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National Labor Relations Board (“NLRB”) Issues Historic Decision Which Overturns Definition of “Joint Employer”

In late August, the NLRB issued its decision in <em>Browning-Ferris Indus. of California, et. al. v. Sanitary Truck Drivers</em> (362 NLRB No. 186). In a 3-2 decision, the Board determined that Browning-Ferris (a recycling agency) was the “joint employer” of workers who were placed at Browning-Ferris through a staffing firm (Leadpoint Business Services).

Background:  In 2013, the Sanitary Truck Drivers and Helpers Union (“Union”) sought to represent approximately 240 of Leadpoint’s employees, who were performing various functions inside Browning-Ferris’ facility. The Union was already representing about 60 of the current employees of Browning Ferris who work outside of the facility.

Leadpoint hired its own employees, fixed and paid their wages, handled discipline and termination of these employees, and was responsible for the all matters concerning the essential terms of their employment (including training, scheduling, etc).

Leadpoint and Browning-Ferris entered into a temporary labor services agreement in 2009, in which Leadpoint agreed to provide labor to Browning-Ferris in exchange for compensation. The contract could be terminated by either party with 30 days notice, and further provided that Leadpoint was the sole employer of its personnel, and that nothing in the contract would be construed to create an employment relationship between Leadpoint’s employees and Browning-Ferris.

The Union argued Browning-Ferris and Leadpoint were “joint employers” because Browning-Ferris either directly or indirectly controlled the essential terms and conditions of employment for the Leadpoint employees. Browning-Ferris asserted that it could not be held to be a “joint employer” because it had nothing to do with the terms and conditions of employment for the Leadpoint employees (i.e., did not hire/fire/discipline, set wages, train, schedule, etc). The Regional Director for the Board issued a decision finding Leadpoint was the sole employer of the employees being sought to be represented by the union.

The Union requested review to the Board of the decision by the Regional Director arguing the Regional Director ignored particular evidence and reached an incorrect conclusion, and further asserted the Board should reconsider its standard for evaluating joint-employer relationships.

The Board granted review indicating its issues for review were whether it should adhere to its current standard for assessing the joint-employer status under the National Labor Relations Act, or whether that standard should be “revised to better effectuate the purposes of the Act, in the current economic landscape.” As part of its review, the Board invited interested parties to also file briefs on whether the Board should change its current joint employer standard. One of the “interested” parties submitting a brief was the NLRB’s own General Counsel who asserted the Board must redefine its joint employer standard because “it undermines the fundamental policy of the Act to encourage stable and meaningful collective bargaining.”

Analysis: Under the Board’s existing standard for joint employer (which is now a former standard), a joint employer relationship was found where “two separate entities share or codetermine those matters governing the essential terms and conditions of employment.” Specifically, an employer had to “meaningful[ly] affect[] matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” (See TLI, Inc. (1984) 271 NLRB 798, 798; Laerco Transportation (1984) 269 NLRB 324, 325.)

The Board in Browning-Ferris overruled the above standard stating the “diversity of workplace arrangements in today’s economy has significantly expanded” and staffing and subcontracting arrangements had steadily increased since 1984. The Board further stated since it had never “clearly and comprehensively explained its joint-employer doctrine,” nor “the shift in approach reflected in the current standard, it was persuaded the “current joint-employer standard is not mandated by the Act and that it does not best serve the Act’s policies.”  Consequently, the Board created a broader joint-employer standard, and stated a joint employer relationship may be found where the statutory employers “share or codetermine those matters governing the essential terms and conditions of employment.” The Board explained that the initial inquiry is two-fol

  1. Whether a common-law employment relationship exists; and
  2. If so, whether the putative joint employer “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.”

The Board also stated a company’s direct control over workers is no longer required to demonstrate a joint employer relationship. A company will be found to be a joint employer if its exercises “indirect control” over working conditions or if it has “reserved authority” to do so, meaning a company can be found to be a joint employer if could or had the right to control the working conditions (i.e., contractual provisions set forth particular terms that allow the company to exercise control over particular working conditions).

Applying its new standard to the present case, the Board determined Browning-Ferris exercised direct and indirect control of the employees’ working conditions to warrant a finding that Browning-Ferris was a joint employer of the Leadpoint staffing employees. In coming to this decision, the Board relied upon facts such as the following: Browning Ferris could reject any worker referred by Leadpoint; Browning Ferris set safety standards on its worksite that the Leadpoint employees had to follow; Browning Ferris had unilateral control over specific productivity standards; under the parties’ cost-plus contract, Browning Ferris was required to reimburse Leadpoint for labor costs plus a specified percentage markup; and Browning Ferris had approval over employee pay increases.

The Board made it clear the determination of whether or not a joint employer relationship exists will be made on a case by case basis.

What does this decision mean?  
The NLRB’s decision will likely have an impact across the board on those companies who either are using labor supplied by staffing agencies including sub-contractors, and those companies who are parties to franchisor agreements. These companies will now be potentially exposed to collective bargaining agreements, and may also be subject to unfair labor practices, grievances, strikes, boycotts, etc. Given the analysis set forth in Browning-Ferris, companies may need to reevaluate their current relationships/contracts and determine if they have either direct or indirect control over contracted employees. Revisions may need to be made to contracts to scale back on any perceived control over employee relationships.

ABOUT THE AUTHOR  Ms. Silva is a graduate of University of the Pacific. She is the head of the firm’s Employment Practices Group. She is a former prosecutor and has considerable trial experience. Contact her at rsilva@tysonmendes.com.

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