NLRB Issues New Joint Employer Standard
In a long-awaited and split decision, Browning-Ferris Industries of California, Inc., the National Labor Relations Board addressed whether BFI should be deemed a joint employer with the staffing agency whose employees performed various work functions for BFI and, in so doing, the Board revised its 30+-year standard for determining joint employer status. According to the three-member Democratic majority, the new standard in intended “to better effectuate the purposes of the Act in the current economic landscape.” This decision clearly alters the landscape for staffing agencies and host companies utilizing the services of staffing agencies. The two-member Republican minority castigates the new standard as a test that “confuses the definition of a joint employer and will predictably produce broad-based instability in bargaining relationships.”
The Staffing Arrangement Between BFI and Leadpoint
BFI owns and operates a recycling facility. It employs its own employees to operate forklifts and loaders on the outside portion of its facility, where the material to be recycled is delivered, moved around, and staged for processing. These 60 employees are represented by the Teamsters Union and subject to a collective bargaining agreement. Inside the recycling facility are conveyor belts on which the material to be recycled is placed for sorting and screening. A temporary staffing agency, Leadpoint, provides 240 workers to perform the sorting and screening services, as well as housekeeping services for BFI. Leadpoint also provides on-site supervision and lead workers who create the workers’ schedules and oversee the work.
The staffing arrangement between BFI and Leadpoint is typical of the type of arrangement that many companies have with the staffing agencies that they use. Under the staffing agreement, Leadpoint is responsible for the recruiting and hiring of workers, although it must ensure that the workers have the appropriate qualifications to perform BFI’s work. Leadpoint also conducts drug testing, piece-of-the-job testing, and background checks. Leadpoint is responsible for all discipline, evaluation and termination of the workers, but BFI has the authority to order the removal of any worker. Leadpoint sets the wages for its workers, although the agreement specifies that the wages cannot exceed those paid to BFI workers performing similar tasks (of which there was one worker, making $5.00 more per hour). All benefits, including holidays, PTO, and insurance are provided by Leadpoint.
BFI has established three shifts of work, and Leadpoint schedules the workers to cover all shifts. BFI determines if overtime is required on a particular shift, and Leadpoint then chooses which workers will work the overtime. The workers submit a weekly summary of hours worked, which must be signed by a BFI representative attesting to its accuracy. If no signature is obtained, BFI may refuse payment. On a daily basis, BFI decides which material stream will run and how many workers are required to work each stream, while Leadpoint chooses which workers will be assigned to the stream. BFI also determines the work priorities each day. BFI monitors the operation and productivity of the work, and issues are addressed with Leadpoint supervisors. On occasion, however, BFI managers have addressed job task and quality issues directly with Leadpoint workers. Orientation and job training is initially provided by Leadpoint, but BFI periodically conducts substantive job and safety training as well. Leadpoint workers must comply with BFI’s safety standards.
The Prior Standard
The union sought to unionize the agency workers, arguing that BFI was a joint employer with Leadpoint. Under the prior standard for joint employer status, BFI likely would have not been found to be a joint employer. The prior standard is based on the 1982 decision, NLRB v. Browning-Ferris Industries of Pennsylvania. Under this standard, an entity must exercise direct control over the employees of the other entity in order to be considered a joint employer. Later Board decisions further refined this standard. Thus, there must be actual exercise of this control, and the control must be “direct and immediate”; the mere possession of the authority to exercise such control or the indirect control over these employees is not enough to establish joint employer status. In this case, BFI did not have direct control over the Leadpoint workers – the actual employment actions, wages and benefits were handled by Leadpoint.
In addition, the control exercised by the host entity must be more than “limited and routine” in nature. Under prior Board law, supervision is limited and routine where the supervisor tells employees what work to perform, or when and where to perform the work, but does not tell the employee how to perform the work. Thus, the limited instances where BFI managers directly addressed job task and quality issues with employees by directing them to perform a particular task or reassigning them to another stream would not have been sufficient to render BFI a joint employer.
The New Standard
Under the Board’s new standard, which it characterizes as a return to the original principles of Browning-Ferris Industries of Pennsylvania, two or more employers are joint employers of the same employees if they “share or codetermine those matters governing the essential terms and conditions of employment.” The first question in applying the standard is “whether there is a common-law employment relationship with the employees in question.” If so, then the next question is whether the “employer” in question “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.”
According to the Board, the essential terms and conditions of employment includes hiring, firing, discipline, supervision and direction. It also includes wages and hours, as well as dictating the number of workers to be supplied; controlling scheduling, seniority, and overtime; and assigning work and determining the manner and method of work performance.
The Board specifically states that it will no longer require that the employer actually exercise such authority to control the terms and conditions of employment; the mere possession of this authority is sufficient to support a finding of joint employer status. In addition, the Board rejects the requirement that this authority must be exercised “directly and immediately.” Instead, it may be exercised indirectly, through an intermediary (such as the staffing agency).
In applying this new standard, the Board found BFI to be a joint employer, determining that it exercised significant control – both indirect and direct – over the terms and conditions of employment of the Leadpoint workers. The Board found that BFI imposed specific conditions on Leadpoint’s ability to make hiring decisions, by establishing qualifications and requiring certain tests. BFI also retained the right to reject any worker. Its complaints about workers led to two instances where Leadpoint chose to impose discipline and ultimately remove them from the BFI facility.
The Board also found that BFI controlled work processes by establishing work speed and productivity standards, thereby affecting break times, safety, the speed of work, and need for overtime. BFI also determines what tasks must be completed, and exercises “near-constant oversight” of job performance. BFI decides how many workers are needed, dictates the timing of shifts, and determines overtime.
The Board further held that BFI interacted directly with workers by directing them to perform certain tasks or assignments, and conducting trainings and meetings about BFI objectives or concerns. BFI must also approve the weekly wage summaries for Leadpoint workers.
In addition, the Board determined that BFI “plays a significant role in determining employees’ wages,” by establishing a “ceiling” based on the wage rate of the single BFI employee performing sorting work. In addition, the Board found that BFI also apparently required approval over wage increases, as it negotiated a new wage rate with Leadpoint after a minimum wage increase went into effect.
What This Means for Employers
This decision vastly expands the universe of who will be deemed a joint employer. The typical staffing agency relationship will now be deemed a joint employer situation, thereby subjecting the host employer to the panoply of labor obligations. This decision will also undoubtedly implicate other business relationships, such as franchise and subcontractor arrangements, where the union could argue that the franchisor or contracting company has some control over the franchisee or subcontractor employees. For example, franchise agreements often contain provision specifying what the franchisee must do vis-à-vis the franchisee’s employees: qualifications, appearance and schedules. The concern is that the Board’s opinion would allow joint employer status to be found where the franchise agreement imposes the most indirect influence over the working conditions of the franchisee’s employees.
As the dissent notes, “[t]his change will subject countless entities to unprecedented new joint-bargaining obligation that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts and picketing.” We anticipate that there will be legal challenges to this new standard. In the meantime, however, companies engaged in business relationships with entities such as staffing agencies, franchises and subcontractors must be aware that they could be deemed a joint employer under this expanded standard, and thereby subject to significant labor obligations under the NLRA.