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Divided NLRB loosens joint employer standard; reverts to prior standard

By Lisa Milam-Perez, J.D., and Ronald Miller, J.D.

Revisiting its joint employer standard, a divided five-member panel of the NLRB reaffirmed the standard articulated by the Third Circuit’s 1981 decision in NLRB v. Browning-Ferris Industries of Pennsylvania, Inc. Noting that the Board had since imposed additional requirements for finding joint-employer status, which had no clear basis in the Third Circuit’s earlier decision, in the common law, or in the text or policies of the Act, the Board explained that the newly adopted standard serves “to better effectuate the purposes of the Act in the current economic landscape” (Browning Ferris Industries of California, Inc. dba BFI Newby Island Recyclery, August 27, 2015).

New standard announced. Under the new standard, the Board may find that two or more statutory employers are joint employers of the same statutory employees if they “share or codetermine those matters governing the essential terms and conditions of employment.” In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.

Authority to control employees. Going forward, the Board will examine how control is manifested in a particular employment relationship. The Board rejected those limiting requirements that have been imposed after Browning-Ferris. It will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. Nor will the Board require that, to be relevant to the joint-employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly—such as through an intermediary—may establish joint-employer status.

Joint employer found. Applying the restated joint-employer standard retroactively here, the Board found that Browning-Ferris, the respondent company, was a joint employer along with its labor supplier, relying on the fact that the company had indirect and direct control over the leased workers’ essential terms and conditions of employment, and also that it had reserved the authority to control those terms and conditions. Thus, it reversed the regional director and held the union established that the two entities were joint employers of the petitioned-for bargaining unit.

Employment relationship. BFI owns and operates a recycling facility at which it solely employs approximately 60 employees. Most of these BFI employees work outside the facility, where they move materials and prepare them to be sorted inside the facility. These BFI employees are part of an existing separate bargaining unit that is represented by the union. Workers provided to BFI by Leadpoint, a labor supplier, work inside the facility at four conveyor belts removing either recyclable materials or prohibited materials from the stream. The union sought to represent these workers.

The relationship between BFI and Leadpoint is governed by a temporary labor services agreement. It can be terminated by either party at will with 30 days’ notice. The agreement states that Leadpoint is the sole employer of the personnel it supplies. BFI and Leadpoint employ separate supervisors and lead workers at the facility. BFI and Leadpoint maintain separate human resource departments. The agreement provides that Leadpoint will recruit, interview, test, select, and hire personnel to perform work for BFI. It also requires Leadpoint to ensure that its personnel have the appropriate qualifications consistent with all applicable laws. Workers must also pass drug screening.

Although the agreement provides that Leadpoint has sole responsibility to counsel, discipline, review, evaluate, and terminate personnel who are assigned to BFI, it also grants BFI the authority to “reject any Personnel, and . . . discontinue the use of any personnel for any or no reason.” The record included evidence of two incidents where discipline of Leadpoint employees was prompted by BFI action. Additionally, the agreement included a rate schedule that required BFI to compensate Leadpoint for each worker’s wage plus a specified percentage mark-up. BFI established the facility’s schedule of working hours, operating three shifts on weekdays. Also, BFI determined which material streams would run each day and provided Leadpoint with a target headcount of workers needed.

When Leadpoint employees begin working at the facility, they receive an orientation and job training from Leadpoint supervisors. Periodically, they also receive substantive training and counseling from BFI managers. As to safety, the agreement mandated that Leadpoint require its employees to comply with BFI’s safety policies, procedures, and training requirements. According to the terms of the agreement, Leadpoint personnel must not be assigned to BFI for more than six months.

Regional director findings. Applying TLI, Inc., the regional director found that BFI was not a joint-employer of the Leadpoint employees because it did not “share or codetermine [with Leadpoint] those matters governing the essential terms and conditions of employment.” The regional director issued a Decision and Direction of Election finding that Leadpoint was the sole employer of the petitioned-for employees. In granting the union’s request for review, the Board invited the parties and interested amici to file briefs addressing, among other things, the question “Should the Board adhere to its existing joint employer standard or adopt a new standard?”

Evolution of standard. Analyzing the joint-employer issue and evaluating the various arguments raised, the Board reviewed the development of its law in this area. It pointed out that three aspects of the development seem clear. First, the Board’s approach has been consistent with the common-law concept of control within the framework of the NLRA. Second, before the current joint-employer standard was adopted, the Board (with judicial approval) generally took a broader approach to the concept of control. Third, the Board has never offered a clear and comprehensive explanation for its joint-employer standard, either when it adopted the current restrictive test or in the decades before.

Here, the Board found that joint employer status was consistent with common-law principles and served the purposes of the NLRA. BFI possessed significant control over who Leadpoint could hire to work at its facility. In addition, it exercised control over the processes that shaped the day-to-day work of the petitioned-for employees. The Board also found that BFI played a significant role in determining employees’ wages. As a result, BFI’s role in sharing and codetermining the terms and conditions of employment established that it was a joint employer with Leadpoint.

Subcontracting arrangements. At this juncture, the Board observed that as its view of what constitutes joint employment under the Act has narrowed, the diversity of workplace arrangements in today’s economy has significantly expanded. The procurement of employees through staffing and subcontracting arrangements, or contingent employment, has increased steadily. This development was reason enough to revisit the Board’s current joint-employer standard. Today’s decision was intended to address this shortcoming. Thus, the Board was persuaded that the current joint employer standard was not mandated by the NLRA and did not best serve the Act’s policies.

Dissent. Members Miscimarra and Johnson dissented. They argued that this change will subject countless entities to unprecedented new “joint-bargaining” obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have in the past been unlawful secondary strikes, boycotts, and picketing.

However, their greater concern was that the impact of the majority’s reformulation on a much broader body of law, affecting multiple doctrines central to the NLRA that have been developed and refined through decades of work by bipartisan Boards, the courts, and Congress. The dissent argued that the majority had given insufficient consideration to the “potentially massive” economic implications of its new joint employer standard.

Expert view. Mark G. Kisicki, shareholder in the Ogletree Deakins Phoenix office, spoke to Employment Law Daily about the NLRB opinion, noting that perhaps the most salient point was that the Board has overturned decades of precedent commonly applied to establish a joint employment relationship, not just under the NLRA, but for all purposes—that one company must be directly or immediately involved in controlling the terms of another’s workers. That precedent has been that “you are not a joint employer simply because you contract out to another employer for services you need rendered, even if you are having those services performed on your property,” he said.

Now the NRLB is focused on the indirect or potential right to control—which happens “any time a business uses or contracts out to a third party some services that it needs,” stressed Kisicki. He offered the example of janitorial services, and pointed out that when a company puts limits on the services it has contracted for, the Board now would consider this as “exerting indirect control,” as would requiring background checks or requiring confidentiality agreements.

Finally, Kisicki said it was important to understand the context of this case, which did not involve an employer that brought in temporary employees whom it supervised; “this was a true subcontracting relationship,” he emphasized, noting that the labor supplier here did its own hiring and provided its own onsite HR and supervisory staff.