With a recent decision, the National Labor Relations Board (NLRB) announced broad changes to its “joint employer” standard by creating a new test that is virtually guaranteed to result in more findings of a “joint employer” relationship under the National Labor Relations Act (the Act). Under this new test, the NLRB considers a company to be a “joint-employer” if it (1) exercises “indirect control” over working conditions, or (2) if it has “reserved authority” to do so. This marks a significant departure from the NLRB’s decades-old “joint-employer” standard that required the actual exercise of control—not just the ability to do so. Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the NLRB’s decision also has the potential for broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OFCCP.
On August 27, 2015, the NLRB issued a 3-2 ruling, involving Browning-Ferris Industries of California, Inc. (BFI), an owner/operator of a California-based recycling facility. In its decision, the NLRB ruled that BFI should be considered a “joint employer” with a Leadpoint Business Services, a temporary staffing company that provided short-term labor to BFI’s recycling facility. At the time, BFI employed approximately 60 employees—most of whom worked outside the recycling facility, moving and preparing materials to be sorted inside the facility. BFI contracted with Leadpoint to provide over 200+ in-facility workers under a temporary labor services agreement. In June 2013, the Teamsters Local 350 (the Union) filed a claim with the NLRB on behalf these in-facility employees, claiming that BFI and Leadpoint were actually their “joint-employers.”
Under the former joint-employer standard (utilized by the NLRB since 1984), the NLRB examined “whether alleged joint employers share the ability to control or co-determine essential terms and conditions of employment.” See TLI, Inc., 271 NLRB 798 (1984); Laerco Transp., 269 NLRB 324 (1984). The NLRB provided specific examples of what it considered to be “essential terms and conditions of employment,” including: hiring, firing, discipline, and supervision. TLI, Inc., 271 NLRB 798. In later decisions, NLRB emphasized the type of control exercised by alleged joint employers—requiring that the control be “direct and immediate.” See, e.g., Airborne Freight Co., 338 NLRB 597 (2002).
The NLRB’s Browning-Ferris decision overturns this 30 years of precedent. Under the new test, the NLRB first asks if there is a common-law employment relationship between the employees and the alleged employer in question. If this common-law employment relationship exists, the NLRB then asks if the alleged joint employer possesses “sufficient control” over the employees’ “essential terms and conditions of employment.” Importantly, the NLRB stated that from now on, a company possesses “sufficient control” if it has the ability to exercise control over these terms and conditions of employment. While the actual exercise of “direct and immediate” control is probative, it is no longer essential.
This decision by the NLRB vastly expands the types and number of entities that can be held responsible for unfair labor practice violations and who may be held to have collective bargaining obligations regarding employees of a totally separate, independent employer. While the NLRB claims it is clarifying its joint-employer standard, in actuality, the NLRB is completely recasting the “joint employer test.” In the past, the determination was based on a close analysis of the actual relationships between the alleged joint employers. Going forward, the NLRB will consider what the relationship between the two entitiesmight be expanded to encompass. Then, based upon that speculation, the NLRB’s decision shoehorns this “possible relationship” into a concrete joint-employer finding.
The NLRB’s Browning-Ferris decision follows on the heels of the July 2014 decision from the NLRB General Counsel stating that McDonald’s is a “joint-employer” of workers at franchised restaurants, along with the individual franchisees. The NLRB’s expanded concept of a “joint employer” also parallels recent efforts by the U.S. Department of Labor, the U.S. Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs—all seeking to hold large companies responsible for legal compliance as to individuals from whose services they benefit—regardless of whether a direct employment relationship exists.
The NLRB’s new theory of joint employment has the potential to have far-reaching and, if so, likely troubling impacts on employers throughout the United States. In addition to facing joint liability for labor law violations, entities that are deemed to be joint employers under this new standard may face collective bargaining obligations and find themselves enmeshed in labor disputes between direct employers and labor organizations. Any companies that utilize contingent workers employed by another entity or staffing company, as well as parties to franchise agreements, should consider reviewing their employment practices, contractual arrangements and course of dealing in light of this significant change in the law.
Unfortunately, there is no single or simple solution to the issue. A company’s “joint employment” status is a factual inquiry that will vary from employer to employer. Each relationship will need to be considered in light of (as the NLRB puts it) the “industrial realities” to develop the most effective responses.
This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.
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