Who Do You Work For? The NLRB Drastically Expands Employer Liability Under New “Joint Employer” Standard.

On August 27, 2015, the National Labor Relations Board (Board), in Browning-Ferris Industries of California (Case 32-RC-109684), overturned decades-old precedent by abandoning a longstanding test and replaced it with a new test that may impose bargaining and unfair labor practice obligations on multiple entities in a wide variety of business relationships.

Who are Joint Employers?
Companies are considered joint employers when two or more separate business entities share or codetermine matters governing the essential terms and conditions of employment for employees. This issue typically arises when a company subcontracts work to be performed, but is also potentially present for franchising businesses.
What Happened in Brown-Ferris Industries?

Brown-Ferris Industries (BFI) owned and operated a recycling facility. BFI employs its own employees, but also subcontracted with Leadpoint to provide workers to BFI. Leadpoint retained the sole responsibility in hiring, firing, and disciplining the employees assigned to BFI. However, BFI could reject Leadpoint personnel for any or no reason. When hiring, Leadpoint had to ensure the applicants could meet or exceed BFI’s expectations. As for wages and benefits, the contract stated that Leadpoint would solely determine the pay rates, provided that it would not—without BFI approval—pay Leadpoint workers more than BFI employees. BFI established the facility schedule of working hours and controlled the productivity of the facility. Leadpoint would assign specific Leadpoint employees to specific posts at the direction of BFI.

On July 22, 2013, the International Brotherhood of Teamsters union filed a petition seeking to represent employees employed by Leadpoint and BFI as joint employers. Under the old standard, the Regional Director found that BFI and Leadpoint were not joint employers. Yet, the Board reversed and articulated a new standard in determining joint employer status.

The Old Standard

Prior to Browning-Ferris, the Board examined whether actual control over workers was direct and immediate. The Board did not consider any indirect control in determining joint employer status. Rather, the employer (like BFI) must have meaningfully affected employment matters such as hiring, firing, discipline, supervision, and direction of the subcontractor’s employees (like Leadpoint employees). Previously, the Board would generally not find joint employer status where the employer would direct the subcontractor’s employees on what jobs to perform, but did not tell the employees how to perform their job. Likewise, the Board previously did not find control when the subcontractor retained the sole responsibility of hiring, firing and disciplining its employees.

The New Standard
Under the new standard, the Board may find that two or more entities are joint employers of a single work force if they both possess sufficient control over the work of the employees and share or codetermine matters governing the essential terms and conditions of employment (e.g., hiring, firing, discipline, supervision, and direction; number of workers needed; scheduling; seniority and overtime; and work assignment). The Board no longer requires joint employers to exercise authority directly and immediately. Instead, control can be either direct or indirect. For example, the Board found that BFI codetermined with Leadpoint the hiring of employees because Leadpoint was required to ensure its employees met or exceeded BFI expectations. Thus, because BFI set the expectations that Leadpoint had to follow, BFI held indirect control over the hiring of Leadpoint employees.

What Does This Mean for Employers?

The new standard overturns long-standing joint employer principles. Under the new standard, a company can be considered a joint employer even if it has only indirect control over working conditions. If the company is deemed a joint employer under the National Labor Relations Act, then several issues arise. Each employer will be jointly liable for personnel policies and any unfair labor practices brought against either of the employers. In the bargaining context, each employer will have a duty to bargain with the union over terms and conditions of employment. There is also indication that OSHA, the EEOC, and other federal and state agencies will follow the Board’s lead.

Employer Advice

Employers should review current subcontractor and franchise agreements. Since indirect control is now an indication of joint employer status, employers need to make sure any control of another company’s employees is limited to avoid potential joint employer liability. Evidence in favor of establishing a joint employer relationship can include:

  • Reserving a contractual right to set a specific term or condition of employment for a subcontractor’s workers.
  • An employer who owns and controls the premises, dictates the essential nature of the job, and imposes broad operational contours of the work, while a subcontractor makes specific personnel decisions and administers job performance on a day-to-day basis.
  • An Employer sets a de facto wage ceiling and requires consent before a subcontractor can increase wages of its employees.

For more information on this article, or if you have questions regarding your liabilities as an employers, please contact Attorney Erik Mosvick, at emosvick@seatonlaw.com, 952-921-4624, or any attorney at Peters, Revnew, Kappenman & Anderson, P.A.

Special thanks to Law Clerk Richard Sharp for his contribution to this article.

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