United States: How Will Browning-Ferris Change The Test For Joint-Employer Status For Union And Non-Union Employers?

In a ruling that will affect most business relationships and extends far beyond either labor law or the concept of employment generally, the National Labor Relations Board ("NLRB" or "Board") issued a much awaited decision today,  Browning-Ferris Industries of California ("Browning-Ferris"), 362 NLRB No. 186 (August 27, 2015), found here, that expansively broadened the definition of who is a joint employer -- an otherwise unrelated entity that does not hire, fire, supervise or determine the wages and benefits of another employer's employees but that nevertheless bears responsibilities to those employees under the National Labor Relations Act ("NLRA" or the "Act"). 

Under the Board's newly expanded test, a 3-2 majority (Chairman Mark Gaston Pearce and Members Kent Hirozawa and Lauren McFerran) held two or more otherwise unrelated employers may be found to be a joint employer of the same employees under the NLRA "if they 'share or codetermine those matters governing the essential terms and conditions of employment.' In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining."   Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the decision has broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OSHA.      

Case Background

This case arose after the International Brotherhood of Teamsters, Local 350 (the "Union") filed a representation petition seeking to represent sorters, housekeepers and screen cleaners employed by Leadpoint, a subcontractor performing sorting, screen cleaning, and housekeeping work.  The Union's petition claimed that Browning-Ferris, a waste and recycling services company, was a joint employer with Leadpoint because it contracted with Leadpoint to obtain temporary labor to sort materials, clean the screens on the sorting equipment, and otherwise clean the recyclery.   

After a hearing, the Regional Director for NLRB Region 32 issued a decision and direction of election holding that -- under established law and agency principles  -- Leadpoint was the sole employer because, among other things, it alone recruited, hired, counseled, disciplined, reviewed, evaluated, and terminated its employees.  As  a result, an election was held to determine whether Leadpoint's employees wanted to be represented by the Union.  The ballots, however, were impounded after the election because the Union filed a request for review of the Regional Director's decision that Browning-Ferris and Leadpoint were not joint employers.  The Board granted the petition for review on April 30, 2014, and issued its decision today.   

The Board's Established Joint-Employer Doctrine

Until today, the Board's joint employer doctrine has comported with the law of agency: a putative employer was found to be a joint employer if there was a showing that the putative employer "meaningfully affect[ed] matters relating to the employment relationship, such as hiring, firing, discipline, supervision and direction."  Laerco, 269 NLRB 324, 325 (1987).  Thus, two or more entities were joint employers if they "share[d] or codetermine[d] those matters governing the essential terms and conditions of employment."  Id. No single fact was dispositive in determining control over employees' terms and conditions of employment.  Rather, the question of joint employer status needed to be assessed based on the "totality of the facts of the particular case."  Southern California Gas Co., 302 NLRB 456, 461 (1991).

The Board's Holding

In today's decision, the three Member Board majority opined that it "decided to restate the Board's legal standard for joint-employer determinations and make clear how that standard is to be applied going forward."  The majority's new test purports to "return to the traditional test used by the Board ... 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 [.]"

Importantly, however, the Board "will no longer require that a joint employer not only possess the authority to control employees' terms and conditions of employment, but must also exercise that authority, and do so directly, immediately, and not in a 'limited and routine' manner. Accordingly, we overrule Laerco, TLI, A&M Property, and Airborne Express, supra, and other Board decisions, to the extent that they are inconsistent with our decision today. The right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect."

In dissent, Board Members Philip Miscimarra and Harry Johnson found the majority decision to be contrary to Congressional intent, common law understandings of co-employment relationships, and Board and court precedent.  Perhaps most significantly, the dissent argues that the majority opinion impermissibly resurrects an "economic realities" test specifically rejected by Congress in enacting the 1947 Taft-Hartley amendments to the NLRA.  Moreover, in practical terms, the dissent believes that the majority's new test is "impermissibly vague and overbroad and will have substantial adverse consequences" to employers, putative contractors, and employees alike.  

Implications of the NLRB's Ruling

The NLRB's decision vastly expands the types and number of entities that can be held responsible for unfair labor practice violations and who may be held to have collective bargaining obligations regarding employees of a totally separate, independent employer.  Notwithstanding what the Board claims to be accomplishing, in actuality it is recasting the joint employer test from one based upon a close reading of actual relationships between the alleged joint employers; and, instead, considering what their relationship might be expanded to encompass.  Then, based upon that speculation, the Board's decision bootstraps such possible relationships into a concrete joint employer finding.

Every industry sector and business is potentially affected by today's decision, including those who -- in reliance on Supreme Court precedent and over 30 years of settled NLRB law -- have structured their business arrangements with the understanding that absent the direct control necessary for a true employer-employee relationship, the entity will not be a joint employer under the NLRA. For example, today's decision potentially affects, among others, the following:

  • Any business that regularly uses contractors, such as a cleaning or janitorial services, maintenance services, caterers, or a management company to staff and operates its business;
  • Investors, real estate holding companies and general contractors;
  • Any entity that outsources some of the non-core work integral to its business model, such as a manufacturer that contracts with a trucking company for shipping;
  • Any entity that uses a staffing agency to obtain additional or temporary help;
  • Any franchisor that contracts with others via franchise agreements; and
  • Any entity with a relationship to a subsidiary or other corporate entity.

In addition, the NLRB's decision may be a precursor to the approach taken by other government agencies:

  • The NLRB's expanded concept of a "joint employer" parallels recent efforts by the U.S. Department of Labor, Wage and Hour Division (WHD).  With a particular focus on franchisors, contractors, and businesses in the restaurant, construction, staffing, agricultural, janitorial and hotel industries, WHD is seeking to hold large companies responsible for wage and hour compliance as to individuals whose services they benefit from--regardless of whether a direct employment relationship exists.  Guidance this summer from the WHD on how to distinguish employees from independent contractors reflects a similarly sweeping view of what counts as an employment relationship. The WHD's theory--if the courts accept it--could support a dramatically expanded joint employer doctrine that might require businesses to defend wage and hour claims by individuals whom they have never considered their employees.   
  • In its amicus brief, the Equal Employment Opportunity Commission (EEOC) urged the Board to abandon its prior standard and adopt the common law agency test used by the EEOC under Title VII.  While the EEOC's test is broader than the previous NLRB standard, both tests focus on actual control of the essential terms and conditions of employment.  Since the Board has now removed this critical counterweight in favor of a new standard based on "potential" or "unexercised" control over the employment relationship, the EEOC will almost certainly see it as an opportunity to expand its own definition of joint-employment and to take a more aggressive enforcement stance against potential joint employers -- both at the administrative level and in litigation.  This would translate to significant expansion of existing and future investigations, including broad and expensive requests for information and potentially even subpoenas for information that is not readily accessible by most employers.  It could also mean new EEOC-initiated and class/collective actions against employers that exercise little or no control over their contingent workforce.
  • The Office of Federal Contract Compliance Programs (OFCCP) will use the decision to bolster the five-factor "single entity" analysis it uses to exercise jurisdiction over businesses that do not hold federal contracts.  Specifically, the NLRB's ruling will have implications for the following factors: 1) whether one entity has de facto day-to-day control over the other through policies, management or supervision of the entity's operations; 2) whether the personnel policies of the entities emanate from a common or centralized source; and 3) whether the operations of the entities are dependent on each other (e.g., services are provided principally for the benefit of one entity by another or the entities share management, offices, or other services).
  • We have seen an increase in litigation alleging that various entities are joint employers under ERISA, thereby arguably entitling various excluded individuals to benefits under plans.  While language in many benefit plans may address this risk, it is unclear whether this new standard announced in Browning-Ferris will change this analysis, or at the very least motivate excluded "employees" to pursue claims for additional benefits in litigation.  


Whether in this or another case, the federal appellate courts and the Supreme Court will likely eventually review today's approach by the NLRB and any eventual similar decisions by other government agencies.

Actions to Take

In response to today's decision, every business should assess the risk of joint employer liability with its suppliers, vendors, contractors, franchisees, service providers or others.  There is no single or simple solution to the issue; each relationship will need to be considered in light of -- as the NLRB puts it -- the "industrial realities" to develop the most effective responses.  In the meantime, businesses that want to respond proactively and attempt to protect themselves from today's decision, may want to take several steps:

  • Review and modify service agreements with third parties;
  • Ensure that third parties establish separate terms and conditions of employment, employment policies and employee handbooks; 
  • Distinguish the work performed by your employees from the work performed by the other entities' employees;
  • Where possible, establish payment structures for service providers not based on wage rates and hours of work rendered by non-employees; and
  • Consider broad indemnification agreements with third parties.

While each situation will be unique and require a thoughtful analysis of the facts, relationships with third parties and business needs, steps can be taken to reduce the risk of a joint employer determination.

Conclusion

Today's decision has significant implications for the economy and the ways that organizations structure their business operations.  Businesses should prepare now for the potential that they must defend against organizing drives and unfair labor practice charges filed not only by their own employees, but against similar claims naming them their contractors, subcontractors, franchisees, vendors and other entities who contract with them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.