Less than two years ago we commented on the inability of the National Labor Relations Board (NLRB or Board) to gather a legally sufficient legal quorum, let alone promote the pro-union agenda that both US business and labor groups expected from an NLRB appointed by President Obama. What a difference a year - and a constitutionally valid 3-2 majority of union-backed appointees - makes.
In Browning-Ferris Industries of Californiad/b/aBFI Newby Island Recyclery, 362 NLRB No. 186 (Aug. 27, 2015), the NLRB reversed longstanding precedent to broaden the circumstances under which a union can demand joint bargaining with both a staffing agency (or other labor supplier) and the client that contracts for the agency's labor.1 This is easily the most pro-union decision of the NLRB under President Obama. A copy of the decision is available here.
As a result, companies who use contractors to perform labor--either core labor, such as agency workers used to supplement regular employees on a factory floor, or ancillary labor, like cafeteria workers on a university campus--will find themselves embroiled in union negotiations. All that is now required is that the client company (that is, the one hiring the labor supplier) has an "indirect" or even "reserved" right to control the essential terms and condition of workers' employment. As discussed below, this is intended to be a very broad test.
In this Advisory, we will briefly discuss the background of the NLRB's Browning-Ferris decision, what the case holds (and what it does not hold), and what industries and staffing practices are likely to be most affected by this expansive new doctrine. We will finally discuss some potential "workarounds" to the Browning-Ferrisdecision, although continuing NLRB scrutiny will make all but the most detached staffing arrangements vulnerable to joint-employer status. Following convention, we will describe the company that contracts for another company's services as the "client" company, and the company providing that service as the "supplier." Examples of "supplier" companies include temporary and staffing agencies, on-site service vendors providing security, food, or cleaning services, and tech industry "body shops."
It all started in the 1960s at four Greyhound Bus terminals in Florida. The Greyhound Corporation contracted with a local company to provide cleaning and maintenance services. The employees were on the payroll of the cleaning company, but the interstate bus company set schedules, specified the number of employees required, and provided most day-to-day supervision of the workers (indeed, the cleaning company did not have permanent on-site supervisors). In addition, Greyhound had the right to reject cleaning company personnel it found inadequate-a right it had in fact exercised. After several rounds of litigation, both the NLRB and the courts agreed that Greyhound and the cleaning company were joint employers and, as such, the union representing the workers could demand joint bargaining with both companies. See Greyhound Corp., 153 NLRB 1488, 1495 (1965), enf'd, 368 F.2d 778 (5th Cir. 1966), related proceeding reported sub nom. Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964), rev'g injunction granted at 205 F.Supp. 686 (S.D. Fla. 1962), aff'd 309 F.2d 397 (5th Cir. 1962).
Despite various union attempts to read Greyhound and the joint-employer doctrine broadly, the NLRB historically required a high degree of shared control by the client and supplier companies before a joint bargaining obligation could be found. Over the years, the NLRB rejected arguments that "limited and routine" oversight of a supplier's workers could create joint employment. Instead, the NLRB found that "direct and immediate" control of the supplier's employees was required. In addition, contractual provisions permitting various forms of control over supplier employees were disregarded unless the evidence showed the client company actually exercised that control. Thus, the Board found that the following arrangements did not create a joint-employer relationship:
- A contract by which local delivery companies delivered express overnight packages to their final destination, even though payments to the local delivery companies were based largely on wage rates, and the express company even imposed a "maximum wage" on the local company.
- A warehouse company's agreement with a staffing agency to provide truckers who would drive routes determined by the warehouse company.
- A building management company's services agreement with a cleaning company, under which the building manager would frequently make direct requests of the cleaning company's employees.
- An outsourcing agreement in which a logistics company provided terminal and delivery services for dangerous chemicals on a cost-plus basis.
As we will see below, all of these cases would almost certainly be decided differently under the new standard announced last week in Browning-Ferris. (Indeed, the cases providing the first three examples were expressly overruled in Browning-Ferris, and the Board discusses the case spawning the fourth example as if it were obviously decided in error.)