Legal Updates

NLRB Hands Unions Another Victory With Joint Employer Decision

In its latest of a long line of pro-union rulings under the Obama Administration, the National Labor Relations Board (“NLRB” or the “Board”) has dramatically broadened the circumstances under which an employer may be found to be a “joint employer” of workers employed by another business for purposes of federal labor law.

In Browning-Ferris Industries (“BFI”), the Board held that a California waste-management company was a joint employer of workers at its plant who were directly employed by an outside staffing agency. The Board based its decision on a determination that BFI had a contractual right to control certain essential terms and conditions of employment for those workers. In so ruling, the NLRB reversed decades of case precedents holding that an employer must exercise actual control over workers’ terms and conditions of employment in order to be considered a joint employer.

As a result of the BFI decision, employers face a heightened risk of becoming subject to collective bargaining obligations toward workers employed by staffing agencies or other third parties.

Background

The BFI decision arose from a union election involving workers at a BFI recycling plant in California. The workers were employed by an outside staffing agency, Leadpoint Business Services (“Leadpoint”).

BFI and Leadpoint were parties to a written contract under which Leadpoint agreed to provide workers for the BFI facility. The contract provided that Leadpoint would be solely responsible for hiring and firing those employees and for determining their pay, benefits, and other terms and conditions of employment. BFI compensated Leadpoint for the workers’ labor costs and also paid a mark-up as a management fee.

In June 2014, a union election was held to determine whether Leadpoint’s workers at the BFI facility would be represented by Local 350 of the International Brotherhood of Teamsters. The ballots were impounded pending a determination by the Board as to whether, if the union prevailed in the election, both BFI and Leadpoint would be obligated to bargain with the union over the workers’ terms and conditions of employment.

Regional Director’s Decision

The NLRB Regional Director ruled in favor of BFI, based on precedents holding that separate entities qualify as joint employers only where they actually codetermine essential terms and conditions of employment, such as hiring, wages, benefits, work hours, work assignments, and discipline.

The union appealed the Regional Director’s decision to the full Board, arguing that employers that obtain workers through outside agencies can nonetheless significantly affect those workers’ terms and conditions of employment – for instance, by capping the amounts they are willing to pay for workers’ labor costs, which potentially may limit the wages paid to the workers. Thus, the union contended, employers that exercise even such indirect control over workers’ terms and conditions of employment should be obligated to bargain with the workers.

NLRB’s Decision

In a 3-2 decision, the Board ruled in the union’s favor and articulated a new standard for determining joint employer status. Under this new standard, if an employer has a right to control essential terms and conditions of employment of workers employed by another business (such as a staffing company), the employer may be considered a joint employer of those employees. This is the case even if the employer does not actually exercise control over such workers, and regardless of whether the right of control is direct or indirect.

Further, the Board expanded the list of factors that qualify as “essential terms and conditions of employment” for purposes of joint employment status. In addition to matters such as hiring, wages, benefits, and discipline, actions such as “dictating the number of workers to be supplied; controlling scheduling, seniority and overtime; and assigning and determining the manner and method of work performance” may now be considered essential terms and conditions of employment and thereby support a finding of joint employer status.

Implications Of Decision

The NLRB’s BFI decision holds potentially momentous implications for employers. In particular, employers that, like BFI, secure workers through staffing agencies face an increased risk of being obligated to bargain collectively with those workers.

For instance, contracts between employers and staffing agencies commonly give employers the right to determine the number of workers to be supplied, to set minimum job qualifications for workers, and to reject workers whom they deem unsatisfactory. While, under previous NLRB holdings, such factors would have been insufficient to support a finding of a joint employer relationship, the opposite appears to be the case under the Board’s new standard.

Assuming so, if workers obtained through a staffing agency voted to unionize and then asked to meet with the employer operating the facility in order to discuss safety conditions, the employer might well be obligated to bargain with the workers concerning that subject. It is conceivable that an employer could even be required to bargain with workers concerning the financial terms of the employer’s arrangement with their staffing agency, since those terms could potentially affect the compensation paid to the workers for their services.

Potentially, the BFI decision could be applied to other contexts as well. For example, it is possible that future Board cases could extend the holding to franchisor-franchisee relationships. In that event, franchisors could be deemed joint employers of their franchisees’ workers, and thereby be obligated to bargain collectively with them.

Finally, as the Board’s two Republican members argued in dissent in the BFI case, some observers believe that the Board’s new joint employer standard could be applied to further restrict the circumstances under which workers may be classified as independent contractors for purposes of the NLRA.

Recommendations For Employers

In the wake of the Board’s BFI decision, employers that secure workers from staffing agencies or other third parties should consult experienced labor counsel to determine what steps they might take to limit the risk of a potential finding of a joint employer relationship as to those workers.

Additionally, employers should closely monitor further developments in this area of the law, including future Board decisions applying the BFI holding in other contexts.