NLRB Decision on Standard for Joint Employers Impacts the Staffing Industry and its Clients
On August 27, 2015, the National Labor Relations Board eased its joint employer standard. Pursuant to its Browning-Ferris Industries decision, a company will now be considered a joint employer under the National Labor Relations Act (NLRA) if it exercises indirect control over terms and conditions of employment or if it has reserved the authority to exercise control. The previous test required that a joint employer exercise direct and immediate control over working conditions, as opposed to merely possessing the right to do so.
The Board was asked to determine whether Browning-Ferris Industries (BFI), owner and operator of the Newby Island Recycling facility, was a joint employer with Leadpoint Business Services, a temporary staffing agency, in a union representation petition covering Leadpoint’s employees. BFI contracted with Leadpoint to supply workers under a temporary labor services agreement. In a 3-2 vote, the Board found that the two companies were joint employers, highlighting BFI’s indirect control over terms and conditions of employment of the temporary employees Leadpoint assigned to BFI.
The Board applied a two-prong test stating that two or more entities will be joint employers of a single workforce if (i) they are both employers within the common law meaning, and (ii) they share or codetermine matters governing essential terms and conditions of employment. The second prong of this test focuses on whether the client of the staffing firm possesses sufficient control over employees to qualify as a joint employer. In making this determination the Board will consider, among other factors, whether the client has exercised, or reserved the right to exercise, control over terms and conditions of employment through the staffing firm. Essential terms and conditions of employment include hiring, firing, discipline, supervision, direction, and scheduling, among others.
Although BFI lacked direct control over the employees’ day-to-day working conditions, the Board ruled that joint employer status existed because BFI indirectly, through its contract with Leadpoint, codetermined employee wages, hours, and other conditions of employment. BFI also enforced production standards, assigned shifts and set working hours of Leadpoint’s assigned employees. The Board justified its decision to overturn established precedent by asserting that the previous test was out of step with changing economic circumstances, particularly the growth in contingent employment relationships. The dissent and critics have cautioned that this decision will create uncertainty in many business relationships. If this decision stands, not only will staffing clients be exposed to potential joint liability for unfair labor practices and breaches of collective bargaining agreements under the NLRA, but other administrative agencies, including OSHA and the Department of Labor, may now also refer to the Board’s expansive approach to determining joint employer status.
Lawmakers in the Senate and House of Representatives have already taken action to attempt to limit the impact of this Board decision; however, until the matter is resolved with finality, staffing firms and clients should be conscious of the potential effect the terms of their contracts and actions may have.
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