National Labor Relations Board Drastically Revises Standards for Determining Joint-Employer Status
The National Labor Relations Board in Browning–Ferris Industries of California Inc. has drastically revised the standards for determining if an employer–user of the employees of a temporary agency, is a joint employer of the temporary employees. This decision represents a dramatic change for employers who are franchisors, employers who subcontract part of their operations, and employers who use staffing agencies, to name a few. Prior to this ruling, companies had to actually exercise "direct and immediate control" over another company's workers in order for a joint–employer situation to exist. Now it appears that the NLRB wants to apply an "economic realities" test, in which the main factor in determining whether an employer–employee relationship exists is whether the company has a potential to exercise control over a worker's wages and working conditions. This ruling has brought uncertainty to the outcome of future cases by dismissing a simpler to prove test and adopting legal principles that cannot be accurately applied by employers. Employers must now evaluate even the most routine business decisions, like whether to fire a contractor or how to structure operations, in terms of how the decision might affect union organizing efforts.
BFI is a waste disposal company. At its sorting operation, it contracted with Leadpoint, to provide sorters and on–site supervision. In the agreement between BFI and Leadpoint, BFI reserved the following rights:
- No employee assigned to BFI sorting would be paid more than a BFI employee performing the same work. Within that cap, Leadpoint was free to establish wages and fringe benefits.
- All Leadpoint employees would have to be drug tested.
- Leadpoint was paid on a cost plus basis.
- Leadpoint was to exercise reasonable effort not to assign an employee who had previously been fired by BFI.
- Leadpoint was solely responsible for recruiting, interviewing, testing, selecting, hiring, and discipline of its employees.
- Leadpoint would employ site supervisors to supervise its employees deployed on the site.
- BFI established the facility's work schedule, including when the conveyors would stop for facility–wide rest breaks.
- Each day the site managers of both companies would meet to coordinate daily activities.
- Leadpoint performed initial training of its employees, but BFI occasionally provided pointers and tips.
The NLRB (though very divided along party lines) ruled that joint employment would be found if the business entities, while separate, share or codetermine those matters governing the essential terms and conditions of employment. Critically, the majority held that it was unnecessary to find that BFI had actually exercised its rights reserved in the agreement; rather, the mere existence of the right sufficed. Further, it held that the alleged joint employer need have no direct and immediate control; rather, indirect control would suffice.
Unfortunately, the majority does not clarify for employers whether possession of any one of the elements of control was sufficient to find joint employment. Is the mere fact that BFI had the right to exclude a Leadpoint employee from the premises decisive or merely one of a number of factors to be considered? The decision does not provide an answer. The failure of the Board to provide clear direction on these key issues leaves them to future case-by-case determinations, a most unsatisfactory result for employers.
Further, the decision does not explain how joint employers are to bargain. What if they are joint employers on a single construction site, but not at other sites? How do the joint employers bargain? Together? Separately? The Board suggests the duty to bargain will depend upon who has the power of decision on a particular issue. Collective bargaining is difficult enough without coping with this artificial construct. If there is a silver lining, the Court of Appeals will likely overturn this very impractical decision, though unfortunately that will be at least eighteen months from now.