The NLRB’s Adoption of a New Rule for Determining Joint-Employer Status is a Game Changer
September 9, 2015
In its decision issued on August 27 in Browning-Ferris Indus., Inc. of California, the National Labor Relations Board (NLRB or the Board) jettisoned the standard the Board had developed and used over the past 30 years for determining joint-employer status and adopted a new and significantly more expansive standard. For roughly the past 30 years, the Board has looked beyond boilerplate reservation of rights and control provisions in temporary/contingent labor service agreements and focused on the actual practice of the parties, requiring evidence of direct and immediate control over employees and requiring evidence that the exercise of such control is substantial, not limited and routine, before finding the “user” party to such agreements to be a joint employer with the provider party. Not anymore. As the NLRB expressly acknowledged in the decision, “we have modified the legal landscape for employers.” Boy is that an understatement - it may fairly be said that the decision does not simply “modify” the landscape, rather it renders the landscape entirely indiscernible.
The Board articulated its new standard as follows: “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.” The Board went on to explain that “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.” With respect to applying the standard, the Board noted, “Issues related to the nature and extent of a putative joint-employer’s control over particular terms and conditions of employment . . . are best examined and resolved in the context of specific factual circumstances.” The Board brushed aside criticisms voiced by the dissenting members that “there can be no certainty or predictability regarding the identity of the ‘employer’”; and, it plainly gave the Board no pause that “multifactor common-law inquiries are inherently nuanced and indeterminate.” In that regard, the Board simply quoted and concurred with the Supreme Court, stating: “In such a situation as this there is no shorthand formula or magic phrase that can be applied to find the answer, but all of the incidents of the relationship must be assessed and weighed with no one factor being decisive. What is important is that the total factual context is assessed in light of the pertinent common-law agency principles.”
The nightmare created by the Board’s adoption of an indefinite, indeterminate, multi-factor standard that necessarily requires a fact specific case-by-case analysis hardly requires elaboration. What merits attention is that the Board’s ultimate holding in the case - namely, that Browning-Ferris (d/b/a BFI Newby Island Recyclery (“BFI”)) was a joint employer with its contingent-labor supplier Leadpoint Business Services - cannot be disregarded on the assumption that the holding reflected some sort of unusual or atypical contingent labor agreement or unique circumstances in the way BFI and Leadpoint administered their agreement in the day-to-day operations at the recycling facility. To the contrary, anyone familiar with temporary/contingent labor service agreements will recognize the language from the agreement under consideration in the case as standard boilerplate in these types of agreements. Likewise, the anecdotes recounted by the Board as informing the analysis of whether BFI shared or codetermined matters governing the essential terms and conditions of employment at the facility.
For example, with respect to hiring, the Agreement required Leadpoint to ensure that its personnel “have the appropriate qualifications (including certification and training) consistent with all applicable laws and instructions from [BFI], to perform the general duties of the assigned position.” Under the Agreement, BFI also had the right to request that personnel supplied by Leadpoint “meet or exceed [BFI's] own standard selection procedures and tests.” With respect to discipline, while the Agreement provides that Leadpoint has sole responsibility to counsel, discipline, review, evaluate, and terminate personnel who are assigned to BFI, it also grants BFI the authority to “reject any Personnel, and . . . discontinue the use of any personnel for any or no reason.” With respect to safety, the Agreement provides that Leadpoint must require its employees to comply with BFI’s safety policies, procedures, and training requirements; at the same time, the Agreement provides that BFI “reserves the right to enforce the Safety Policy provided to [Leadpoint] personnel.” These examples should suffice to show that the contractual provisions the Board deemed material to the analysis are commonplace and hardly atypical.
Likewise, the anecdotes highlighted in the Board’s decision to support its holding that BFI was a joint employer recount scenarios that routinely occur at plants and facilities with operative contingent labor agreements. For example, as evidence of the fact that BFI exercised direct and immediate control over disciplinary matters notwithstanding contractual language assigning sole responsibility for discipline to Leadpoint, the Board pointed to an email from a BFI Operations Manager [Keck] to Leadpoint CEO Ramirez, stating that he observed two Leadpoint employees passing a pint of whiskey at the jobsite. Keck also contacted a Leadpoint Manager, who immediately sent the two employees for alcohol and drug screening. Leadpoint subsequently investigated the matter and terminated one employee and reassigned the other. There is nothing unusual about the scenario depicted here with respect to how daily operations play out at facilities in which contingent employees, who are supervised and managed by employees of the contingent workforce provider, work alongside employees of the “user” party to the labor agreement.
The point of all this is to say that companies that use contingent/temporary employees under the terms of third-party contingent labor services agreements cannot close their eyes to the broad sweeping ramifications of the NLRB’s decision in Browning-Ferris. Both the agreement at issue in Browning-Ferris and the way the agreement was carried out as a practical day-to-day manner are ubiquitous. Changes in the legal landscape such as this fundamentally affect the parties’ agreements as to risk allocation as embodied in the terms of their contingent labor service agreements and present a need for both the users and suppliers of contingent labor to conduct an audit of their agreements themselves, along with their implementation.
