United States: NLRB Blows Up Staffing Agency Model: Rewrites Joint-Employer Test

Last Updated: September 16 2015
Article by Todd Lebowitz

Boom!

In a 3-2 decision, the National Labor Relations Board spontaneously redefined joint employment in a way that threatens to turn almost every company that works with a staffing agency into a joint employer for collective bargaining purposes.

Throwing a gigantic bone to unions, the NLRB overturned 30 years of its own precedent to create an "unprecedented" and "ambiguous" new world order that, according to the two-member dissent, "promises to effect a sea change in labor relations and business relationships."

In Browning-Ferris Industries of California, the Board considered a scenario in which Browning-Ferris retained a staffing firm, Leadpoint, to supply labor at a recycling facility. The staffing firm did all hiring, firing, supervising, scheduling, disciplining, evaluating, assigning, and training of its personnel.

Browning-Ferris, on the other hand, did little more than run its core business, controlling the speed at which product ran on its assembly lines and requiring that any worker hired by the staffing agency follow Browning-Ferris's safety rules. Browning-Ferris also required the staffing agency's workers to be drug-free. (Tyrants!)

Before issuing its decision, the Board expressed concern over the rapid growth of the contingent workforce model in the modern economy. The Board decried the expanded use of nonemployee labor from staffing agencies. Union membership is not nearly as high as it used to be. (Early drafts of the decision also bemoaned the untimely demise of the telegraph and the "Dick Van Dyke Show.") The three-member Democratic majority wrote (presumably in ink, with a freshly plucked quill) that because of this newfangled way of doing business, the joint-employer standard that the Board had followed for the past 30 years "does not best serve the Act's policies" anymore. "This development is reason enough," wrote the majority (its black-and-white Zenith humming softly in the background) "to revisit the Board's current joint-employer standard."

The Board ruled that companies and their staffing agencies may be deemed joint employers even when the staffing agency controls almost all the roles typically handled by an employer – hiring, firing, disciplining, scheduling, etc. The Board ruled that the limited control Browning-Ferris exerted over the staffing agency's employees was enough to make it a joint employer, because Browning-Ferris could have exercised more control if it wanted to, even though it never did and never had.

The Board claimed it was applying a common law right-to-control test to reach its decision, which on its face sounds reasonable. Common law right-to-control tests are commonly used to determine whether someone is an employee or an independent contractor. But over the past 30 years, the Board had consistently evaluated joint employment based on a real-world assessment of how the two entities actually oversaw the work force. Where a staffing agency controlled all routine aspects of employment, no joint employment would be found.

This decision blows everything up. The Board took the most minute and insignificant aspects of control exerted by Browning-Ferris and elevated their importance to a point where nearly every company that retains staffing-agency workers is now at risk of being deemed a joint employer. In the NLRA context, a finding of joint employment means that both companies – despite being completely separate and independent – would have to sit at the bargaining table with the putative union to collectively bargain over terms and conditions of employment.

"This change," the exasperated dissenting members explained, "will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have [and] to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements."

With charts, diagrams, and bullet-pointed outlines, the dissent explained in detail how this new scheme is unworkable in the real world. Who sits at the bargaining table? What is the bargaining unit? What if the company and staffing agency disagree? Which employer participates in NLRB proceedings? What happens when the staffing agency gets new clients? What if those new clients have other staffing agencies or other pre-existing bargaining obligations? The list of questions and problems consumes page after page in the dissent.

The dissent concluded by warning of the "potentially massive economic implications" of this decision. The long-term consequences remain to be seen. For now, those companies that engage staffing agencies, as well as staffing agencies themselves, need to prepare themselves for a greatly increased risk that they may be deemed joint employers that are required to collectively bargain – collectively.

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.

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