NLRB Dramatically Expands Definition of Employer

August 28, 2015Articles

Updated November 18, 2015

The National Labor Relations Board (NLRB) has overruled 30 years of precedent by dramatically increasing the circumstances in which a “joint employer” relationship can be found by the agency. This decision should be of particular interest to employers who are franchisors or who routinely contract with temporary labor providers to supplement their workforce, as it will increase the rights of applicable unions in organizing or expanding. At its core, the NLRB decision changes the existing legal standards by testing whether one employer could control the terms and conditions of another employer’s employees. The NLRB reversed 30 years of precedent which focused those decisions upon whether one employer has, in fact, exercised a right to assume the role of the employer of another employer’s laborers.

For decades, the NLRB has declined to recognize a “joint employer” relationship between two employers unless the agency can prove that the contracting employer has engaged in the actual control or supervision of temporary employees and that the control is “direct, immediate and not limited and routine.” Therefore, where a contractor’s employees were hired, supervised and disciplined by the contractor, there was no direct control by the contracting employer. Moreover, where the contractor provided immediate discipline to an employee engaged in misconduct – and not the contracting employer – there was no evidence of a joint employer relationship. Finally if a contracting employer did complain about a contractor’s employee episodically, but not in limited and routine fashion, there was no evidence of control by the contracting employer that would support a joint employer finding.

In Browning-Ferris Industries of California, Inc. and Sanitary Truck Drivers and Helpers Local 250, IBT, 362 NLRB No. 186 (August 27, 2015), the NLRB rejected the Board’s prior standard requiring the actual exercise of authority by a contracting employee, but has held that the mere potential of the exercise of such authority may establish a joint employer relationship. In making this finding the Board found it has a responsibility of “encouraging the practice and procedure of collective bargaining.”

The new standard adopted by the Board for finding a joint employer relationship is:

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 co-determine those matters governing the essential terms and conditions of employment.

The NLRB found that a contracting employer may be a statutory “employer” of another employer’s employees under agency principles where the

(s)ervant (employee) is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other’s control or right to control.

The NLRB wrote that it would look to the contracting employer’s ability to control – not whether or not it had exercised any of those abilities – the terms and conditions of the contractor's employees’ employment and was entirely unconcerned whether such right to control was immediate, direct or limited and routine, or whether, in fact, had actually occurred. An expressly non-comprehensive list of such “terms and conditions” includes the right to influence or control matters relating to:

set wages;
dictate hours or schedules of work;
dictate the number of workers to be employed;
control seniority;
mandate overtime;
assign work to particular workers; and
determine the method or manner of work performance.

In the opinion released August 27, Browning-Ferris, Inc. (BFI) contracted with Leadpoint to supply labor to operate a “stream” – or, essentially, an assembly line – for cleaning purposes.

The NLRB upheld an Administrative Law Judge’s findings that:

BFI established basic qualifications, or skills, that Leadpoint’s employees must have to work at BFI’s facility;
BFI refused to permit employees it had fired to work at its facility for Leadpoint;
BFI required Leadpoint’s employees to pass a drug test;
BFI had a right to refuse to allow any Leadpoint employees in its facility;
BFI encouraged Leadpoint to fire an employee who damaged their property;
BFI prohibited Leadpoint to pay its employees more than similarly-situated BFI employees;
Leadpoint employees were required to acknowledge they did not have a right to BFI benefits;
BFI set its own shift schedules that Leadpoint employees worked in;
BFI established when overtime was needed by keeping the “stream” running beyond the regular schedule;
BFI determined when the stream stopped and that is when Leadpoint employees took breaks;
BFI provided Leadpoint with targeted “headcounts” of the number of employees it needed services from on a daily basis;
BFI set its own productivity standards;
BFI told Leadpoint supervisors when it was appropriate to deploy an emergency “stop” switch halting the stream;
BFI supervisors attended meetings with Leadpoint supervisors and employees to discuss customer complaints;
BFI required Leadpoint employees to comply with its plant safety policy and participated in safety orientation meetings; and
BFI reserved the right to enforce its safety policy.

Based on these factual findings, under its new legal standard which was applied retroactively, the NLRB concluded BFI and Leadpoint were joint employers.

Joint representation status is significant. While the Leadpoint employees could, and did, seek to require a collective bargaining relationship with Leadpoint itself, it was prohibited under prior law from seeking to compel BFI to participate in collective bargaining with them as an “employer.” As a result of this decision, BFI may be forced to recognize the union as the bargaining representative, although the employees are actually employed by its labor contractor, Leadpoint. This is a very significant departure from decades old precedent and will further expand the right of unions to organize and expand bargaining units where labor contractors supply employees to a primary contractor.

Moreover, and perhaps of greater impact, the decision is likely to be interpreted by the NLRB General Counsel to enable the agency to establish joint employer relationships between franchisors and franchisees where the franchise agreement establishes or creates the ability of the franchisor to “control” the franchisee’s employees’ terms and conditions of employment even if the franchisor has never exercised any such “control” over those employees.

Senator Lamar Alexander has proposed legislation that would nullify the Browning-Ferris decision. Senate Bill 2015 would amend the National Labor Relations Act to make the previous joint employer standard statutory and thereby prohibit the Board from enforcing its new standard. A floor vote is yet to be conducted. Further, BFI is in the process of seeking appellate review of the controversial decision.

If you or your corporation contracts with a labor contractor, is a labor contractor, or participates in a franchisor/franchisee relationship, you are encouraged to seek counsel to ensure you have a full appreciation of this very important decision by the National Labor Relations Board.