What Did the NLRB Say in its Ruling on Joint Employment–and Why?

Last week, I promised to start looking at issues employers face when dealing with non-competition provisions (aka “non-competes”)–but then the NLRB rendered a long-awaited decision in  Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (August 27, 2015). I previously posted about that case here, when the case was pending. The NLRB’s ruling expands the scope of joint employment as we have come to know it. What exactly did the NLRB say — and why? Let’s see if we can answer that question — after the jump…

Here are the facts in a nutshell: Browning-Ferris Industries (BFI) operated a recyclery, at which it sub-contracted out a portion of its recycling operation (aka “the sorting line”) to a staffing company, Leadpoint Services. BFI was a union shop. The union, seeking to  include the Leadpoint employees in the bargaining unit, argued that BFI was a joint employer of those employees. BFI, of course said it was not.

Since 1984 the standard for determining joint employment was whether the two  (or more) entities exercise direct and immediate control over the working conditions of the same workers. In other words, all entities in question must share the ability to hire, fire, discipline, supervise and direct the workers in question. Browning Ferris met this standard. Leadpoint, not BFI, hired, disciplined and fired its own workers– and even had its own supervisors and HR personnel on-site. While BFI determined the hours Leadpoint needed to staff the line, the speed at which the line must move, and the physical environment at the recyclery, Leadpoint supervisors independently set standards for picking material out of the recycling stream, trained its own workers and monitored each shift using its own productivity forms. BFI workers were largely if not entirely uninvolved in this part of their operations. Oh, and Leadpoint directly paid its own employees.

So here’s the burning question: Since Leadpoint clearly assumed all key employer functions with respect to its employees, how did the NLRB conclude that temporary employees provided by Leadpoint were also BFI’s employees?

First, the NLRB not only discarded its 30-plus year precedent, and specifically overruled its own decisions in TLI, AM Property, Lareco and Airborne Express. The Board has now adopted the following two-part test: 

1. Is there a common-law employment relationship? In other words, do the workers in question perform work for you and can you control what will be done and how it will be done; and
2. Does the putative joint employer possess sufficient control over the workers’ essential employment terms and conditions to permit meaningful collective bargaining?

The real change appears to be in how broadly the NLRB now interprets the second requirement. Under the standard used for the last few decades the Board required that the control be “actual, direct and substantial”, not just possible, theoretical or limited.  Now, according to the Board, control can be direct or indirect, which includes the right to control. In other words, the fact that you can control working conditions, whether or not you actually do so, is enough. The Board also expanded the definition of essential terms and conditions of employment to include, not just hiring, firing, discipline, supervision and direction, but also  “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.”

Why did the NLRB reverse itself? According to the Board, it was “required” to re-visit the joint-employer standard, because its responsibility is to apply  “the general provisions of the Act to the complexities of industrial life.” The Board reasoned that the current joint employer standard was “narrower than statutorily necessary”, that the definition of “employer” should encompass as many employment relationships as possible to foster collective bargaining.  To the more cynical, this last point is the real motivation behind the ruling. If you are in this camp, then you likely believe that the NLRB ruled the way it did to give unions, having lost a lot of clout over the years, a chance to revitalize. To be fair, however this standard is not really “new”. In fact the standard adopted by the Board last week had been the standard applied by the Board before 1984. So while this ruling is a reversal of more than 30 years of precedent, to be fair and accurate, it is a return to previous precedent. Some are calling it the “new-old” standard.

OK, you may be thinking, even with the new  standard, given how hands-on Leadpoint was compared to how hands- off BFI was, how could the NLRB have found that BFI was a joint employer? According to the NLRB, even though BFI did not have exercise actual control,  it retained the right to control the temps’ working conditions. According to the NLRB, the following contractual provisions supported that conclusion:

1. BFI could a) prohibit use of former BFI employees and b) require Leadpoint to meet or exceed its own hiring selection procedures and tests — despite the majority’s acknowledgement that “BFI does not participate in Leadpoint’s day-to-day hiring process.”
2. BFI had the “unqualified right” to discontinue the use of any Leadpoint workers. In reality, BFI asked for workers to be discontinued in only two instances in which they observed workers consuming alcohol on the premises–but, as the Board acknowledge, Leadpoint conducted its own investigation into the alleged misconduct.
3. Leadpoint workers had to comply with BFI safety policies and BFI had the right to enforce those policies – though it never actually did so.
4. While the Board majority conceded that “Leadpoint determines employees’ pay rates, administers all payments, retains payroll records, and is solely responsible for providing and administering benefits” under the contract”, since BFI had to approve pay increases and prohibited Leadpoint from paying its workers more than BFI paid its own workers for the same work, the Board found that BFI “indirect control” over their pay.
5. BFI controlled the speed at which the conveyor belt moved material down the sorting line. Ergo, according to the NLRB, BFI controlled the speed at which Leadpoint employees had to work. Similarly, BFI set productivity standards and assigned specific tasks with “near-constant oversight”‘; therefore BFI controlled “the processes that shape the day-to-day work”.

(For many, these five factors, are a stretch. At the very least the last two in particular really seem to be testing the doctrine’s elasticity.)

Who is really impacted by this change? Staffing companies and those who use them, sub-contractors (and those who use them) and those in a franchisor-franchisee relationship. Since I can’t bear to weigh you down with a longer post, let’s talk more about the impact of this decision–and what impacted employers can do about it– in next week’s post. Can’t wait to see you back here then!

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