an agreement between two employers to temporarily transfer or loan employees from one employer to another during the pandemic.

Akin to traditional secondment or assignment arrangements, an employee or group of employees of one employer are assigned to a second employer on a temporary basis while remaining on the payroll and benefits of the assigning/seconding employer. This model eliminates the need to hire the employees directly, expedites access to health care benefits, and could eliminate the inefficiencies that come with layoffs or furloughs, particularly during a period of uncertainty.

It also brings with it the benefit of building goodwill with the workforce, building goodwill and expanding the relationship between the partnering companies, and the greater likelihood of retaining critical talent when economic conditions normalize. For this model to be effective, the loaned employees should have training, experience and transferable skills needed of the borrowing employer.

Examples of this model have surfaced in other countries affected by the pandemic such as China, where a large grocery store chain, Alibaba, borrowed excess employees from restaurants, karaoke bars and ride-hailing firms after they were laid off.[3] In the U.S., examples of this model have been around for quite some time and are time tested, particularly in professional services environments of law, consulting and accounting where resources are deployed to clients on a short- to medium-term basis.

Key Legal Considerations

While this model presents an attractive solution, it may require significant strategic thinking and investment at the outset. Determining who will pay the employees, whether adjustments to employee pay will be made (particularly if there is a significant difference between wages at the two employers), which employer bears the liability during the loan period, and how best to protect confidential or proprietary trade secrets are just a few of the considerations employers should entertain. 

Parties to such an arrangement should also determine which entity is liable in the case of an injury, how workers' compensation and unemployment insurance payments are allocated, and the triggering events for returning employees to the loaning employer. 

Another critical consideration in these circumstances, including at essential businesses that are continuing to operate in the challenging circumstances of COVID-19 is the potential for increased union and other concerted action on the part of both their regular workforces and added staff with whom they are flexing up to meet demand.

In many instances this has been seen to involve workers banding together to protest what they perceive to be more dangerous working conditions, either to seek to improve those conditions or to demand increased pay and benefits to reward them for working in such conditions. Not only are unions advancing these types of causes in unionized workplaces, but unions are also in some instances using these circumstances as an opportunity to organize.

Because these arrangements often involve staffing workers on the front lines of the health crisis — in positions in health care, grocery and food delivery, and essential consumer goods — many of these workers are more likely to come in direct contact with COVID-19.

Therefore, employers creating these arrangements should consider the effects of an employee who becomes ill. For workers that exhibit symptoms of or test positive for COVID-19, the parties must determine which entity will be responsible for providing leave, including under the Families First Coronavirus Response Act if applicable, and potentially a reasonable accommodation under the ADA. 

Conclusion

These unprecedented times call for dynamic, creative solutions to confront the second battle of the pandemic — the impact on the economy and on the U.S. labor market more specifically.

While there is no one-size-fits-all solution to this challenge, these non-mutually exclusive blueprints offer models that employers can and should prudently consider implementing (and in many cases, already have) — to do right by both their employees, their businesses and the country during this period of suspended animation.



Ian Carleton Schaefer is a member at Epstein Becker Green.

Nathaniel Glasser is a member at the firm.

Steven M. Swirsky is a member at the firm and co-chair of its labor management relations practice group.

The authors would like to thank Epstein Becker law clerks Eric I. Emanuelson Jr., Alison E. Gabay and Eduardo J. Quiroga for their contributions to this article.


The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://www.nytimes.com/2020/04/03/business/economy/coronavirus-jobs-report.html?action=click&module=Spotlight&pgtype=Homepage.

[2] http://www.tngrocer.org/jobs.html.

[3] https://www.abacusnews.com/culture/forget-bike-sharing-china-tries-employee-sharing-during-pandemic/article/3075923.

For a reprint of this article, please contact reprints@law360.com.

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