As you may have read, the NLRB has changed its definition of what is a "joint employer" relationship. In the labor law context, this may come up, for example, when the Board decides what is an appropriate unit for bargaining or voting. Additionally, a joint employer may have to bargain alongside its co-employer about the employment conditions under its "joint" control. Joint employers also can be jointly liable for unfair labor practice decisions and more.
"Joint" employer is when there are two separate entities, owned and managed by different enterprises. But they both exercise sufficient control over a group of workers that they are considered "jointly" responsible for issues that arise. A "single" employer or "integrated enterprise" on the other hand, usually refers to when there are related entities, like parents and subsidiaries, that are deemed one enterprise. An "alter ego" is when one entity pretends to be unrelated to another, usually to disguise itself and avoid liability.
Joint employer relationships often come up in the context of temporary agencies, or when an employer subcontracts some of its work to a separate company, such as cleaning.
In the case under consideration, Browning-Ferris Industries operated a recycling plant. They employed their own employees, who operated forklifts, loaders and other equipment. Inside the facility, there are a series of conveyor belts that sort the recycled materials. BFI hired another company, Leadpoint, to staff the conveyor belts. The Leadpoint workers cleaned the facility, sorted the materials and performed other work. A union sought to represent the Leadpoint workers. The same union already represented the BFI employees mentioned above.
BFI and Leadpoint had a written agreement, under which Leadpoint was the employer of its workers. Here are some of the provisions:
- Leadpoint had its own supervisors and managers on site.
- Leadpoint management scheduled its workers
- Leadpoint evaluated its own employees' work.
- Leadpoint had its own HR manager on site.
- Leadpoint made all hiring decisions, but BFI provided criteria / job qualifications
- BFI imposed hiring criteria including a drug panel and skills test
- Leadpoint made all discipline and termination decisions, although BFI requested a couple of discharges after catching Leadpoint employees engaged in misconduct at the facility.
- Leadpoint set pay rates with employees, but BFI's agreement provided the maximum it would reimburse Leadpoint.
- BFI set the hours of operation of the plant and the shift times. But Leadpoint scheduled the employees.
The Board undertook an historical analysis of the joint employer test. It found that the Board over the years had narrowed the test to exclude many relationships that were "joint employers" under older Board and case law. The Board then announced its "new" rule, which it argues is really a "return" to the old rule:
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. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may “share” control over terms and conditions of employment or “codetermine” them, as the Board and the courts have done in the past
So, there are two prongs. First, what is "employer within the meaning of the common law?" The Board quoted from the Restatement of Agency:
a servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other’s control or right to control.
The Board emphasized that, going forward, it would merely look to the "right" to control, rather than the exercise of control. So, BFI owns the equipment, sets the starting and ending times, and has its own quality and management standards in play in its own plant. Does BFI always have the "right" to control its own property and, therefore, the sub's employees to one degree or another? Probably yes, right? I think that's the way the Board wants it. Am I just trying to scare you? Nope. From the opinion:
The common law, indeed, recognizes that control may be indirect . For example, the Restatement of Agency (Second) §220, comment l (“Control of the premises”) observes thatSo, that is the outer limit of what an employee is, but it's not enough to ensure joint employer status. Hence the second prong: "share or codetermine those matters governing the essential terms and conditions of employment." Here, the Board decided to return to prior case law that expanded the list of criteria it considers relevant to "share or codetermine."
[i]f the work is done upon the premises of the employer with his machinery by workmen who agree to obey general rules for the regulation of the conduct of employees, the inference is strong that such workmen are the servants of the owner... and illustrates this principle by citing the example of a coal mine owner employing miners who, in turn, supply their own helpers. Both the miners and their helpers are servants of the mine owner.
Essential terms indisputably include wages and hours, as reflected in the Act itself.82 Other examples of control over mandatory terms and conditions of employment found probative by the Board include dictating the number of workers to be supplied;83 controlling scheduling,84 seniority, and overtime; 85 and assigning work and determining the manner and method of work performance
The Board overruled at least four decisions "and others" that conflict with its new standard.
Then, the Board turned to BFI and found, yes, it is a joint employer with Leadpoint.
- Re hiring, BFI required drug testing, asked Leadpoint not to hire those BFI previously employed and deemed ineligible, and BFI could reject anyone brought to its premises.
- Re discipline and termination, BFI could report to Leadpoint employees whom BFI felt should be disciplined or discharged.
- Re working conditions, BFI had the right to control its conveyor belt, including the speed at which it operated. BFI held meetings with Leadpoint employees to provide feedback and training. And because BFI set the shift times and decided how many workers were needed to staff the plant, those were indirect indicia of control.
- Re wages:
Under the parties’ contract, Leadpoint determines employees’ pay rates, administers all payments, retains payroll records, and is solely responsible for providing and administering benefits. But BFI specifically prevents Leadpoint from paying employees more than BFI employees performing comparable work.111 BFI’s employment of its own sorter at $5 more an hour creates a de facto wage ceiling for Leadpoint workers. In addition, BFI and Leadpoint are parties to a cost-plus contract, under which BFI is required to reimburse Leadpoint for labor costs plus a specified percentage markup.112 Although this arrangement, on its own, is not necessarily sufficient to create a joint-employer relationship,113 it is coupled here with the apparent requirement of BFI approval over employee pay increases.114
The Board's decision is 3-2. Two Members dissented in an opinion that expressed more than a touch of concern about the affect the majority's decision may have on labor law. Here are a couple of excerpts from the beginning of the dissent:
Today, in the most sweeping of recent major decisions, the Board majority rewrites the decades-old test for determining who the “employer” is. More specifically, the majority redefines and expands the test that makes two separate and independent entities a “joint employer” of certain employees. This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing.
What do you really think, dissenters?
no bargaining table is big enough to seat all of the entities that will be potential joint employers under the majority’s new standards.
But, the majority said that the Board is merely returning to an existing set of precedents, right?
today’s majority holding does not represent a “return to the traditional test used by the Board,” as our colleagues claim even while admitting that the Board has never before described or articulated the test they announce today. Contrary to their characterization, the new joint-employer test fundamentally alters the law applicable to user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships under the Act. In addition, because the commerce data applicable to joint employers is combined for jurisdictional purposes,11 the Act’s coverage will extend to small businesses whose separate operations and employees have until now not been subject to Board jurisdiction.
This decision will mean more collective bargaining, and that can't be bad! Can it?
The Act encourages collective bargaining, but only by an “employer” in direct relation to its employees. Our colleagues take this purpose way beyond what Congress intended, and the result unavoidably will be too much of a good thing. We believe the majority’s test will actually foster substantial bargaining instability by requiring the nonconsensual presence of too many entities with diverse and conflicting interests on the “employer” side. Indeed, even the commencement of good-faith bargaining may be delayed by disputes over whether the correct “employer” parties are present. This predictable outcome is irreconcilable with the Act’s overriding policy to “eliminate
the causes of certain substantial obstructions to the free flow of commerce.”
The dissent then goes into great detail to explain its reasons for why the new Board decision is so problematic, contrary to the Board's authority, and how it will have unintended consequences. But I have a day job so I cannot summarize it all here.
This case likely will be appealed to the court of appeals. So we will see it it is enforced. The courts are very deferential to board decisions, however. So, the odds are that this is another major shift in labor law. Or "fundamental transformation" as someone might say.
This case is Browning-Ferris Indus. of Calif. and the opinion is here.
