In a move less surprising for its outcome than the breadth of its likely effects, President Obama’s NLRB adopted, by a 3-2 vote, a new standard for joint employers in Browning-Ferris Industries. Case 32-RC-109684 (Aug. 27, 2015). The aftershocks of the Board’s decision, which overturned three decades of stable case law, may very well revamp the landscape of collective bargaining.
Section 8(a)(5) of the National Labor Relations Act (NLRA) prohibits employers from “refus[ing] to bargain collectively with the representatives of his employees.” Entities that use temporary staffing agencies and subcontractors have long been insulated from this requirement as long as they do not control the essential terms and conditions of employment for the individuals working for the staffing agencies or contractors.
Unions claiming that an entity is a joint employer bear the burden of proving the existence of a joint employment relationship. This determination turns on whether the entity “possesses sufficient control over the work of the employees” for its presence to be required at the bargaining table with unions. Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964). Since 1984, the Board has consistently held that only entities that actually exercise “direct and immediate” control over employees are joint employers, while those with “limited and routine” control, or merely theoretical control are not. See, e.g., TLI Inc., 271 NLRB 798 (1984), enfd. mem. 772 F.2d 894 (3d Cir. 1985); Laerco Transportation, 269 NLRB 324 (1984).
In Browning-Ferris, the NLRB abandoned the “direct and immediate” standard in favor of the common-law agency test. Under the new standard, “[t]he 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.” 32-RC-109684, at 15. According to the Board, control can be established directly or indirectly, such as through contractual provisions that preserve the right to control, regardless of whether control is actually exercised.
Applying this new standard to the dispute before it, the Board concluded that BFI Newby Island Recyclery (BFI) was properly treated as a joint employer along with Leadpoint, the staffing firm that provided workers for the BFI facility. In spite of a contractual provision stating that Leadpoint was the sole employer, the Board found that nondescript facts such as BFI’s (1) ability to request that Leadpoint require potential hires to submit to drug screening tests like its own workers undergo, (2) setting working hours, and (3) recommending one disciplinary and one termination decision that Leadpoint later implemented were enough to conclude that BFI and Leadpoint both employed the facility’s workers. Remarkable.
In a thirty-page (!) dissent, Members Miscimarra and Johnson criticized the majority for acting without Congressional authority, and failing to provide a limiting principle, in a manner that will create significant confusion and added costs (including extensive litigation costs) going forward. There is a real concern, according to the dissent, that even a homeowner who hires a plumber for bathroom renovations may inadvertently become a joint employer.
Because the Board failed to specify which factor(s), if any, are the most important in this analysis, businesses are left to determine whether they have the “right to control” the potential employees under the totality of the circumstances. Although a joint employer is only required to bargain “with respect to such terms and conditions which it possesses the authority to control,” this rule poses real difficulty in practice. The line separating “control” from indirect influence inherent whenever any business owns and operates a facility with workers from another business is now almost impossible to define ahead of time.
The Board’s standard will continue in full effect unless and until a federal court announces otherwise – a process that will conservatively take over a year. In the meantime, employers of all sizes should analyze their labor staffing processes and evaluate whether they have any bargaining obligations to unions under their supervision, however indirectly.