New Laws

NLRB Expands Joint-Employer Status

Employers using third-party employers or placement agencies have a new case to worry about.  In a recent NLRB decision, the board expanded the test for joint-employer status, making it easier for employees and unions to allege multiple entities are actually joint employers under the National Labor Relations Act.

In Browning-Ferris Industries of California, Inc., (Case 32–RC–109684) the NLRB considered whether the Board should adhere to its current standard for assessing joint-employer status under the NLRA or whether that standard should be “revised to better effectuate the purposes of the Act, in the current economic landscape.” The issue in the case was whether BFI and Leadpoint were joint employers nunder the NLRA. The Regional Director issued a Decision and Direction of Election finding that Leadpoint was the sole employer. The Union filed a request for review and asked the Board to reconsider its standard for evaluating joint employer relationships.

The board held that while the current standard is ostensibly based on a Third Circuit Court of Appeals decision, (NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117), recent board decisions have “since imposed additional requirements for finding joint-employer status, which have no clear basis in the Third Circuit’s decision, in the common law, or in the text or policies of the Act.”  According to the board:

these additional requirements—which serve to significantly and unjustifiably narrow the circumstances where a joint-employment relationship can be found—leave the Board’s joint-employment jurisprudence
increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.

Relationship Between BFI and Leadpoint

BFI owns and operates a recycling facility.  It employs about 60 people outside of the facility who move materials and prepare them to be sorted inside the facility.  Leadpoint provides BFI with employees who work inside the facility sorting the recycled material and cleaning the facility and the equipment.  BFI’s contract with Leadpoint specifies that Leadpoint is the sole employer.  The contract is terminable at-will upon 30 days notice.

The board examined several factors in its analysis, that it believed relevant to deciding whether BFI and Leadpoint were joint employers.

Management Structure

Each company employs their own supervisors and managers, with BFI managers supervising BFI employees, and Leadpoint managers supervising Leadpoint employees.  The companies have separate human resources departments, although only Leadpoint had an HR representative on site.

Hiring

Leadpoint was responsible for recruiting, interviewing, testing, selecting, and hiring personnel to perform work for BFI, but BFI retained the right to request that personnel supplied by Leadpoint “meet or exceed [BFI’s] own standard selection procedures and tests.”

Discipline and Termination

Although the Agreement provides that Leadpoint has sole responsibility to counsel, discipline, review, evaluate, and terminate personnel who are assigned to BFI, it also grants BFI the authority to “reject any Personnel, and . . . discontinue the use of any personnel for any or no reason.

Wages and Benefits

Although the Agreement provides that Leadpoint “solely determines the pay rates paid to its Personnel,” the Agreement includes a rate schedule that requires BFI to compensate Leadpoint for each worker’s wage plus a specified percentage mark-up.  Additionally, Leadpoint was not allowed, without BFI’s approval, to “pay a pay rate in excess of the pay rate for full-time employees of [BFI] who perform similar tasks.”

Scheduling and Hours

Although Leadpoint selects which employees will work each shift, Leadpoint cannot change the shifts set by BFI.  Leadpoint employees must obtain an authorized BFI representative’s signature on the employee time records.

Work Processes

When BFI’s managers identify job performance problems of Leadpoint employees, they communicate their concerns to a Leadpoint supervisor, who is expected to address those issues with the employees.

Training and Safety

Leadpoint provides orientation and job training to its employees, but BFI occasionally provides substantive training and counseling.

Other Terms

The Agreement also says Leadpoint employees are not to be assigned to work at a BFI facility for more than 6 months, but BFI never invoked that particular clause.

Following prior Board precedent, the Director determined BFI is not a joint-employer of the Leadpoint employees because it does not “share or codetermine [with Leadpoint] those matters governing the essential terms and conditions of employment” of the Leadpoint employees.

The Board analyzed the changes to the joint-employer analysis over the last 60+ years.  The Board believed that prior cases impermissibly narrowed the test for joint-employer status, and made it clear that “[i]n determining whether an employment relationship exists for purposes of the Act, the Board must follow the common-law agency test.”  As emphasized by the Supreme Court, a critical issue is “whether one statutory employer ‘possessed sufficient control over the work of the employees to qualify as a joint employer with’ another statutory employer.”

New Test for Joint-Employer Status

The board announced a new standard, that it believes is really a restatement of the original correct standard, for determining joint-employer status:

The Board may find that two or more entities are joint employers of a single work force 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. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may “share” control over terms and conditions of employment or “codetermine” them, as the Board and the courts have done in the past.

The new test eliminates the the previously-applied requirement of “actual and direct control over workers” to establish a joint-employment relationship. Browning-Ferris may appeal the decision to federal courts, so we don’t know if this decision will be the final word in this case.

Although this case arose from a union’s attempt to represent previously unrepresented employees, the decision is important for all employers.  State and federal agencies are cracking down on employee misclassifications.  California enacted legislation allowing workers to sue labor contractors and the end-clients without having to prove a joint-employer relationship.  Several class actions are pending throughout the nation alleging joint-employer relationships, even when the companies maintain entirely separate companies.  Employers have to be more cautious than ever when using third-party employers and placement agencies.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

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