A recent ruling of the National Labor Relations Board (“NLRB” or the “Board”) dramatically expands the circumstances in which the Board will hold companies responsible for the labor practices of their staffing agencies, subcontractors, and franchisees. The decision will have an impact in union and non-union workplaces alike and could force significant changes on any company that relies on workers hired by another company.
In its 3-2 decision, the NLRB ruled that Browning-Ferris Industries of California (“BFI”) was a joint employer of workers employed by Leadpoint, a separate and independent company that BFI hired to supply workers at a recycling facility run by BFI. As a result, BFI could be legally obligated to bargain with the union seeking to represent Leadpoint’s workers.
The August 27, 2015, decision did away with the joint-employer test that the Board has followed for over 30 years. Under the prior standard, to be considered a joint employer by the NLRB, a company needed to both possess the authority to control terms and conditions of the employees’ employment and also exercise the authority “directly” and “immediately.” Under the test adopted in the Browning-Ferris case, however, a company need only assert “indirect control” over the terms and conditions of employment in order to be considered a joint employer.
The NLRB found that BFI had such indirect control over Leadpoint’s employees through its contract with Leadpoint, under which BFI set standards for the employees hired by Leadpoint and set limits on what Leadpoint could pay its employees. The NLRB also cited the fact that BFI controlled the speed at which all work was performed in its facility and “exercised near-constant oversight” of the work—even though Leadpoint assigned its own supervisors to manage its employees.
The two Board members who voted against the new joint-employer test warned that the “change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have,” to liability for unfair labor practices and breaches of collective-bargaining agreements, and to strikes, boycotts and picketing.
The decision applies to both union and non-union workplaces, as the National Labor Relations Act protects employees who work together to protest what they see as unfair working conditions or to lodge other complaints. Under this new test, a company that receives a complaint from employees of a subcontractor or a temporary-staffing agency – and then reacts with some sort of disciplinary measure – now faces scrutiny and potential enforcement action from the Board, if its investigators consider the company’s response to be punitive.
- Companies that use staffing agencies and other suppliers of temporary workers should carefully review the contracts with those suppliers to assess the extent that common contract terms—such as minimum standards for background checks, hiring, and guidelines for pay—could be determined to amount to “indirect control” over the terms and conditions of the suppliers’ employees’ employment.
- Likewise, companies would be wise to examine the labor practices and employment conditions of the staffing agencies and subcontractors to determine whether there is a risk of union organizing activity.
- Similarly, franchisors should assess agreement provisions that may dictate the manner and method of work performed by a franchisee to assess the risk of an “indirect control” finding.