On August 27, 2015, the National Labor Relations Board (NLRB or Board) issued a groundbreaking decision upending long-held precedent for when a joint-employer relationship could be found. The Board’s decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015) is yet another step in the NLRB’s trend of injecting itself into non-union private sector employment issues and its increasing efforts to charge non-unionized employers with violations of the National Labor Relations Act.
The Board’s Browning-Ferris decision articulated a new two-step test that will likely result in more entities being deemed joint employers. Previously, the exercise of control over working conditions had to be “direct and immediate,” not of a “limited and routine” nature. The Board’s new standard no longer requires a joint employer to exercise direct control over employees’ terms and conditions of employment, such as setting wages and hours, issuing work assignments, promulgating rules, and the authority to hire and fire employees. Instead, an employer may be deemed a joint employer if it has “indirect control” over the terms and conditions of employment or if it has “reserved authority” to do so, such as through an intermediary.
Under the new test, two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law; and (2) they share or codetermine the matters governing the essential terms and conditions of employment. If more than one employer has sufficient authority over the terms and conditions of employment, even if that authority is not exercised, the employer can be considered a joint employer.
In its 3-2 opinion last month, the Board found that Browning-Ferris was a joint employer with Leadpoint, a staffing agency that supplied workers at its California recycling plant. Browning-Ferris employed workers outside the facility to prepare items for sorting, and contracted with Leadpoint to provide workers inside the building to sort items for recycling. The Teamsters union that represented Browning-Ferris's unionized employees, who wanted to include the Leadpoint employees in their bargaining unit, arguing Browning-Ferris was a joint employer of these employees. Browning-Ferris disagreed. The regional NLRB director sided with Browning-Ferris, ruling that its involvement with the Leadpoint employees was only “routine in nature,” and therefore Browning-Ferris was not a joint employer. The national Board’s decision last month overruled that judgment.
The Browning-Ferris decision reveals just how broadly the Board will interpret facts to find a joint employer relationship. For example, the Board found that although Browning-Ferris did not participate in day-to-day hiring, it had the right to request the workers meet or exceed its own standard selection process and tests, and it had the ability to set the required qualifications. Browning-Ferris set the schedule, productivity headcount, and the number of Leadpoint workers assigned to each post, but Leadpoint determined which specific workers would work at each spot. The Board highlighted that while Leadpoint had the sole responsibility for counseling, disciplining, reviewing, and terminating the workers assigned to the Browning-Ferris facility, Browning-Ferris possessed the authority to reject or discontinue the use of any worker for any reason. Ultimately, the Board found that Browning-Ferris was a joint-employer as it exercised control, both directly and indirectly, over the Leadpoint employees. The Board explained that the inquiry is highly fact specific, and will depend on the particular circumstances in each case.
With one fell swoop, the NLRB overruled 30 years of precedent and redefined what it means to be an employer. According to the Board, this change was necessary because the former standard was “out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.” More than 2.8 million employees in the United States today are employed through temporary agencies. In some instances, these workers are unable to bargain effectively over working conditions because those conditions are imposed by more than one employer.
The decision illustrates the NLRB’s continued attempts to expand its reach in the private sector. This decision could increase liability, regulatory burdens, litigation, and other expenses in many business relationships. For instance, the decision will make it easier for workers employed by staffing agencies or contractors to hold a principal company liable for alleged unfair labor practices. It will also have far-reaching effects for companies that are parties to franchise agreements, as it will make it easier for unions to bargain for better pay and working conditions for employees working at locations owned by franchisees. Although not currently controlling on the courts, the NLRB’s expanded joint-employer doctrine could be utilized by courts in the future to impose liability on one company for unlawful activity committed by the employees of another.
Although the Browning-Ferris will likely be reviewed by the courts in the coming years, it would be prudent for businesses to review their contracts and business practices to prepare for the potential that they must defend against organizing drives or charges of unfair labor practices filed not only by their own employees, but also against subcontractors, franchisees, or other entities with which they contract.
Hilary Weddell is an attorney with McManis Faulkner whose practice focus is employment law. For more information, please visit mcmanislaw.com.