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The NLRB’s Latest Decision on the Joint-Employer Standard Signals Increased Complications for Companies That Use Temporary and Subcontract Workers

December 1, 2015

By Candace D. Embry, Esq.*

 

Key Points

  • Use of temporary or contract workers has increased in workplaces nationwide.
  • Contractual agreements that name the supplying organization as sole employer of temporary workers may not be sufficient to insulate employers from liability to temporary workers.
  • In Browning-Ferris Industries (BFI) of California, the NLRB returns to a broad interpretation of “joint employer,” subjecting unsuspecting employers to potential liability for temporary workers.

 

On August 27, 2015, the National Labor Relations Board announced a decision that will primarily impact companies and organizations that outsource temporary or contract workers when it revised the standard used to determine joint-employer status under the National Labor Relations Act (NLRA). Under this revised standard, the NLRB may find that “two or more statutory employers are joint employers of the same statutory employees ‘if they share or codetermine those matters governing the essential terms and conditions of employment.’”

While this decision is ultimately a restatement of the NLRB’s prior rule on joint employer status, the major change arises from the fact that the Board will no longer require that a putative joint employer both possess and exercise the power to control an employee’s terms and conditions of employment. Rather, this decision permits a joint-employer determination where a putative joint employer possesses that authority, even when it does not exercise that authority. The NLRB interpreted this restatement as necessary in light of the changing landscape of the American workforce and as a preservation of the Board’s long-standing view regarding joint-employer status, which had become muddled following decades of inconsistencies and narrower interpretations than initially intended.

Dating back to 1965, the NLRB and the courts used this “share or co-determine” formulation to decide in many cases that control over a worker’s terms of employment, whether or not that control was exercised, was indicia of a joint-employer relationship. Over the last 30 years, however, the Board has introduced additional requirements that have collectively narrowed the joint-employer standard—focusing its attention on whether that control was actually exercised and requiring that the control be direct, immediate, and not “limited and routine.” Using this restrictive approach, the Board has determined that a joint-employer relationship did not exist even in some cases where the contract between two parties expressly provided the putative employer with the power to dictate the terms and conditions of a worker’s employment.

As this standard continued to narrow, the use of workers through staffing or subcontracting agencies increased dramatically. In its decision, the NLRB cited statistics noting that workers employed through temporary staffing agencies now make up two percent of the nation’s workforce. Temporary workers are also now used in a larger variety of occupations, and the employment services industry is expected to become one of the largest and fastest growing industries over the next eight years. With this in mind, the Board considered that an ever-narrowing approach to defining joint employers risked failing the Board’s responsibility of adapting the NLRA to the “changing patterns of industrial life.”

Application of the new or restated rule requires considering whether an employment relationship exists pursuant to the NLRA and whether the putative joint employer possesses sufficient control over an employee’s essential terms and conditions of employment to permit meaningful collective bargaining. In spite of even the best contract, a finding in the affirmative would, according to the new or restated standard, require unsuspecting companies and organizations that use temporary or contract workers to potentially recognize these workers as employees and to bargain with a union representing a group of these employees, should one form.

In Browning-Ferris Industries (BFI) of California, the decision that sparked this change, BFI contracted with a supplier firm (Leadpoint) to provide additional workers for its recycling facilities. The agreement between the two companies stated that Leadpoint was the sole employer of the workers it supplied. The arrangement provided for separate management, hiring and disciplinary procedures of these employees, among other important employment factors. However, BFI was able to influence each of these areas by requiring specified qualifications, determining wage caps and suggesting disciplinary measures to be taken against workers. In light of these considerations, the Board found that BFI maintained control over the essential terms and conditions of these workers’ employment and exercised that control both directly and indirectly, therefore, making BFI a joint employer with Leadpoint pursuant to the NLRA.

In its decision–which made the Board recognize the inherent challenges of navigating these multi-party employment relationships–the NLRB ultimately reiterated its duty to “encourage the practice and procedure of collective bargaining.” The Board also boldly noted they are not responsible “to guarantee the freedom of employers to insulate themselves from their legal responsibility to workers, while maintaining control of the workplace.”

While courts are not bound by decisions of the NLRB, they often are greatly influenced by them. With this in mind, it is imperative that businesses that utilize staffing agencies and/or subcontractors seek legal assistance in navigating the increased complications of maintaining both their independence from temporary workers and a workplace that still accomplishes its intended goals.

*Candace is an associate in our Philadelphia, Pennsylvania office. She can reached at 215.575.2884 or cdembry@mdwcg.com.

Defense Digest, Vol 21, No. 4, December 2015

Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2015 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

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