08.31.2015
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Updates
The decision by the National Labor Relations Board (NLRB) last week in BFI Newby Island Recyclery expands the circumstances in which two otherwise separate and independent employers may be found to be joint employers of a group of workers. The new standard is explicitly designed to increase opportunities for collective bargaining by contracted and contingent workers.
Stating that it was returning to the traditional “common law” standard adopted in 1982, the three-member NLRB majority held that:
... [T]wo 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. In evaluating the allocation and exercise of control in the workplace, [the NLRB] will consider the various ways in which joint employers may “share” control over terms and conditions of employment or ‘codetermine’ them ...
If a common-law employment relationship exists, the inquiry under this new standard turns to “whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.”
The NLRB went on to say that it is not necessary that an employer actually exercises control so long as it has the right to control. Also, the fact that control is exercised only indirectly does not make a difference: “the actual exercise of control [is probative of joint-employer status], whether direct or indirect.”
In rejecting the current joint-employer standard, the NLRB expressly overruled 30 years of precedent. It justified this change because the current standard is “significantly narrower than the common law would permit” and, under it, employees covered by the Act may be deprived of the statutory right to bargain effectively over wages, hours, and working conditions, solely because they work pursuant to an arrangement involving two or more employing firms, rather than one. Such an outcome seems clearly at odds with the policies of the Act.
The new standard will require a nuanced, fact-intensive inquiry. The NLRB will consider the specific factual circumstances of each case to determine whether a putative joint employer “affects the means or manner of employees’ work and terms of employment, either directly or through an intermediary."
Background of the Decision
The decision concerned a recycling plant owned by Browning-Ferris Industries of California (BFI). BFI contracted with an independent company, Leadpoint Business Services (Leadpoint), to supply workers to operate the recycling lines in the plant. BFI’s own employees worked outside the plant, moving and preparing materials to be loaded onto the recycling lines where the materials were sorted by Leadpoint’s employees. A Teamster union local filed a petition to represent Leadpoint’s employees at the plant and named BFI as a joint employer. The NLRB regional director who processed the petition decided that BFI was not a joint employer, and the union filed a request with the NLRB to review that decision. In the meantime, the regional director conducted the election and impounded the ballots pending the NLRB’s decision.
The NLRB granted review and concluded that BFI was a joint employer with Leadpoint over the workers, even though Leadpoint hired its own employees, established their wages and benefits, had its own HR function on site and supplied its own supervisors over its recycling line employees.
The NLRB pointed to a number of facts to support its conclusion, which include the following:
1. The contract between BFI and Leadpoint was terminable at will by BFI and contained the following provisions:
- Leadpoint’s employee selection process had to meet or exceed BFI’s procedures and tests.
- Leadpoint’s applicants had to undergo and pass drug tests.
- Leadpoint could not hire former BFI employees whom BFI considered not eligible for rehire.
- BFI had the right to reject any worker referred by Leadpoint for “any or no reason.”
- BFI had the unlimited right to “discontinue the use” of any Leadpoint employee.
Leadpoint could not pay wages higher than BFI paid for its employees performing comparable work.
2. BFI had, on two occasions, requested the immediate dismissal of Leadpoint employees observed engaging in misconduct.
Collectively, these facts demonstrated that BFI had the right to dictate who worked in the plant. In addition, the NLRB relied on the following facts:
- BFI retained the sole authority to dictate the speed of the work (by controlling the speed of the recycling lines—a particular source of dissatisfaction by Leadpoint’s employees—and by setting specific productivity standards for the sorting work done by the Leadpoint employees).
- BFI counselled Leadpoint employees and urged them to work smarter and faster.
- BFI specified where the Leadpoint employees were to be positioned and exercised near-constant oversight of their work performance, albeit through Leadpoint’s supervisors: “the fact that many of [BFI’s] directives are communicated through Leadpoint supervisors hardly disguises the fact that BFI alone is making these decisions.”
- At times BFI issued direct instructions to Leadpoint employees—instructions that took precedence over work assigned by Leadpoint.
- BFI specified the number of workers it wanted, dictated shift start and end times, controlled the timing of breaks (through control of the recycling lines), and determined when overtime work was necessary.
- Leadpoint employees were required to obtain the signature of a BFI representative on their time records—otherwise BFI could refuse to pay Leadpoint for that time.
- The contract was a “cost-plus” contract providing that BFI would reimburse Leadpoint for its labor costs plus a specified percentage markup; however, Leadpoint was apparently required to obtain BFI approval before increasing wages.
Based on all these facts, the NLRB majority concluded that BFI had a sufficient role in sharing and codetermining the terms and conditions of employment to be a joint employer.
Therefore the NLRB directed the regional director to open the ballots and, if the union received a majority of the votes, to certify the union as the exclusive collective bargaining representative of the employees, naming BFI and Leadpoint as joint employers. That means, if the union wins, both BFI and Leadpoint will be required to bargain in good faith with the union concerning the wages, hours and other employment terms and conditions of the recycling line employees.
The precise scope of BFI’s and Leadpoint’s respective duties to bargain, however, are not clear. The NLRB majority stated that a joint employer would have a bargaining obligation only concerning those terms and conditions of employment over which it had a right of control. Therefore it is easy to imagine situations where one employer will have the sole obligation to bargain over a particular matter (where it alone determines it) but a joint obligation to bargain over others (where they are jointly determined by the two employers). That may very well be the case with BFI and Leadpoint. It will be interesting to watch how all that will sort out and how the employers and the union will manage those nuances.
Because this is a representation case, the NLRB’s decision cannot be directly appealed. However, assuming that the NLRB applies the same principles in unfair labor practice cases, those decisions can be appealed to a U.S. Court of Appeals and ultimately, perhaps, to the United States Supreme Court.
Impact of Decision on Employers
Under this decision, more employers will be considered joint employers than would have previously and will therefore have labor law obligations that they did not have before. Moreover, the joint employer issue is not limited to situations such as BFI’s.
Although the risk of a joint employer determination may be greatest when an owner contracts with another employer to supply labor to work on the owner’s property, a joint employer relationship can arise in any situation where two employers share control over some aspect of the terms and conditions of employment of a group of workers, or they have a say in how the workers do their jobs. For example, in some jurisdictions construction general contractors are required to be sure that the subcontractors on their projects are complying with occupational safety and health rules and often impose that obligation in the subcontracts. Also, it is common for a facility owner to require everyone in the facility (employees, vendors, contractors and visitors alike) to follow established safety rules and reserve the right to exclude anyone they want. Franchisors impose requirements on their franchisees to protect the franchise brand and assure uniformity of customer experience. Whether those actions will be enough to support a joint employer determination is unknown.
To minimize the risk of a joint employer determination, employers who contract with other employers to have work performed should review their contracts to be sure that they have not reserved the right to control aspects of the employment of the contractor’s employees or the right to direct how the employees are to accomplish the work. And, during the course of the work, the employer should not in fact exercise any control over the contractors’ terms of employment or the work of their employees directly or indirectly.
© 2015 Perkins Coie LLP
