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Joint Employment: NLRB Ruling Poses New Risks for Employers

Companies that contract with other companies to provide workers may be tagged as “joint employers” liable for issues not of their own making.

For employers dealing with worker relationships, federal and state employment and labor laws pose a confusing, frequently changing array of requirements, prohibitions and other risks.

The complexity of employment laws and regulations can reach extraordinary heights when companies utilize staffing services, independent contractors, subcontractors, temporary agencies, leased workers or other non-traditional working arrangements. In such cases, courts, government agencies and employers often must wrestle with the question of who actually employs the company’s workers and, thus, must comply with the obligations that come with the employment relationship.

Under the doctrine of “joint employment,” that may not be an “either/or” question; in a growing number of cases, the answer may be that the workers actually have more than one employer.

NLRB Ruling

In its recent ruling involving Browning-Ferris Industries, the National Labor Relations Board (NLRB) announced a new standard for determining whether employees will be considered to be jointly employed.

Under the BFI ruling, the NLRB will consider a company a joint employer if the company either (a) actually exercises control over workers or (b) reserves the right to do so, even indirectly, even if it has never exercised that authority. Two of the five NLRB members, who expressed concerns about the expansive nature of this new standard, dissented from the decision.

The BFI decision involved workers engaged to work at BFI’s recycling plant through a staffing agency, Leadpoint. While BFI solely employed a number of employees at the plant, Leadpoint supplied some of the workers who performed certain jobs. When a labor union attempted to organize employees at the worksite, the union contended that both Leadpoint and BFI should be required to engage in collective bargaining.

The NLRB ruled for the union, finding that, based on the contract between BFI and Leadpoint, the two companies were joint employers.

Under the contract between BFI and Leadpoint, BFI delegated to Leadpoint a number of decisions, such as hiring, firing and wage determinations. BFI provided certain criteria to Leadpoint in making those decisions, such as requiring drug testing and other minimum qualifications for workers. BFI also had the right to terminate its arrangement with Leadpoint at any time and had the right to ensure that Leadpoint’s workers’ wages were within the range of wages for BFI’s own employees.

In the view of the NLRB majority, those contractual features were sufficient to find joint employment, even though there was no evidence that BFI had actually used its abstract contractual authority to dictate employment policies or practices.

Implications for Employers

The NLRB’s decision holds significant implications for companies that have business arrangements in which they partner with others. Examples of such arrangements include:

  • hiring employees through temporary employment agencies;

  • utilizing independent contractors or subcontractors who have employees;

  • outsourcing certain job functions; and

  • having franchisor/franchisee relationships.

In the view of the dissenters, the decision could reach even further, even affecting relationships that are seemingly as arm’s length as landlord/tenant. As a common example, a company might be held responsible for back pay as a result of a business partner terminating an employee for something as seemingly innocuous as a refusal to sign a confidentiality agreement that the NLRB views as overly broad. As in BFI’s case, the company could ultimately be faced with having to bargain with a union representing workers that, as far as the company knew, were not even its employees.

BFI may appeal the decision in federal court but, as of the date of this article, it had not yet done so. As a result, the decision of the agency is in full force and effect.

Contract Review

In addressing the potential consequences of this new standard, employers should seek the help of an experienced employment attorney in reviewing their ongoing arrangements with staffing companies, outsource providers, contractors and subcontractors to determine whether they may be subject to unintended joint employment relationships.