As widely reported in the media and labor law updates, at the end of August, the NLRB issued its long-awaited decision in Browning-Ferris. The NLRB found that Browning-Ferris (BFI) was a joint employer with its supplier/contractor – Leadpoint Business Services. Although most commentators expected an expansion of the definition of “joint employment”, the breadth of the Board’s “re-interpretation” of the joint employment standard raises significant issues for employers who rely on temporary or contract workers to supplement their regular workforce.
The purpose of this summary is not critique the decision, which was ably covered by the dissenting Board members. Rather, this summary is intended to evaluate the various “control” factors cited by the Board in Browning-Ferris as “evidence” that a joint employer relationship exists. This should enable clients to assess their vulnerabilities with their supplier/employer relationships. In addition, this summary will identify the potential legal pitfalls raised by the Board’s expansion of joint employment relationships.
For purposes of the analysis below, “supplier/employer” refers to the contractor-employer, like Manpower, that supplies temporary or contract workers. “User/employer” refers to the employer using the temporary or contract employees supplied by the supplier/employer.
Summary of NLRB’s Browning-Ferris Decision
The case involved BFI’s recycling facility at Newby Island, which employs 60 employees. Most of BFI’s employees work outside the facility. BFI contracts with Leadpoint Business Services, who supplies contract employees to work inside the recycling center. Leadpoint employees manually sort the materials on conveyor belts, clear jams, and clean the facility. The BFI employees are represented by the Teamsters, who filed an RC petition seeking to represent the Leadpoint employees. The Regional Director concluded BFI and Leadpoint were not joint employers, and the Union filed a request for review of that decision. The election was conducted with the ballots impounded pending resolution of the joint employer issue. The NLRB’s decision reversed the Regional Director, concluded that that BFI and Leadpoint were joint employers, and ordered the ballots opened.
The factors cited by the Board in support of its joint employment finding included an expansive analysis of “direct” control and “indirect” control, without any cogent analysis of which facts or factors were deemed more significant to the joint employer finding. The Board’s analysis, therefore, opens the door for most user/supplier relationships to be challenged as joint employment relationships. Absent a reversal of the decision by a federal Court of Appeals, the Board has likely made use of temporary or contract employees a quagmire for the employment community.
- What factors will establish a joint employment relationship?
Unfortunately, the sweeping language in the decision does not lend itself clarity in terms of which factors were considered significant to the Board’s joint employment finding. The Board simply cited a standard definition of joint employment, that is, a joint employment relationship exists when two employers “(A) share or codetermine those matters governing the (B) essential terms and conditions of employment” over a group of employees. The Board embraced a sweeping “totality of the circumstances” test, without providing any clarity on which factor or factors may be more heavily weighted or dispositive. It is the broad application of this “joint employment” test that raises numerous pitfalls that exist in most user/supplier relationships:
- Share or codetermine:
Prior to Browning-Ferris, it was commonly accepted that both the user and supplier employers had to actually exercise control to support a finding that joint employers “shared or codetermined” terms and conditions of employment. Under the Board’s revised test, if the user employer has reserved “control” (meaning the user employer had the potential to exercise control (contractually or otherwise), even if it did not exercise such control, and/or possesses “indirect control”, a joint employment relationship appears likely. In support of this broader definition, the Board noted that “control”, regardless or whether or not that control is actually exercised, was consistent with common law “master-servant” definitions indicative of an employment relationship.
- As an example, in support of its finding BFI was a joint employer with Leadpoint, the Board noted that BFI exercised “control” over hiring decisions because BFI retained the right to require Leadpoint to ensure applicants met BFI’s hiring standards, including drug screens, retained the right to prohibit the hiring of workers deemed by BFI to be ineligible for re-hire (such as former BFI employees terminated for cause), and BFI retained the right to reject any Leadpoint worker sent to BFI for any or no reason.
- The Board also concluded BFI controlled termination decisions because BFI retained the right to remove Leadpoint employees for “any reason”. In addition, on two occasions, BFI supervisors requested that Leadpoint employees be removed from the facility (even though the BFI supervisors contacted a Leadpoint supervisor and did not directly discipline the employees). Based on the reserved right to control, and the indirect exercise of that control, the Board concluded BFI retained “control” over termination decisions of Leadpoint employees.
- Indirect Control over wages. The Board concluded that because BFI imposed a ceiling on wages paid to Leadpoint employees (by paying Leadpoint on a cost-plus basis), and because Leadpoint sought BFI’s approval to grant a wage increase (in response to new minimum wage legislation), BFI controlled Leadpoint employees’ wages.
- Some of the factors that may lead to a joint employment finding are listed below based on the NLRB’s new “joint employer” analysis. Notably, these factors that are typical in many user/supplier agreements:
- Having the ability to reject temporary employees or to ask the supplier/employer to remove employees.
- Establishing the qualifications of the temporary employees.Requiring a drug test of temporary employees.
- Setting forth a maximum wage scale to be paid to temporary employees
- Provisions that the user/employer establishes work shifts.
- Requiring temporary employees to comply with the user/employer’s safety and training procedures.
- Having the primary employer’s supervisors supervise the temporary agency’s employees.
- Exercising “control” over the speed of work performed by the temporary employees.
- Controlling "essential terms and conditions of employment"
The Board will evaluate whether the user/employer exercises direct or indirect control over the terms and conditions of employment of the supplier/employer’s employees to evaluate whether a joint employment relationship exists. “Terms and conditions of employment” appear to be the Board’s broadest definition of those terms -- what are historically considered to be mandatory subjects of bargaining with a union, including:
- Direct/indirect control over hiring
- Direct/indirect control over firing
- Direct/indirect control over discipline
- Direct/indirect control over Supervision
- Direct/indirect control over day to day work instructions, work direction or work assignments
- Direct/indirect control over wages, including agreements with wage caps, cost plus agreements or other provisions affecting worker compensation
- Direct/indirect control over hours scheduled or worked, including overtime
- Direct/indirect control over the number of workers supplied
- Direct/indirect control over the method and manner of work performance
For example, BFI was found to be a joint employer because it exercised control over supervision, direction of work and hours for Leadpoint employees. The Board reached this finding because BFI controlled the flow of product through sorting streams, and maintained productivity standards, purportedly urging Leadpoint employees to work faster. Under the Board’s rational, because these subjects are amenable to bargaining, and Leadpoint did not control these issues, finding BFI as a joint employer would further of federal labor policy by permitting bargaining over these topics with BFI.
In addition, the Board also cited the fact that BFI controlled: (1) what tasks were to be performed by Leadpoint employees; (2) where Leadpoint employees were stationed; (3) the number of Leadpoint employees assigned to work; (4) the timing of Leadpoint employee shifts; and (5) when overtime was necessary. The Board found BFI controlled these terms and conditions of employment even though BFI provided such direction through Leadpoint supervisors. In a nutshell, under the NLRB’s analysis, putting temporary employees on a work schedule comparable to regular employees, directing what assignments temporary employees will perform and determining where temporary employees will work appears to amount to “direct or indirect control” over terms and conditions of employment sufficient to support a joint employment finding (even if that direction is given via the supplier employer’s supervisors).
Using this analytical framework, the vast majority of contractor relationships would seem to now fall under the Board’s joint employer standards. The exceptions might be where a user employer uses an entire temporary or leased workforce, including supervisors.
- Legal Pitfalls
Given the breadth of the decision, employers using contractor employees or temporary employees, must now be aware of the following potential pitfalls:
- A joint employment relationship means joint liability for labor and employment law violations
If the NLRB test is upheld, supplier and user employers become jointly liable for violations of federal labor law. For example, if a manager of the supplier employer unlawfully threatened a contract worker concerning activities protected under the NLRA (such as signing a union card), both employers would be liable for that violation. This has repercussions for union avoidance campaigns, bargaining orders due to labor law violations, and objections leading to re-run elections.
In addition, it can be expected that if the NLRB’s test is upheld, the Department of Labor, the EEOC and state agencies will embrace a comparable definition, which would lead to expanded liability under various federal and state employment laws (such as statutes prohibiting race or sex discrimination, including claims of sexual harassment, age discrimination, FMLA violations, disability claims, and wage-hour claims such as overtime claims).
- Expanded voting units in union elections. Employers must be aware of the potential need for early detection systems of possible union activity among their own employees, as well as temporary or contract employees. Part of the underpinning of the Browning-Ferris decision is the Board majority’s belief that temporary workforces are underserved by federal labor law. The majority noted that the existing definition of joint employers “foreclosed collective bargaining even in situations where it would be productive”, and criticized employers for attempting to “insulate themselves from legal responsibility to workers while maintain[ing] control of the workplace”. The decision is clearly intended to maximize organizing opportunities for unions seeking to organize temporary workers, implicitly suggesting that by organizing such employees, unions will be able to bring both the supplier/employer and user/employer to the bargaining table. In light of this, both the supplier/employer and user/employer will be required to have early detection systems in place, along with appropriate training to managers on the respective “do’s and don’ts” under federal labor law given that both the supplier/employer and user/employer’s managers are potentially jointly liable for unfair labor practices. In addition, as joint employers, it should be easier for unions to now claim that temporary workers in existing bargaining units should simply be accreted into those bargaining units.
- Uncertain bargaining obligations. The Board’s decision raises questions concerning the supplier/employer and user/employer’s actual bargaining obligations. The example provided by the dissent involved a cleaning company serving multiple clients. During the 1990’s, the Board attempted to address temporary workers through MB Sturgis (pursuant to which the Board found that multi-employer consent was NOT required for bargaining). Under Sturgis, however, joint employers were only required to bargain over those issues that each employer actually controlled. Given the expansive definition of “control” in Browning-Ferris (direct and indirect), it can be expected that the Board will find both employers are required to be at the table, negotiating over all terms and conditions of employment controlled by either employer. It can safely be assumed that the Board’s prohibition on non-consensual multiemployer bargaining will not survive in light of Browning-Ferris, and the Board’s invitation of briefs in Miller & Anderson which should address that precise issue. However, this leaves open the question raised by the dissent - what is the bargaining unit and bargaining obligation for one supplier/employer serving multiple clients, particularly if the supplier/employer is deemed a joint employer with some, but not all, of its customers?
- Elimination of secondary boycott protections. The Board’s new joint-employer doctrine will eliminate many secondary boycott protections currently in place, in that now more entities will become primary employers, thereby exposing those entities to labor disputes not directly involving their employees. As a result, those entities will no longer receive the protections of 8(b)(4) and (e) of the National Labor Relations Act, which protect neutral parties from being subjected to “secondary” picketing and other threats, coercion and restraint that have an object of forcing one employer to cease doing business with the other. This concern was again noted by the dissent by reference to a cleaning company having a labor dispute with a union. Currently, the union would be prohibited from direct picketing of one of the client companies because the client company would be a secondary employer, and therefore, picketing the client would run afoul of secondary boycott restrictions. If the client is deemed a joint employer, both the cleaning company and the client are primary employers, and may be lawfully targeted by a union for picketing.
- Replacing unionized contractors may constitute unlawful discrimination. A user/employer is typically free to terminate contracts with and replace supplier/employers if the supplier/employer’s employees become unionized even if motivated by anti-union motivations. As joint employers, the user/employer would no longer be free to do so as that action would constitute discrimination against the now joint employees. Thus, even replacing contractors is likely to lead to increased litigation with user/employers being required to justify and defend their business reasons for doing the same.
The Browning-Ferris decision will be challenged on appeal. If the decision is upheld, the fallout from the decision will be dramatic, significantly affecting traditional contractor relationships. Over the short-term, both users and suppliers of contract or temporary workforces will need to review their applicable service agreements, as well as the actual day-to-day “practice” on the floor to assess the “control” factors indicative of joint employment, with an eye toward limiting those factors. In the real world, however, limiting the "direct" and "indirect" control will prove challenging, with the likely outcome that many more joint employment relationships will be found.