GDP Blog

NLRB Adopts New “Joint Employer” Standard

Posted by John Powter

Nov 1, 2015 4:30:54 AM

Quick Facts:

  • The new test looks at whether there is a common law employment relationship and whether the employer has sufficient control.
  • The new test considers direct and indirect forms of control.
  • The new test may considerably increase the number of potential joint employers and may noticeably change the way franchises, staffing agencies and seasonal employers operate.

On Aug. 27, 2015, the National Labor Relations Board (NLRB) issued a decision adopting a new standard to determine “joint employer” status. In general terms, two or more employers are “joint employers” when they share control of a common workforce. Joint employment can happen by design or unintentionally when employers divide personnel hiring, supervision and management practices among themselves. Whether joint employment is by design or unintentional, the law often holds all joint employers responsible for compliance with labor and employment laws.

This NLRB decision is significant because it adopts a more inclusive standard for determining joint employer status, expands the definition of essential terms and conditions of employment, and may ultimately alter employment relationships in various industries.

Background

The case at issue is Browning-Ferris Industries of California, Inc. (BFI) vs. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters.

BFI operates a recycling facility and employs around 60 workers. The workers are union employees represented by the Teamsters. BFI also has a labor services agreement with Leadpoint, a personnel supplier. Leadpoint provides non-union workers who perform tasks at BFI’s facilities. The dispute between BFI and the union arose when the union sought to represent the 240 workers supplied to BFI by Leadpoint. BFI claimed that Leadpoint employees could not bargain with BFI for their terms and conditions of employment because BFI was not their employer. The union responded that BFI exercised sufficient control over Leadpoint employees and should therefore be considered a joint employer. 

Initially, the NLRB dismissed the union’s claims because it concluded that BFI and Leadpoint were not joint employers under the current NLRB joint employment definition.  In its analysis, the NLRB found that BFI did not exercise direct and immediate control over non-unionized workers and that it did not share or codetermine with Leadpoint the matters governing the essential terms and conditions of employment of non-unionized workers. At the time, essential terms and conditions of employment included hiring, firing, disciplining, supervising and directing employees.

The union appealed this decision and urged the NLRB to reconsider its existing joint employer standard. Specifically, the union argued that the NLRB should adopt a broader and more inclusive standard.

The Need for a New Standard

Upon appeal, the NLRB decided that a new standard was indeed needed in order “to better effectuate the purposes of the Act in the current economic landscape.” The NLRB noted that, under the previous standard, too many employers insulated themselves from their legal responsibilities, while maintaining control of their workplaces.

Under the new standard, joint employment exists for employers that directly or indirectly exercise control over a workforce. The NLRB stated that the new standard allows the agency more flexibility to align joint employer status to common law principles and to hold parent companies accountable for the terms and conditions of employment set through their intermediaries.

The New Standard

The newly adopted standard is more inclusive and finds that “two or more entities are joint employers of a single workforce 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.”

To determine control in the workplace, the NLRB will now use a two-part test to evaluate whether multiple employers share control over essential terms and conditions of employment.

First the NLRB will determine whether there is a common-law employment relationship. Second, if there is a common law employment relationship, the NLRB will look at whether the potential joint employer has “sufficient” control over the workers’ essential terms and conditions of employment to permit meaningful collective bargaining.

In this analysis, sufficient control is determined by considering all factors of the employment relationship. The new standard has also expanded the traditional definition of essential terms and conditions of employment to include:

  • 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.

In its decision, the NLRB recognized that this type of evaluation would require an analysis of the facts on a case-by-case basis, but also noted that this type of analysis is similar to the economic realities test used by the U.S. Department of Labor to determine independent contractor classification status.

With this new approach, the NLRB will now consider both the direct and indirect control an employer has over a workforce’s terms and conditions of employment. Considering areas of indirect control could also lead to an evaluation of any rights and powers an employer reserves, by contract, to control terms and conditions of employment. The evaluation of reserved rights and powers under the new test may become relevant even when an employer never actually exercises this authority.

For this reason, critics of the new standard are skeptical of whether the new test is clear enough to provide stability in bargaining and operational planning. Critics also claim that the new test is too vague and provides little guidance on how much is “sufficient” to establish joint-employer status.

NLRA Compliance for Employers

The National Labor Relations Act (NLRA) applies to workplaces with labor unions. However, certain provisions of the NLRA also apply to non-unionized workplaces. Joint-employer scenarios can present a complicated scenario when evaluating compliance with the NLRA.

Among other things, the NLRA protects workers from employer retaliation when workers engage in protected concerted activities.  Workers engage in protected concerted activities when they join together to improve their wages and working conditions.

The key to determine whether an employee has engaged in a protected concerted activity is whether the worker was acting for the benefit, or on behalf, of others and not solely for his or her personal interest. Workers do not need to formally agree to act as a group or designate a representative to participate in concerted activities.

Concerted activities can include spontaneous, non-eventful actions such as a discussion of working conditions and wages or questioning a supervisor on a company policy. In that sense, the NLRA protects any employee who:

  • Addresses group concerns with an employer;
  • Forms, joins or helps a labor organization;
  • Initiates, induces or prepares for group action; or
  • Speaks on behalf of or represents other employees.

Affected Employers

The new standard promises to have a large impact on NLRA compliance across many industries. In fact, because there is not a clear limit as to where liability ends based on the new standard, the list of potential joint employers for any given operation may considerably increase and noticeably change the way franchises, staffing agencies and seasonal employers operate.

Specifically, the new standard may fundamentally alter the following types of business relationships:

  • User-supplier;
  • Lessor-lessee;
  • Parent-subsidiary;
  • Contractor-subcontractor;
  • Franchisor-franchisee;
  • Predecessor-successor;
  • Creditor-debtor; and
  • Contractor-consumer.

Employers in franchises, hotels, technology, real estate, investment, general contracting, transportation and staffing agencies will be particularly affected.

Even though there is great speculation that the NLRB’s decision will be appealed to a federal court due to its wide-reaching impact, employers should take the time to review their current business practices and identify whether they are at risk of being considered a joint employer under the NLRA.  

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