Locke Lord QuickStudy: NLRB Expands Joint Employment
September 2, 2015
In today’s economy, businesses of all types rely upon agencies to engage temporary employees, subcontractors and independent contractors. Until last week, these businesses and their agencies were not considered joint employers for purposes of collective bargaining. However, the NLRB has now expanded the joint employer doctrine to include businesses that directly or indirectly possess the right to control the terms and conditions of workers’ employment.
On August 27, 2015, in Browning-Ferris Industries of California, Inc., Case 32-RC-109684, decision available here, the NLRB, in a 3-2 majority decision, unwound 33 years of rulings and returned to a 1980’s test to determine who is considered a joint employer for purposes of collective bargaining. The Board announced that companies with the right to control the terms and conditions of employment may now be joint employers regardless of whether an “employee” is on their payroll. The implications of this ruling are severe: not only may temporary employees, subcontractors and independent contractors organize to form a union, as joint employers, companies that may control the terms and conditions of their employment now will be required to bargain with the union.
BFI and Leadpoint Business Services
BFI owns and operates a recycling plant that processes 1,200 tons of mixed materials daily. BFI contracts with Leadpoint Business Services through a temporary labor services agreement that states that Leadpoint is the sole employer of the workers it supplies to work inside the BFI plant. The Teamsters Union, Local 350, filed a petition with the NLRB to organize Leadpoint’s employees, asserting that BFI was a joint employer with Leadpoint.
While Leadpoint and BFI’s agreement states that it should not be construed as creating an employment relationship between BFI and the Leadpoint’s employees, the NLRB found that BFI nevertheless exerts and maintains the right to exert significant control over its Leadpoint employees.
Accordingly, The NLRB found that if the Leadpoint employees vote to recognize the Teamsters, BFI will be required to collectively bargain over the terms and conditions of their employment. In that event, BFI will likely appeal the Board’s decision to the appropriate federal appellate court. Ironically, if the union vote fails, BFI will not have standing to appeal (since it “won” the election). The Board’s decision would then stand until another employer found to be a joint employer takes up the fight after losing an election.
A New, Old Standard
Under the new (old) standard announced by the Board, two or more entities are joint employers of a single workforce if they both have a common law employment relationship with the employees and if they possess sufficient control over the employees’ essential terms and conditions of employment to permit meaningful collective bargaining. This new standard goes back to the Third Circuit’s 1982 articulation of the joint employer standard in NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117 (3rd Circ. 1982), and it disregards 33 years of subsequent NLRB decisions which limited the scope of the joint employer doctrine. Under those NLRB decisions, putative joint employers had to actually exercise authority or control over employees, not merely possess that authority.
The Immediate Future
While the NLRB’s decision fails to state what steps companies could take if they wish to avoid joint employer status, companies should conduct an immediate review of their workforce arrangements to determine the extent to which they possess the right to exert direct or indirect control over workers who may be on another employer’s payroll. When companies have the right to dictate even routine or limited terms and conditions of employment, they are now at risk of being considered joint employers for collective bargaining purposes.
The NLRB will likely provide further guidance on its new joint employer standard when it issues its decision in the pending case concerning McDonald’s franchises. In the McDonald’s case, franchisee employees are seeking to collectively bargain with McDonald’s parent corporation as well as their franchisee. Prior to the August 27 BFI ruling, McDonald’s would likely not have been found to be a joint employer, because it did not exert the necessary control over the terms and conditions of the employees’ employment. Now, however, the Board may find that McDonald’s is a joint employer with its franchisees because it reserves the right to exert indirect control over the terms and conditions of employment of the franchisees’ employees through its various franchise agreements. Companies who operate through franchise arrangements should carefully monitor the McDonald’s case.
To avoid joint employer status, companies should immediately review their arrangements with temporary workforce sources and distance themselves from the temporary or contractor employees’ terms and conditions of employment as much as practicable. Businesses need to assess the risk of unionization if they work closely with their contractors, franchisees, outsourced production partners, vendors and, of course, temporary labor suppliers.