September 10, 2015
There has been buzz for many months about the likely decision of the National Labor Relations Board (NLRB) to expand the definition of “joint employer” under our federal labor laws. Two weeks ago, the U.S. House of Representatives Subcommittee on Health, Employment, Labor and Pensions held a field hearing in Savannah entitled “Redefining ‘Employer’ and the Impact on Georgia’s Workers and Small Business Owners.” Ironically, on the same day the hearing took place, the NLRB released its decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), which effectively redefines who is an employer under the National Labor Relations Act (NLRA).
First, a little background: The NLRB enforces the NLRA, passed in 1935, which preserves the right of employees to join a union and collectively bargain regarding their wages, hours, and other terms and conditions of employment. The NLRB has broad jurisdiction over most private employers throughout the United States. While unionization in America is at an all-time low, the NLRB has steadily expanded its reach by overturning decades of its own legal precedent in a number of areas, including the confidentiality of witness statements, the scope of appropriate employee bargaining units, and the timing and procedures for union elections.
The NLRB has pursued its agenda through the agency rulemaking process and through the decisions in particular cases before it. Two companies whose cases have been closely followed are Browning-Ferris Industries of California, Inc. (BFI) and McDonald’s, USA, LLC. For both, the central question before the NLRB is whether the companies are joint employers of another entity’s workers.
In Browning-Ferris, the International Brotherhood of Teamsters (IBT) sought to represent employees of a subcontractor, Leadpoint Business Services, at one of BFI’s recycling facilities in California. Arguing that BFI was necessary for meaningful collective bargaining, the IBT contended that BFI was a joint employer with Leadpoint. The Board agreed.
In its decision, the NLRB overruled 30 years of precedent in this area, finding its “joint-employment jurisprudence increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships [temporary or contract workers].” Browning-Ferris Industries of California, Inc., 362 NLRB No. 186. Thus, the NLRB turned to common law principles to determine whether an employment relationship exists – in this case between the putative employer (BFI) and the employees of Leadpoint.
According to the Board, the fundamental analysis centers on who has the right to control – directly or indirectly – the employees, even if that right is not exercised. Using this analysis, the NLRB found that BFI did have the requisite right to share control of, or co-determine, the essential terms and conditions of employment for Leadpoint’s employees.
Some of the factors that the Board found supported BFI’s status as a joint-employer included: Leadpoint’s employees had to pass a drug screen, and BFI could request a written certification of the completion of the drug screen; BFI retained the authority to reject or discontinue use of any Leadpoint employee for any or no reason; Leadpoint was forbidden from paying its employees higher than BFI employees who performed similar tasks; BFI determined the shifts that Leadpoint employees worked; BFI had to sign off on the accuracy of the hours of service summary submitted by Leadpoint; BFI dictated the number of Leadpoint employees to be assigned certain tasks and set productivity standards; and BFI trained and counseled Leadpoint employees on specific issues following customer complaints.
As BFI was a joint-employer with Leadpoint, the NLRB required BFI to bargain collectively with the IBT in the event the union won the election.
There are also multiple NLRB cases pending that involve McDonald’s, USA, LLC’s relationship to employees of certain McDonald’s restaurant franchisees. Most franchisors justifiably seek to protect the company brand and the quality of their products and services, regardless of whether they are selling french fries or hotel rooms. This business interest often leads franchisors to provide extensive training on operations and customer service to their franchisees, which are by their nature separate and distinct legal entities.
Did McDonald’s, USA, LLC reserve too much control over the independently operated restaurants’ employees? Although each case must be determined on its own facts and circumstances, the NLRB will no doubt use its newly minted standard from Browning-Ferris to make its rulings, which ultimately may have profound impact on the viability of the franchise as a business model, no matter the industry.
A party may appeal an NLRB decision to a federal appellate court, and there is already talk of legislation to combat what is perceived by many observers to be an activist board. For the moment, however, the NLRB’s new joint employer standard is alive and well and applies broadly to all businesses where subcontractors, staffing agencies, temporary workers, and leased employees are used.
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