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August 31, 2015

Did Your Workforce Just Grow? It Did If You Use A Staffing Agency, Says The NLRB

The NLRB issued its much-anticipated decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), and expanded the test for determining joint-employer status. This 3-2 ruling means that entities who use subcontractors or other contingent workers are more likely to be considered an employer of those workers. Franchisors are also more likely to be considered a joint-employer of the franchisee's employees. These entities will face joint bargaining obligations and potential liability for unfair labor practices and breaches of collective bargaining agreements.

Background and Facts

The Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters, (the "Union") filed a representation petition seeking to represent Leadpoint Business Services employees assigned to work at a Browning-Ferris Industries ("BFI") recycling facility. The Regional Director denied the Union's representation petition, finding that BFI was not a joint-employer of the Leadpoint employees because it does not "share or codetermine [with Leadpoint] those matters governing the essential terms and conditions of employment" of the Leadpoint employees. The Union requested review of that determination.

Leadpoint and BFI were parties to a temporary labor services agreement which provided that Leadpoint is the sole employer of the personnel it supplies and nothing shall be construed as creating an employment relationship between BFI and the Leadpoint employees. BFI oversaw the operations where the Leadpoint employees worked, established expectations and goals for Leadpoint, established certain hiring restrictions, a maximum wage rate, the shifts and the number of employees required for each shift, determined the specific tasks to be performed each shift, provided substantive training and counseling, and recommended termination of certain Leadpoint employees.

The NLRB analyzed the evolution of the joint-employer test and concluded that its view had narrowed over the years. Yet, at the same time, the diversity of work-place arrangements expanded. The Board's joint-employer test long focused on whether the putative joint-employer "share[d] or codetermine[d] those matters governing the essential terms and conditions of employment." But, the NLRB added additional restrictions and required employers to actually exercise control that is direct, and immediate, and not limited and routine. The Board concluded that this narrowing had no basis in the National Labor Relation Act or the common law.

The Board Sets Forth A Revised Standard

Looking to the common law, the NLRB restated the joint-employer standard and "return[ed]" to the traditional test: Two or more entities are joint-employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment. The concept of control is still important but it is the right to control, not the actual exercise of control, that is determinative. In other words, if a putative employer reserves a contractual right to set a specific term or condition of employment, it retains the ultimate authority as to that term, even if it has, in practice, not exercised it. The NLRB "no longer require[s] that a joint employer not only possess the authority to control employees' terms and conditions of employment, but must also exercise that authority, and do so directly, immediately and not in a 'limited and routine' manner." Terms and conditions of employment include hiring, firing, discipline, supervision and direction. Examples include, dictating the number of workers to be supplied, controlling scheduling, seniority and overtime, assigning work and determining the manner and method of work performance.

The Potential Implications of the Decision

The vigorous two-member dissent called this ruling the "most sweeping of recent major decisions" which "rewrites the decades-old test for determining who the 'employer' is." The dissent argues that the decision expands the traditional common law test and accuses the majority of seriously overstepping its authority:

The Board is not Congress. It can only exercise the authority Congress has given it. In this instance, our colleagues have announced a new test of joint-employer status based on policy and economic interests that Congress has expressly prohibited the Board from considering.

The majority countered that it was simply returning to the old, common law standard and that the additional restrictions on the joint employer test were not based on any provision in the Act or the common law. The dissent disagreed: "Contrary to their characterization, the new joint-employer test fundamentally alters the law applicable to user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships under the Act."

The dissent found several practical problems with the majority's conclusion. For example, the bargaining table is not big enough to seat all of the entities that will be potential employers. (The majority noted that a joint employer will be required to bargain only with respect to such terms and conditions over which it possesses the authority to control)1. And, the new standard will erode the prohibition against unlawful secondary strikes, boycotts and picketing. The new test is also unpredictable. The majority abandoned "a longstanding test that provided certainty and predictability, [replacing] it with an ambiguous standard that will impose unprecedented bargaining obligations on multiple entities in a wide variety of business relationships, even if this is based solely on a never-exercised 'right' to exercise 'indirect' control over what a Board majority may later characterize as 'essential' employment terms." Finally, this test could extend the Act's coverage to small businesses because joint employers' commerce data is combined for jurisdictional purposes.

Whether the dissent's concerns will come to fruition remains to be seen. But, it is likely that this decision will embolden unions to increase their organizing efforts seeking joint employment status.

1The NLRB's Oakwood Care Center decision, 343 NLRB 659 (2004), requires consent from employers to have a multiemployer bargaining unit of solely employed and jointly employed workers. But, on July 7, 2015, the NLRB invited briefs in the Miller & Anderson Inc. matter asking whether the board should abandon the Oakwood Care Center decision.

If you have any questions about the content of this alert please contact the Barclay Damon attorney with whom you normally work or any attorney in our Labor & Employment Practice Area.


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