NLRB Greatly Expands “Joint Employer” Doctrine

September 10, 2015

As we previously reported on Aug. 27 and 28 (on our blog Labor Relations Today), the National Labor Relations Board (NLRB) recently issued its ruling in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), that significantly alters the NLRB’s existing joint employer standard. In a 3-2 decision, the NLRB overruled its prior joint-employer standard and approved a far more expansive view of joint employment. Although the full ramifications of the NLRB’s decision remain to be seen, Browning-Ferris substantially increases the likelihood that certain companies (e.g., users of temporary staffing agencies and franchisors) will be deemed joint employers for National Labor Relations Act (NLRA) purposes.

Browning-Ferris arose out of a fairly typical user-temporary staffing agency relationship. Browning Ferris Industries of California, Inc. (BFI), operated a recycling facility that received and sorted for resale various mixed materials. BFI employed approximately 60 employees, who worked mostly outside the facility, moving and preparing material to be sorted inside the facility. Additionally, BFI had a temporary labor services agreement with a staffing agency, Leadpoint Business Services (Leadpoint). Leadpoint provided BFI with approximately 240 workers, who worked inside the BFI facility, either sorting materials or providing cleaning services.

Teamsters Local 350 sought to represent the 240 Leadpoint employees and to force BFI to be at the bargaining table as the “joint employer” of these employees. The regional director, applying the NLRB’s traditional joint employer standard, concluded that BFI was not a joint employer with Leadpoint because it did not exercise direct control over the terms and conditions of Leadpoint’s employees. After the union filed a request for review of the regional director’s decision, the NLRB invited briefing as to whether it should reconsider its standard for evaluating joint employment relationships.

Through a three-person majority, the NLRB overruled the regional director. The majority adopted a new, more expansive joint employer standard and concluded that, under this standard, BFI was a joint employer of Leadpoint’s employees. In doing so, the NLRB laid out in detail the relationship between BFI and Leadpoint and both entities’ practices related to hiring, discipline and termination, wages and benefits, scheduling and hours, works assignments, and training and safety. Notably, much of what the NLRB majority described did not suggest a traditional joint employer relationship:

  • BFI and Leadpoint employed separate supervisors and lead workers at the facility.
  • BFI and Leadpoint maintained separate human resources departments.
  • Leadpoint recruited, interviewed, tested, selected and hired the employees it assigned to BFI’s facility, and BFI’s managers testified that they had no input into Leadpoint’s hiring decisions.
  • Leadpoint maintained the sole responsibility to counsel, discipline, review, evaluate and terminate workers assigned to BFI, and the record showed only two instances of BFI prompting the discipline of a Leadpoint employee (one for passing a “pint of whiskey” at the job site and another for destroying a drop box).
  • Leadpoint solely determined the pay rate of its employees, subject only to a “cap” equal to the pay rate of BFI employees who performed similar tasks.
  • Leadpoint was responsible for providing specific employees to cover specific shifts at the facility.
  • Leadpoint employees submitted their timesheets directly to Leadpoint.
  • Leadpoint issued its employees their paychecks, maintained their payroll records, and was the exclusive provider of their employment benefits.
  • BFI managers set productivity standards for material sorting but only occasionally addressed Leadpoint employees directly as to their job tasks and quality issues.
  • Leadpoint employees received initial orientation and training from Leadpoint and only periodic training and counseling from BFI.

Nevertheless, the NLRB concluded that BFI was the joint employer of Leadpoint’s employees. Addressing what it called the “evolution” of the joint employment standard, the NLRB concluded that the standard had been “effectively narrowed” without reason over the last several decades. Specifically, the NLRB reasoned that prior decisions focused too much on the actual exercise of direct and immediate control, as opposed to the mere “right” to control. The NLRB then announced its new standard:

The Board may find that 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. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may “share” control over terms and conditions of employment or “codetermine” them, as the Board and the courts have done in the past.

The NLRB reviewed the relationship between BFI and Leadpoint under the new standard and found that, although BFI rarely exercised authority over Leadpoint’s employees, it “shared control over or codetermined” the terms and conditions of their employment. In particular, the NLRB noted the following:

  • Although BFI did not participate in Leadpoint’s day-to-day hiring process, it retained the right to require that Leadpoint meet or exceed its own standard employee selection procedures and tests.
  • Although Leadpoint was solely responsible for disciplining its employees, BFI prompted discipline on two occasions.
  • Although Leadpoint was responsible for staffing shifts at the facility, BFI set the facility’s operating hours and productivity standards.
  • Although Leadpoint established the pay rates for its employees, BFI placed a “cap” on such pay rates.
  • Although most communications to Leadpoint employees came from Leadpoint supervisors, Leadpoint supervisors acted only as middlemen for BFI.
  • Although Leadpoint issued its employees paychecks and maintained their payroll records, BFI had to sign off on Leadpoint employees’ weekly timesheets and could refuse payment to Leadpoint for time claimed by a Leadpoint employee.

The NLRB majority did not specify which facts it found controlling or determinative in its analysis. Rather, it admittedly embraced a vague totality-of-the-circumstances approach, which the dissent described as “[we] will know it when [we] want[] to see it.” Indeed, the majority acknowledged that its decision eliminates “certainty and predictability regarding the identity of the ‘employer’” in favor of an “evolutionary process.” Unless and until the NLRB clarifies its new joint employer standard, employers have only the specific facts in Browning-Ferris as their guidepost in analyzing whether they could face exposure as joint employers under the NLRA.

As noted in the blistering dissent and discussed in detail here, Browning-Ferris will have far-reaching consequences. The NLRB’s decision 1) threatens traditional user-staffing agency, franchisor-franchisee, and parent-subsidiary relationships; 2) limits companies’ ability to replace unionized contracts; 3) exposes more companies to secondary economic coercion (e.g., picketing); and 4) potentially leads to a variety of unstable bargaining relationships. Accordingly, companies (especially those that use staffing agencies and franchisors) should evaluate their contractual relationships to determine whether they may be joint employers under Browning-Ferris and continue to monitor developments from the NLRB closely.

Please reach out to your McGuireWoods contact or members of the firm’s traditional labor team with any questions you may have concerning the Browning-Ferris decision, the NLRA, or the NLRB in general.