NLRB Broadens the Circumstances for Finding Joint Employer Status

Paula Lopez, September 2, 2015.

In a 3-2 decision issued last week, the National Labor Relations Board delivered a highly anticipated decision in NLRB v. Browning-Ferris Industries of California, Inc., broadening the joint employer standard that has been in place for the last 30 years.  The decision drew extreme reactions from dissenting board members and polarized pro-employer and pro-union organizations.

Browning-Ferris Industries of California, Inc. (BFI), owns and operates a recycling facility.  BFI directly employs 60 employees, most of whom work outside the facility.  The BFI employees are unionized and a separate bargaining unit.  BFI contracts with Leadpoint Business Services to provide workers who will sort the recycling materials (sorters), clean screens on the sorting equipment (screen cleaners) and to clean the facility (housekeepers).  The arrangement between BFI and Leadpoint is governed by a temporary labor services agreement, which provides that Leadpoint is the sole employer of the workers assigned to BFI and that nothing in the agreement is intended to create an employment relationship between BFI and Leadpoint-supplied workers.  Leadpoint provided BFI with approximately 240 sorters, screen cleaners, and housekeepers. In July 2013, the Sanitary Truck Drivers and Helpers Local 350, International Brotherhood, which already represented other workers at the facility, filed a petition with the NLRB seeking to represent 120 Leadpoint employees. The petition sought to have BFI declared a joint employer with Leadpoint and obligated to recognize and bargain with the union.  The NLRB Regional Director issued a Decision and Direction of Election that found that Leadpoint solely employed the workers and Leadpoint and BFI are not joint employers.  The Decision then directed the NLRB to conduct a secret ballot election, the results of which have not been made publicly known.  The case came before the full board because the Union filed a request for review of the Regional Director’s decision.  In light of the NLRB’s decision finding that BFI and Leadpoint are joint employers, if the secret ballot election results are in favor of unionization, BFI would be required to negotiate with the union alongside Leadpoint.

To appeal the NLRB’s joint employer decision, BFI would have to refuse to bargain with the union.  If the NLRB determines that the refusal constitutes an unfair labor practice, BFI could appeal the unfair labor practice finding to a circuit court and within the appeal obtain review of the validity of the NLRB’s joint employer decision.  Until then, the majority’s newly articulated joint employer standard controls and it will be left to the NLRB’s district offices to determine how the standard will be applied.  If BFI does not end up before the circuit court on appeal, the majority’s newly established joint employer standard could be reviewed at a later time by another employer in a similar circumstance to BFI.

Under the joint employer standard in place for the last 30 years, a company could be considered a “joint employer” if it had “direct control” over the employees’ working conditions.  Under this test, the essential working conditions included things like hiring, firing, discipline, supervision, wages and hours, through direct and immediate control.  It would not be enough to show that a company had indirect control or retained the right to exercise control.   The dissent argued that under the existing standard, an employer utilizing a contingent workforce had clear parameters of what actions it could or could not take in order to not be considered a joint employer.

Following the NLRB’s recent decision, two separate and independent companies will be considered “joint employers” “if they are both employers within the meaning of common law, and they share or co-determine matters governing the essential terms and conditions of employment.”  For two entities to be considered “common law” employers, the NLRB decision relies on the Restatement (Second) of Agency (1958) which states that a “servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other’s control or right to control.”  Based on the common law definition of joint employer, reserved control could give rise to joint employer status.  Relying on this definition, the majority has broadened the factors it will consider in determining the “existence, extent, and object” of the putative joint employer’s control by no longer requiring direct control and making reserved control and indirect control determinative factors that could give rise to joint employer status.

Such a standard could transform companies that utilize staffing agencies to supply their workforce and franchisors into employers, requiring them not only to engage in the collective bargaining process, as is the case in Browning-Ferris of California, but also exposing them to liability on various fronts ranging from worker-safety violations under OSHA, to violations of worker’s rights under the NLRA.

The majority decision understates the chaos that the broader joint employer standard it has adopted will have on union organizing disputes.  Instead, it describes the new standard as merely a return to the joint employer standard set out by the Third Circuit in the case NLRB v. Browning-Ferris Industries of Pennsylvania, Inc.  According to the majority, the joint employer standard adopted by the Third Circuit back in 1982 embraced the common law definition of joint employer.  The majority stated that the standard has been unjustifiably narrowed during the last three decades by a string of NLRB decisions that imposed additional requirements on the party asserting joint employer status.  The additional requirements, according to the majority, are unsupported by the standard set out in the Third Circuit decision.  The majority decision takes the position that the new standard is better suited to further the purpose of the National Labor Relations Act to protect employees’ union-organizing rights, by taking into account the increasing number of contingent employment relationships that dominate the current workforce.   While the full impact of the majority’s decision is yet to be seen, employers who rely on staffing agencies for their work force should revisit their procedures, policies and day to day operations to evaluate what type of control, if any, they are exercising over such workers.