NLRB Ruling Radically Redefines Joint Employer Test for Employers Using Staffing Agencies
December 10, 2015
Imagine that you are an employer who is supplied temporary workers by a staffing agency. You have contractual language in your agreements with the staffing agency that reserves to you only limited control over the temporary workers (such as with regard to the number of employees to be supplied by the agency or with regard to scheduling). Moreover, you never actually invoke the contractual authority to determine the terms and conditions of employment for these temporary workers. In other words, you never invoke actual, direct control over the temporary workforce. All authority you possess is purely theoretical and potential. You are, simply put, “hands-off.” If the staffing agency is found liable under the National Labor Relations Act, such as for unfair labor practices or for violations of its collective bargaining agreement with the workers, you are not jointly responsible, are you?
As of the National Labor Relations Board’s ruling earlier this year in Browning-Ferris Industries of California, Inc., the answer to the above question is yes. You are responsible as a joint employer, even if you never exercised actual and direct control over any temporary workers. In the case in question, the named respondent, Browning-Ferris Industries, used workers that had been supplied by a separate staffing agency and in so doing turned over to the staffing agency all control over the employer-employee relationship, save for the limited contractual ability to “discontinue the use of any personnel for any or no reason.” The National Labor Relations Board (“Board”) ruled 3-2 that this circumstance created a joint-employer relationship due to the potential for exercising control over the workers, such that Browning-Ferris would have to negotiate with the Teamsters union at the facility in question.
This ruling was a major departure from the Board’s long-standing test for determining joint-employer status, namely, whether the control exerted over workers was actual, direct, and immediate. This departure is likely to have significant impact on employers who utilize temporary workers and other staff supplied by third party agencies and vendors, insofar as it greatly increases the likelihood that - even without any alteration of existing policies and practices - such employers will be considered joint employers of workers with employment terms and conditions which they might not have ever actually dictated or influenced. Indeed, even the relative economic power of the principal company vis-a-vis the staffing agency or vendor it uses - and thus merely its unexercised potential ability to influence terms and conditions of employment for a staffing agency’s workers - can establish joint-employer status under the Board’s new standard.
The response to this significant ruling has been widespread and urgent, as one would expect given its impact on business interests and employers. The ruling itself contained several critical observations from the dissenting Board members, and since the ruling was issued there has been recent congressional activity seeking to return the Board to its prior standard (the House Education and the Workforce Committee in October 2015 approved the Protecting Local Business Opportunities Act, which at this point still has a long road to travel before it could ever become law). The majority, which was heavily influenced in its ruling by an amicus brief from the Board’s General Counsel, took the position that it was simply returning to the standard initially intended for the Board in determining joint-employer status. The majority did not believe that the long-standing direct-control requirement was truly compelled and believed that it could thus be abandoned. However, the majority arguably went well beyond the scope ever envisioned for the Board in assessing joint-employer status, and the dissent argued that the ruling was contrary to the original congressional intent. Moreover, as a practical matter, the new ruling sets aside the relative clarity and predictability of the prior standard in favor of uncertainty, destined to confound employers and furthermore produce unintended consequences in the broader economy.
Employers in a broad range of industries would be well-advised, in light of this ruling, to revisit their structures, agreements, and policies to protect against the unintended expansion of joint-employer liability to situations involving the unexercised potential or theoretical - even if not actual - indirect control over workers otherwise subject to the direction of other employers (e.g., staffing agencies and franchisees). While congressional activity and litigation might eventually erode some of the changes wrought by this new ruling, employers cannot afford to wait and see before adjusting to the new guidance.
