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September 1, 2015

Who Do You Employ? It May Be More Than You Think: National Labor Relations Board Expands the Definition of “Joint Employer”

In a case having potentially far reaching application to businesses nationwide, including staffing companies, the National Labor Relations Board (the “Board”) issued its decision in Browning-Ferris Industries of California, Inc., 326 NLRB No. 186 (2015),  expanding the definition of employer.  Using a “joint employer” theory, the NLRB’s ruling creates new opportunities for unions and employees to claim shared liability between multiple businesses, to seek organizing of multiple employers at once, and to interfere with companies’ business relationships.  The broad potential impact of this ruling on day-to-day business operations warrants attention from employers in all industries.

Previously, a party asserting joint-employer status had to demonstrate that the putative joint-employer both possessed and exercised authority to control employees’ terms and conditions of employment.  Under the new standard articulated by the Board in Browning-Ferris, a party can now establish joint-employer status by demonstrating that the putative joint employer reserved authority to control, or exercised indirect control over, the terms and conditions of employment.  The effect will be to increase the number of employers who will now be obligated to collectively bargain with their workforces.
Browning-Ferris Industries of California, Inc. (“BFI”) owned and operated a recycling facility in Milpitas, California.  BFI directly employed approximately 60 employees, including loader operators, equipment operators, forklift operators, and spotters, most of whom worked outside BFI’s facility.  BFI contracted with Leadpoint Business Services (“Leadpoint”) to provide another 240 workers whose jobs included sorting recyclables within BFI’s facility.

BFI and Leadpoint were parties to a temporary labor services agreement which provided that Leadpoint was the sole employer of the personnel it supplied.  BFI and Leadpoint employed separate supervisors and lead workers at BFI’s facility.  Leadpoint was responsible for recruiting, interviewing, testing, selecting, and hiring personnel to perform work for BFI, subject to certain requirements contained within the labor agreement between BFI and Leadpoint.  Leadpoint was solely responsible for disciplining, reviewing, evaluating, and terminating personnel assigned to BFI, subject to BFI’s right to reject or discontinue the use of any personnel.  Although Leadpoint was responsible for determining the rates paid to personnel supplied to BFI, BFI was responsible for paying the labor (plus a markup for Leadpoint).  BFI set the hours of facility operation, and Leadpoint was responsible for supplying the workers required to cover the scheduled shifts.
The International Brotherhood of Teamsters (the “Union”) petitioned to represent the workers supplied by Leadpoint.  The NLRB’s Regional Director, applying the prior standard for joint employer status, found that BFI was not a joint employer of the Leadpoint workers because BFI did not “share or codetermine those matters governing the essential terms and conditions of employment.”  The Union filed a request for review of the Regional Director’s decision, contending the Board should reconsider its standard for evaluating joint-employer relationships.  The Board granted the Union’s request for review.
The Board Articulates a New Standard
The Board began its analysis by providing a history of the joint-employer standard.  The Board explained that prior to 1982, the determination of whether joint-employer status existed included examination of factors such as the putative joint-employer’s right to control the work of the workers; the putative joint-employer’s “indirect” exercise of control over the workers’ terms and conditions of employment; and whether the putative joint-employer held day-to-day responsibility for the overall operations of the worksite, such as whether it determined the scope and nature of the workers’ work assignments.

The Board then explained that following the Third Circuit’s 1982 decision in NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117 (3rd Cir. 1982), the Board adopted a more restrictive approach that effectively narrowed the joint-employer standard.  For example, the Board foreclosed consideration of the putative joint-employer’s contractual right to control workers and instead began focusing exclusively on the actual exercise of such control.  To that end, the Board “refused to assign any significance to contractual language expressly giving a putative employer the power to dictate workers’ terms and conditions of employment.”  The Board also disregarded a putative joint-employer’s exercise of indirect control over workers even where, for example, the employer dictated the number of workers to be employed, communicated specific work assignments and directives to the workers’ manager, and exercised oversight as to whether job tasks were performed properly.
Citing to an increase in the number of workers now employed through temporary services companies and a “responsibility to adapt the Act to the changing patterns of industrial life,” the Board held that the existing joint-employer standard did not best serve the policies of the National Labor Relations Act.  Thus, the Board held, a return to the Board’s broader, pre-1982 test for determining joint-employer status was required: “The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”
The Board held that it would utilize an inclusive approach in defining “essential terms and conditions of employment.”  Thus, not only will control over traditional terms of employment such as hiring, firing, discipline, and supervision constitute control over the “essential terms and conditions of employment,” so too will control over seemingly less significant terms of employment such as scheduling, dictating the number of workers to be supplied, authorization of overtime, assigning of work, and determining the manner and method of work performance.  The Board’s intent is to minimize the degree of control required to establish joint-employment.
Further, the Board will no longer require that a joint-employer both possess the authority to control the terms and conditions of employment and exercise that authority “directly, immediately, and not in a ‘limited and routine’ manner.”  Rather, the Board will examine the putative joint-employer’s right to control, whether or not actually exercised and whether direct or indirect.  The existence, extent, and object of the putative joint-employer’s control will be material to the determination of its status as a joint-employer.  In other words, the Board will critically examine all aspects of the employment relationship and will give weight to previously insignificant factors.
Anticipated Effect on Employers    
It goes without saying the Board’s decision is significant.  In a staffing-company context, user-employers which may have previously maintained a degree of independence from supplier-employers sufficient to withstand a finding of joint-employment may now find themselves in a joint-employer relationship.  Unions may be encouraged to attempt organizing multiple employers at once, particularly employers utilizing staffing companies, employers who are parties to a contractor/subcontractor relationship, and employers who are parties to business relationships with other entities where both have some degree of control over employees’ working conditions.  

Further, the NLRB may be encouraged to pursue shared liabilities against both user-employers and supplier-employers for unfair labor practices and joint bargaining obligations.  Indeed, the Board’s two dissenting members caution that the change in the joint-employer test will “subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity.”
Employers concerned with being parties to a joint-employment relationship should critically evaluate their employment practices and business relationships. Staffing companies, in particular, should take caution to protect against the risk they may be held liable for the employment practices of the companies to which they supply employees, while user-companies should beware they may acquire previously non-existent collective bargaining obligations.
Apart from shared bargaining obligations and shared liabilities for unfair labor practices, the ruling stands to expand unions’ abilities to create headaches for employers which could threaten business relationships.  Picketing or pressure on third parties deemed to have control over another employer may prosper with the new analysis.  Employers entering into business relationships may wish as a matter of due diligence to spend more time on contract language and investigating the day-to-day policies and practices of a new business partner in order to gauge potential risks and benefits.  Management training will no doubt warrant consideration to avoid inadvertent pitfalls.
The nuances of this new ruling will play out as the current NLRB members rule in other cases.  Court review should be expected given the importance of the ruling.  Whether the analysis survives may depend not only on federal appellate court review, but also the next presidential election, as it is the President who appoints the NLRB’s five Board members.

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