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The NLRB Redefines the Standard for Joint Employer Status

On August 27, 2015, the National Labor Relations Board (the “Board”) issued its opinion in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, and FRP-II, LLC d/b/a Leadpoint Business Services, and Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters, 362 NLRB No. 186 (August 27, 2015), which overturned longstanding precedent regarding the standard for determining if a joint employer relationship exists.  The controversy arose when the Union filed a representation petition seeking to represent a class of workers, including sorters, screen cleaners, and housekeepers, who were employed by Leadpoint but provided services at BFI’s facility.  The Regional Director determined that Leadpoint was the sole employer of the sorters, screen cleaners, and housekeepers.  The Union then requested review of the Regional Director’s decision arguing that, due to the structure of the relationship between BFI and Leadpoint, the Union could not engage in meaningful bargaining on behalf of the class of workers without participation from BFI.  The Board granted the Union’s request for review.  The primary issue addressed by the Board was whether the existing joint employer standard encourages the practice of collective bargaining in today’s industrial atmosphere.  The Board held that it does not and adopted a new standard as discussed below.

The long-observed standard to determine if a joint employer relationship exists was whether both companies contributed to decisions regarding the essential terms and conditions of employment and whether the putative employer actually exercised control over the essential terms and conditions in a direct and immediate manner.   A company would have to do more than provide limited and routine guidance or instruction in order to be considered a joint employer. The Board found that this narrow test did not encompass the intent of the National Labor Relations Act when applied to today’s workforce. 

In a 3-2 decision, the Board adopted a new standard for determining if a joint employer relationship exists.  The Board returned to the “traditional test” holding that a joint employer relationship exists if 1) both businesses are employers within the common law meaning; and 2) “if they share or codetermine” the essential terms and conditions of employment. 362 NLRB No. 186 at p. 15  The Board held that essential terms and conditions of employment include wages and hours as well as “dictating the number of workers to be supplied; controlling scheduling, seniority, and over-time; and assigning work and determining the manner and method of work performance.” 362 NLRB No. 162 at p. 15 (internal citations omitted).  Most notably, the Board focused on the aspect of control, overruling past precedent, and expanded the concept of control to include not only if the company exercised direct control over the terms and conditions of employment but also whether the company had the right to control such terms and conditions and whether the company indirectly exercised such control.

Because this NLRB decision occurred in a representation case, BFI will not be able to take an immediate appeal.  Instead, the election including the joint employees will proceed.  If the employees vote against the union, the decision cannot be appealed by BFI.  If the employees vote for the union, then BFI may refuse to bargain to force a technical violation of the Act that then can be appealed.  In the meantime, other cases raising the same issue in the context of an unfair labor practice charge may jump ahead of appellate review of the BFI case. 

While there is already some talk of congressional action to change this new ruling, it is unlikely such action will occur quickly or that it will have sufficient support to override a presidential veto.

Action Items and Take Away for Employers

The newly stated BFI joint employer standard will require a detailed factual inquiry on a case-by-case basis to determine if a joint employer arrangement exists.  The Board’s decision does not provide clear direction on how to avoid a determination that a joint employer relationship exists.  In fact, the lack of such guidance seems intended to make it very difficult for a company to enter into any kind of staffing relationship with a third party that will clearly avoid the joint employer issue.  However, companies should evaluate any contracting or outsourcing relationships to determine if they could be considered to be exercising indirect control over workers, or reserving the right to control those workers.  Further, companies should take steps to ensure that they are not requiring workers provided by a third-party to abide by the company’s rules, policies, or practices and that they are not setting parameters or expectations related to the “essential terms and conditions” specifically noted in the Board’s decision for those workers.

Companies should also be aware that the new standard will likely result in an increase in union activity, additional potential exposure for unfair labor charges from workers provided under an outsourcing or staffing arrangement, and a duty to collectively bargain with workers that are provided by a third-party company.

Finally, companies should be aware that the Board’s decision to broaden the joint employer standard could also influence other government agencies, including the Department of Labor and the Equal Employment Opportunity Commission, who may use this decision as support to broaden their joint employer tests.

This client-alert was drafted by Elizabeth Wente. She is a labor and employment attorney in Spencer Fane’s Springfield, MO office.