With the latest NLRB ruling, independent contractors and sub-contractors have been dealt a severe blow. The broad implications that were handed down with the “joint-employer” decision could potentially hurt retail, restaurant, and hotel franchise owners, staffing agencies, and temporary workers, as well. WilsonElser, Ricki E. Roer, Yoora Pak, & Sara E. Robinson, lay out the probable effects of this ruling.
On August 27, 2015, in a 3–2 decision, the National Labor Relations Board (the Board) determined that Browning-Ferris Industries of California was a joint employer of workers hired by a contractor to staff one of Browning-Ferris’s recycling plants. Browning-Ferris contracted with Leadpoint, a staffing agency, to supply workers to perform cleaning and sorting tasks at its plant. The contract could be terminated by either party within 30 days, and stated that Leadpoint was the sole employer and should not assign workers to Browning-Ferris for more than six months. The two companies kept separate supervisors and lead workers at the facility and they maintained separate human resources departments.
The Union’s Case
The Teamsters, the union that represents Browning-Ferris’s unionized employees, wanted to include the Leadpoint employees in their bargaining unit, and argued that Browning-Ferris was a joint employer of these employees. The union argued that Browning-Ferris controlled the employees’ wages because Leadpoint agreed not to exceed Browning-Ferris’s own wages, and that Browning-Ferris had a role in the discipline of some Leadpoint employees. The union further argued that Browning-Ferris controlled the essential terms and conditions of employment, including qualifications, work hours, breaks, rules and the speed of the lines.
Since the 1980s, the Board has followed a definition that requires joint employers to exercise “direct and immediate” control over the terms and conditions of employment. Finding that its previous joint employer standard has failed to keep pace with changes in the workplace and economic circumstances, the Board stated that the revised standard will “better effectuate the purposes of the Act in the current economic landscape.”
Under the new standard, the Board held that two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law and (2) they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. In other words, the new test is whether a company has the potential to exercise control over wages and working conditions, regardless of whether that control is actually used.
The Board held that Browning-Ferris exercised enough actual and potential control over employees inside the plant to be considered a joint employer. The decision could have far-reaching implications for any company that uses contractors, including large franchisors that may now be required to bargain with the unionized employees of their franchisees if they have the potential to control the wages or working conditions of the employees. While much discussion has centered around the potential impact the decision may have against franchisors, other businesses, including staffing agencies, may face the same challenges being directed against the franchise structure. This trend has the potential to radically alter corporate liability significantly beyond the traditional employer-employee relationship.
All employers who contract out work or use contingent or temporary employees should consider the level of control they may exercise in these arrangements. Wilson Elser’s national Employment & Labor practice attorneys are available to assist employers in navigating this new potential liability in light of this developing area of law.