Summary
In what is widely viewed as yet another victory for organized labor at the National Labor Relations Board ("Board"), last week the Board issued a decision lowering the bar for determining when two or more employers may be deemed to be a "joint employer" of employees for whom they share or codetermine terms and conditions of employment. Under the new standard, the Board is more likely to find "joint employer" status in a variety of circumstances, particularly in cases involving the use of temporary labor provided by a staffing agency. The Board’s ruling is highly significant, because a business which is deemed to be a "joint employer" under the NLRA may be exposed to unwanted bargaining obligations and legal liability for unfair labor practices.
Case Background
In Browning Ferris Industries of California, Inc., 362 NLRB No. 186, the Board was asked to determine whether BFI could be considered the "employer" of certain employees supplied by Leadpoint Business Services, to perform tasks at BFI’s recycling sorting facility in Newby Island, Calif. A Teamsters local union had filed a petition with the NLRB Regional Office seeking to represent the Leadpoint employees working at BFI’s Newby Island facility. In its petition, the Union identified both Leadpoint and BFI as "employers" of the workers at issue. Applying NLRB precedent dating back to the 1980s, the NLRB Regional Director found that BFI did not exercise sufficient control over the workers’ terms and conditions of employment to be deemed their "employer" under the NLRA.
The Union sought review of the Regional Director’s determination with the NLRB. On review, the Board announced that its "test" for evaluating joint-employer status had become outmoded and ill-suited to facilitate the core purposes of the Act, in view of what it described as "the recent dramatic growth in contingent employment relationships." Revealingly, the Board stated that "encouraging the practice and procedure of collective bargaining" was the policy objective that its new test was designed to serve.
The Board’s New Test
The Board announced that going forward, it may find that two (or more) employers are joint employers of the same employees if they "share or codetermine those matters governing the essential terms and conditions of employment." In making this determination, the initial inquiry is whether there is a common law employment relationship with the employees in question. If this common-law relationship exists, the inquiry turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.
The Board continued: "Central to both of these inquiries is the existence, extent and object of the putative joint employer’s control." In a departure from precedent dating back thirty (30) years, the Board stated that going forward, it would not require the putative joint employer to actually exercise authority or control over employees’ terms and conditions of employment; instead, the mere possession of such authority would be sufficient. In this regard, the Board noted that a provision in a staffing agreement providing the "user employer" with the right to control workers’ terms and conditions of employment, even if not exercised, could establish the requisite "control."
With regard to the "essential terms and conditions of employment," the Board emphasized that it would consider all terms and conditions of employment that are mandatory subjects of bargaining under the NLRA, not just "major" terms such as hiring, firing, discipline, supervision and direction.
Moreover, the Board emphasized that such control may be direct or indirect, i.e. exercised through an intermediary, such as a staffing agency or other labor supplier. In BFI, the record showed that Leadpoint, not BFI, had direct control over employees’ hiring, wages and benefits, their hours of work, day to day supervision, assignment and direction, discipline and termination. Leadpoint employed an On-Site Manager, three shift supervisors and seven line heads at BFI’s facility to oversee the Leadpoint workers onsite, as well as a Human Resources representative stationed in a trailer outside the facility.
Nevertheless, applying its new test, the Board found that BFI exercised sufficient indirect control over the workers to be deemed their "joint employer," along with Leadpoint. The Board cited the following facts to support this conclusion:
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BFI retained the right to terminate its staffing agreement with Leadpoint at will
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BFI had the right to reject any worker referred by Leadpoint, or discontinue the use of any Leadpoint worker, for any reason
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Workers provided by Leadpoint were required to undergo and pass drug tests, and demonstrate an ability to perform their assigned tasks effectively
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Leadpoint employees were required to comply with BFI’s safety policy
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BFI would not accept referrals who previously had been employed at BFI and were deemed ineligible for rehire
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BFI controlled the hours of operation of the Newby Island facility, which impacted Leadpoint workers’ schedules and hours of work
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BFI controlled the speed of the production line at which Leadpoint employees worked and set productivity standards for their work
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BFI prevented Leadpoint from paying its workers a higher wage than BFI paid its own employees doing similar work
With the possible exception of the "wage cap," most or all of the foregoing features of BFI’s arrangement with Leadpoint are fairly common in staffing arrangements where a "user" employer procures labor from a third party to perform services at the user employer’s place of business. The Board’s reliance on these factors to find that BFI is a "joint employer" with Leadpoint suggests that all employers who use contingent workforces supplied by a third party may also be at risk. Moreover, the dissent notes that the Board’s decision in BFI logically could be applied to a host of other business relationships, including franchisor-franchisee, parent-subsidiary and contractor-subcontractor, among others. The dissent also warned that a finding of "joint employer" status would expose the joint employers to direct pressure from unions, including strikes and picketing, presently proscribed by the NLRA’s secondary boycott provisions.
What Now?
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