The NLRB's Decision Expanding Joint-Employer Doctrine May Affect Your Business by David T. Krueck

20-Sep-2015

On August 27, 2015, the National Labor Relations Board (“Board”) published its decision in the Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery case redefining and expanding the joint-employer standard.  The new standard adopted by the Board involves application of a multifactor test that will create uncertainty for both businesses and unions when determining whether two or more companies meet the new joint-employer status, which could have far reaching effects to collective bargaining and contracting for certain types of services.

Definition of Joint Employer

The National Labor Relations Act ("Act") does not expressly define who is an “employer,” whether joint or sole.  Section 2.2 of the Act simply provides “the term ‘employer’ includes any person acting as an agent of an employer, directly or indirectly.”  The joint-employer concept recognizes that while certain business entities are separate and distinct, they may share or jointly control certain matters relating to the essential terms and conditions of employment of individuals performing work for the two businesses.

If joint-employer status exists, both employers are subject to the Act, including the requirement that both employers have a duty to collectively bargain with a union representing a particular group of statutory employees. 

The Traditional Joint-Employer Standard 

For approximately the last thirty-five years, the Board has followed the rule that two or more entities may be joint employers of a single work force if both employers share and codetermine the essential terms and conditions of employment.  When evaluating the allocation and exercise of control in the workplace, the Board has traditionally considered the various ways in which the joint employers share control over the terms and conditions of employment. 

In reaching a determination of whether two entities are in fact joint employers, the following factors are typically considered: the management structure between the entities; the hiring process for the employees; discipline and termination authority; determination of wages and benefits; scheduling and hours; work processes; and training and safety programs adopted by the entities for the employees.  The key determining factor is whether both entities actually exercise control over the employees.  A long line of prior decisions required actual control by the joint-employers, not simply the ability to exercise indirect control over the employees.    

Facts in the BFI Case

The BFI case involved a petition by the Teamsters Local 350 Union (“Union”) seeking to represent sorters, housekeepers and screeners employed by a company named Leadpoint.  The Union claimed the Leadpoint employees should be deemed jointly employed by BFI, the owner of the facility where the Leadpoint employees were working. 

Leadpoint had a contract with BFI to perform sorting and housekeeping work at a recycling facility located in Milpitas, California.  The Leadpoint sorters and housekeepers worked alongside BFI loader operators, equipment operators, forklift operators, sort line equipment operators and spotters.  The Union argued that the Board should find Leadpoint and BFI are joint employers on the following grounds: (1) BFI owned the facility where the Leadpoint employees were working; (2) BFI maintained certain production and operational policies, including decisions by BFI as to when the lines would start and stop and if the lines would run outside of normal hours of operation; (3) BFI’s contract with Leadpoint mandated that Leadpoint perform background checks and drug testing on all employees working at the BFI facility; and (4) BFI had the right to reject or discontinue use of any personnel employed by Leadpoint.

BFI opposed the Union’s petition, claiming the rights granted to it under the terms of its contract with Leadpoint were for legitimate business purposes to establish operational, production and safety standards.  BFI contended its contract was not intended to exert direct control over Leadpoint’s employees, but instead, was limited to ensuring a safe work environment and providing a level of quality and service required by BFI’s business operations.

The Regional Director found in favor of BFI, based on the longstanding joint-employer standard adopted by the NLRB.  In a close 3-2 decision, the Board overruled the Regional Director’s decision, and held BFI is a joint-employer of the Leadpoint employees performing work at the BFI facility.  The Board concluded that while there was no evidence of the exercise of actual control over the essential terms of employment of the Leadpoint sorters and housekeepers, BFI had the ability to exercise indirect control over the employees.  Consequently, BFI was deemed a joint-employer with Leadpoint.         

The New Standard Adopted by the Board

The Board restated the traditional joint-employer standard in the BFI decision, and then went one step further by expanding the rule to include situations when the putative joint-employer has the ability to control and determine the essential terms and conditions of employment without limiting the rule to require the exercise of actual control over the employees.  The Board in BFI concluded the mere right to control essential terms of employment is probative of joint-employer status, whether the control is direct or indirect. 

The holding by the Board in BFI is a radical departure from the prior standard, and specifically overruled four prior decisions when the Board found there was no joint-employer status absent evidence of the exercise of actual control by the employer.  The BFI decision references almost every aspect of a business relationship that may be probative to determine joint-employer status, but provides no significant guidance as to what is actually determinative.  By failing to adopt a clear rule to apply the new standard, the BFI decision creates uncertainty for businesses and unions confronted with the issue of whether two entities may be joint employers.

The dissenting opinion in BFI predicts the new 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 heretofore been unlawful secondary strikes, boycotts and picketing."

Industries Potentially Impacted by the New Joint-Employer Standard

While the expansion of the joint-employer standard could affect business relationships throughout the economy, temporary employment services and the construction industry are particularly impacted by the new rule.

The most recent survey conducted by the Bureau of Labor Statistics indicated that contingent workers comprise as much as 4.1 percent of the workforce, or approximately 5.7 million workers.  The temporary help services industry is a subset of the contingent workforce, and is projected to be one of the fastest growing industries in the employment sector over the next decade.  This new change in the law could disrupt these relationships by having a chilling effect on a company's willingness to contract with temporary workers because certain policies may now be deemed "indirect control" over the terms of employment. 

The construction industry could also be affected by the new joint-employer standard adopted by the Board.  For example, the changes to the standard could have the unintended consequence of discouraging companies from incorporating contracting policies or supplier codes of conduct, which are typically intended to promote safety and compliance with the law, not to establish control over another contractor's employees.