What’s the Likely Impact of the NLRB’s Joint Employment Ruling?

We are back with our discussion of the NLRB case, Browning-Ferris Industries of California–and all the doomsday predictions that seem to come with it. Now, I don’t mean to unduly minimize any concerns about how this ruling will impact businesses. I do, however, get a bit suspicious of broad, sweeping statements.  At the same time, what is the likely impact? Who is likely impacted by the ruling, and how? it What’s the big picture? This sounds like something to tackle after the jump. See you there!

Since the ruling deals with joint employers — or potential joint employers–let’s first figure out who is potentially a joint employer. We know staffing companies are potentially impacted, because: a) Browning-Ferris involved a staffing company; and b) staffing companies usually are joint employers, who supply employees to other companies– who are often joint employers. This also means that companies that contract with staffing agencies to augment their workforce are potentially impacted. Contractors and sub-contractors–and companies that use them– for similar reasons could also be impacted. Finally the other group(s) that may be affected are franchisors and franchisees.

How exactly would or could these groups be impacted?  Browning-Ferris now means that even in those instances where a client company leaves all the control of temporary employees to the staffing company, franchisee or contractor/sub-contractor the client company/franchisor/general contractor could be held liable for unfair labor practices committed by the staffing company/contractor/sub-contractor/franchisee and vice versa if those companies have the right to control those workers. Also, client companies might have to deal with a bigger bargaining unit, consisting not only of their direct employees but also the staffing company’s employees.

Now, before you decide to stop using staffing agencies or other outside contractors or sub-contractors,  or before you decide to get out of the staffing or contracting business, let’s take a closer look at the likely impact, and let’s get some perspective. The NLRB ruling only impacts those issues or charges governed by the NLRB.  The standard for determining joint employment for all other non-NLRA issues still requires the actual exercise of control. The fact is, most companies with temporary staff do in fact exercise sufficient control — direct and actual–to be joint employers under, say Title VII, FMLA, ADA, etc. Only those companies that actually pay the staffing company or the contractor to supply on-site supervision have the chance to escape joint employment liability over the employees in question. If client companies are already exercising actual, direct control, then they are already joint employers regardless of Browning-Ferris, and regardless of whether the issue is an unfair labor practice or other allegation.

With respect to unionization, the threat tends to be greater in situations involving large companies that use staffing agencies or other outside contractors or sub-contractors on a long-term basis. Those employees, who may be doing the same work as the client company’s direct employees but whose benefits or other conditions are not as favorable may be interested in joining a union. Many staffing company or outside contractors’ employees are on the client company’s work-site on a short-term basis. Will it make sense to try including those employees in a bargaining unit when tomorrow they may not even be on site? If the specific project for which the temporary employee(s) were hired is finished, it is doubtful that even the NLRB could compel a staffing company to continue employing their contingent workers — especially if they do not have another placement for them immediately following the end of a project.

Getting back to how most staffing/contracting arrangements work: If in most situations, the client company is already a joint employer under the direct-control standard, then, in most situations, this ruling may not change much at all–except in one aspect. Unions, having the explicit backing of the NLRB may more aggressively recruit such workers. Will those workers actually join? Time will tell–if an appellate court doesn’t change things first.

What about general and sub-contractors? How vulnerable are these companies — or the companies that use them? A In a typical owner-contractor relationship the owner often does not retain the right to control the essential employment terms of the contractor employee’s employment. Often the general contractor will not retain a right to control essential terms of the sub-contractor employee’s employment either. To that extent Browning-Ferris may once again have little impact.

With respect to the franchisor-franchisee model, the NLRB separately ruled on that issue in a case involving McDonald’s, and it looks like McDonald’s will appeal that ruling. For that matter, an appeal of Browning-Ferris sounds like a reasonable possibility.  What this really amounts to at this time are a whole lot of maybes.

Wait a minute. Aren’t Professional Employer Organizations (PEO’s) also joint employers? Yes, but typically they do not retain control over the employees’ essential working conditions. PEO’s do not have a right to control the means, method and manner of work that the leased employees perform, nor do they control the work environment, and most often they do not determine benefits, privileges, scheduling, etc. The PEO generally takes care of the administrative functions, such as paying the payroll, administering pre-determined benefits, record keeping and the like. The typical PEO arrangement does not appear to be vulnerable as a result of this ruling.

So where does that leave employers who use staffing agencies or general contractors? For that matter where does it leave the staffing agencies or contractors or sub-contractors? The truth is we don’t know. It’s too soon to tell–especially if you factor in the likely appeals. So what should you all do? First, don’t panic. Second, determine if you really are someone who is likely to be impacted by the ruling. If not, you need not to anything different at all. If you are, then yes, for now, you may want to consult with competent employment counsel to explore your options–and keep your eye out for new developments!

Join The EmpLAWyerologist for regularly scheduled programming, which in this case is the originally promised mini-series on different issues posed by non-competes. Cheerio!

Disclaimer: This post and all its contents are for educational/informational purposes only, are not intended as legal advice, do not create an attorney-client relationship, and are not intended to replace consultation with competent employment counsel in the state(s) in which you employ people.

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