Sep 14, 2016

An Evolving Standard: Joint-Employment

By: Allison Mann

Joint-employment is a legal phenomenon whereby a single employee is considered to be employed by two or more employers. The standards for judging joint-employment have been in constant evolution, but almost one year ago, the NLRB issued an opinion that contained a new test in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015).

Before talking about the new standard, it is important to understand the previous standard. A joint-employment relationship would be found if the putative employer could meaningfully affect matters related to the employment relationship, such as hiring, firing, discipline, supervision and direction. However, previous decisions focused on whether that control was “direct and immediate.” In many cases, the NLRB found that there was no joint-employment relationship where the control exercised was indirect or only potential. In other words, a company needed to not only possess the authority to control, but had to also exercise that authority.

The NLRB has now abandoned this position.

The Browning-Ferris Opinion:

In Browning-Ferris there were two employers, BFI and Leadpoint. BFI is a California waste disposal company. BFI’s employees are unionized. Leadpoint is a staffing agency. BFI hired Leadpoint to provide temporary workers to collect recyclables off a conveyor belt in one of the buildings. Because the Leadpoint employees did not work directly for BFI, they were prohibited from joining the union. The union was not pleased, and it petitioned the NLRB for review.

The NLRB revised its old standard. Instead of requiring that the putative employer actually exercise control over the employee, it was sufficient that the employer merely possessed indirect or potential control of the employee. It used a two-part test to make this determination: (1) whether there is a common law employment relationship with the employee in question, and (2) whether the putative joint employer possesses sufficient control over employee’s essential terms and conditions of employment to permit meaningful collective bargaining.

After reviewing the facts, the NLRB found that BFI had “significant control” that was both direct and indirect over hiring, firing, discipline, supervision, direction of work, hours, and wages of employees. That control was sufficient under the common law for there to be an employment relationship. The court then found that this control was significant enough to warrant collective bargaining. Therefore, BFI was a joint employer of the employees hired by Leadpoint. This means that the Leadpoint employees working at BFI have the right to join the union with the BFI employees, and collectively bargain as to those areas where BFI had control including hiring, firing, discipline, supervision, direction of work, hours, and wages.

The Takeaway:

The NLRB revised its standard “to better effectuate the purposes of the Act in the current economic landscape.” It is the NLRB’s position that the requirement of direct, exercised control served to “significantly and unjustifiably narrow the circumstances were a joint-employment relationship can be found.”

This decision has far-reaching effects. It will likely affect any business that uses independent contractors, companies that outsource work, entities that use staffing agencies, franchisors and companies with parent/subsidiary relationships.

So what should employers look out for today?

First, be aware about the terms and conditions of “employment” contracts with other business entities. It would be helpful to reassess those contracts with a focus on issues of control. Reassess whether there is any direct control (employee must receive a wage of $15 per hour), potential control (ABC Company may adjust employee wages if it sees fit), or indirect control (employee wages will be no more than $20 per hour).

Second, be aware of the changing law. Browning-Ferris has left us with many unanswered questions. It is unclear how this test may be used to apply to certain factual situations. The relative importance of each factor is unclear. It is not clear if there must be some direct control, or if indirect and potential control alone suffice to establish a common law employment relationship. It is likely that we will see answers to these questions in the coming years.

Third, if a joint-employment relationship under the new test does exist, a company is required to collectively bargain in good faith with those employees. Those employees will be permitted to join an existing union, and bargain with that union.

Last, do note that the new decision only affects the standards applied by the NLRB. It is not binding on other federal agencies. There is no indication that other agencies are going to adopt this decision, so as of now, the only real effect is to that of collective bargaining. However, this could change in the future.

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Reprinted with permission from an article submitted for publication in the September, 2016 Southwest Area Human Resource Association newsletter.