NLRB's "Joint Employer" Case Matters to Non-Union Employers, Too

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. 

Before you decide this is "union stuff" and irrelevant, remember that courts may use the "joint employer" doctrine to impose liability on one company for the discrimination, sexual harassment, etc.  perpetrated by employees of another company.  The standards for transferring liability between separate companies (single employer, integrated enterprise, alter ego, joint employer) are influenced by NLRB decisional law.   So, this case could affect other areas of the law unrelated to union stuff.  Plus, the NLRB's reach continues to expand. Sooner or later, it is going to create more private-sector unionization unless the current trend is reversed. So, it pays to pay attention.

"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 that

[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.

So, 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." 

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.

NLRB Overrules Itself and Appropriates Companies' Email Systems for Employees' Protected Communications

In 2007 the National Labor Relations Board held, in The Guard Publishing Company, dba Register Guard, 351 NLRB 1110 (2007), that employers do not have to permit union organizing activity over their own email system.  Here's the essence of that decision:

An employer has a “basic property right” to “regulate and restrict employee use of company property.” Union Carbide Corp. v. NLRB, 714 F.2d 657, 663–664 (6th Cir. 1983). The Respondent’s communications system, including its e-mail system, is the Respondent’s property and was purchased by the Respondent for use in operating its business. The General Counsel concedes that the Respondent has a legitimate business interest in maintaining the efficient operation of its e-mail system, and that employers who have invested in an e-mail system have valid concerns about such issues as preserving server space, protecting against computer viruses and dissemination of confidential information, and avoiding company liability for employees’ inappropriate e-mails. * * * *In numerous cases, however, where the Board has addressed whether employees have the right to use other types of employer-owned property—such as bulletin boards, telephones, and televisions—for Section 7 communications, the Board has consistently held that there is “no statutory right . . . to use an employer’s equipment or media,” as long as the restrictions are nondiscriminatory. * * * *Accordingly, we hold that the Respondent may lawfully bar employees’ nonwork-related use of its e-mail system, unless the Respondent acts in a manner that discriminates against Section 7 activity.

Good times.  But, to paraphrase a talking head's recent statement in another context, "dude, that was like 7 years ago!"  Relying in part on "scholars," second only to referencing "studies" when justifying a peremptory exercise of raw power, the Board has overruled itself.  As a result, employers may not prohibit employees' personal use of email, during non-work time, about a host of subjects covered under section 7 of the National Labor Relations Act, including union activity.

The new decision, following a long tradition of colorful NLRB precedent names, is Purple Communications, Inc., 361 NLRB No. 126 (2014). There, the Company had an email policy that will remind you of your company's policy:

INTERNET, INTRANET, VOICEMAIL AND ELECTRONIC COMMUNICATION POLICY
Computers, laptops, internet access, voicemail, electronic mail (email), Blackberry, cellular telephones and/or other Company equipment is provided and maintained by the [sic] Purple to facilitate Company business. All information and messages stored, sent, and received on these systems are the sole and exclusive property of the Company, regardless of the author or recipient. All such equipment and access should be used for business purposes only.

Prohibited activities
Employees are strictly prohibited from using the computer,  internet, voicemail and email systems, and other Company equipment in connection with any of the following activities
2. Engaging in activities on behalf of organizations or persons with no professional or business affiliation with the Company.
. . . .
5. Sending uninvited email of a personal nature.

All agreed that the policy was lawful under Register Guard, by the way.  Rather, the union and NLRB's general counsel specifically asked the NLRB to overrule the prior decision.

Challenge accepted.  Here's the Board's ruling:

we will presume that employees who have rightful access to their employer’s email system in the course of their work have a right to use the email system to engage in Section 7-protected communications on nonworking time. An employer may rebut the presumption by demonstrating that special circumstances necessary to maintain production or discipline justify restricting its employees’ rights.66 Because limitations on employee communication should be no more restrictive than necessary to protect the employer’s interests,67 we anticipate that it will be the rare case where special circumstances justify a total ban on nonwork email use by employees. In more typical cases, where special circumstances do not justify a total ban, employers may nonetheless apply uniform and consistently enforced controls over their email systems to the extent that such controls are necessary to maintain production and discipline.

(emphasis mine)

I will spare you the detailed rationale. The opinion is above. But the gist of it is that email is a ubiquitous form of communication; employees have special rights to communicate at work about section 7 issues; and the special nature of email warrants treating it different from other company property like bulletin boards. And the employer's property rights must yield to section 7 rights.

Finally, the NLRB decided to apply its decision "retroactively" to pending cases.  So, employers must take action.

So, what does this change mean?

1.  Email policies must allow employees to communicate about activities protected by Section 7 of the National Labor Relations Act.  The catch is that Section 7 is very broad, and permits communications about "wages, hours, and other terms and conditions of employment."  That means, for example, that it's unlawful to prohibit employees' criticism of a boss related to working conditions, or to share salary information over email, and more.

2. The Board's decision applies only to employees.  It does not grant outsiders' access to the Company's email.  It may be, although this is unclear, it means that the employer can ban non-work-related communications over its email system with outsiders.

3.  The decision allows employers to prohibit use of its email system during working time, as long as the policy remains non-discriminatory.

4.  Employers must re-draft their electronic communications policies now, as this decision applies to the unionized and non-unionized workforce, at least those within the jurisdiction of the NLRB.

5. Employers are not required to grant email access to employees for the purpose of making such communications.

6. The decision does not apply to other types of communication (e.g., instant message, text). However, my prediction is that the Board will address those modes in another case.

7.  There will be litigation over what will qualify as allowed "uniform and consistently enforced controls over their email systems to the extent that such controls are necessary to maintain production and discipline."  So, prepare for more handbook updates.

8. The decision may be appealed to the U.S. Court of Appeals, which could decline to enforce it. But this case is Board precedent, which will guide future decisions by Administrative Law Judges.  Also, Courts of Appeals usually (almost always) enforce the Board's interpretation of the NLRA.

What of employer monitoring?

You may ask, rightly, whether an employer who monitors email will be accused of "spying" in violation of the NLRA.  Of course it will!  But, to its credit, the Board addressed this issue, and allows employers to continue email monitoring as a general practice, so long as it is not targeted at section 7-related communications, including of course union organizing activity:

Our decision does not prevent employers from continuing, as many already do, to monitor their computers and email systems for legitimate management reasons, such as ensuring productivity and preventing email use for purposes of harassment or other activities that could give rise to employer liability.73 The Respondent and some amici assert that such monitoring may make them vulnerable to allegations of unlawful surveillance of employees’ Section 7 activity. We are confident, however, that we can assess any surveillance allegations by the same standards that we apply to alleged surveillance in the bricks-and-mortar world. Board law establishes that “those who choose openly to engage in union activities at or near the employer’s premises cannot be heard to complain when management observes them. The Board has long held that management officials may observe public union activity without violating the Act so long as those officials do not ‘do something out of the ordinary.’”74 An employer’s monitoring of electronic communications on its email system will similarly be lawful so long as the employer does nothing out of the ordinary, such as increasing its monitoring during an organizational campaign or focusing its monitoring efforts on protected conduct or union activists. Nor is an employer ordinarily prevented from notifying its employees, as many employers also do already, that it monitors (or reserves the right to monitor) computer and email use for legitimate management reasons and that employees may have no expectation of privacy in their use of the employer’s email system.

So, it's not illegal to monitor for harassment, trade secret misappropriation, etc. 

Happy holidays!

Greg

U.S. Supreme Court: President's "Recess Appointments" to NLRB Were Invalid

The U.S. Supreme Court unanimously held that the President made invalid "recess appointments" to the National Labor Relations Board in January 2012. The Senate declared itself in recess for three-day periods during that month. The President then appointed three out of five members to the NLRB.

The Court's judgment - that the recess appointments were invalid - is unanimous. But only 5 out of 9 justices joined the majority opinion, written by Justice Breyer (joined by Justices Kennedy, Kagan, Sotomayor, and Ginsburg), Four justices, led by Justice Scalia (with Justices Thomas, CJ Roberts, and Alito), issued a separate opinion, disagreeing with the majority's conclusions regarding when recess appointments are valid.

This opinion is over 50 pages long, and it is mostly devoted to the history of the Constitution's recess appointments clause, and the way it has been used historically.  The upshot, however, is that the President has a lot of power to make recess appointments, but there has to be a sufficiently long recess. Moreover, the house of Congress that is controlled by the political party not in power may re-call the Congress from recess and thwart recess appointments. Checks and balances.

Because the appointments were invalid, the NLRB operated without a quorum for several months.  As a result, hundreds of decisions are invalid. It remains to be seen precisely what the NLRB will do with those decisions. The Board currently has a full compliment of members.  Therefore, recent decisions issued since the Senate confirmed the 5 members will be valid and enforceable.  We will update what happens next when we find out.

This case is National Labor Relations Board v. Noel Canning and the opinion is here. 

Federal Appeals Court Put Brakes on NLRB

The National Labor Relations Board was busy in 2012. The Board overturned a number of precedents and began to forge new law applicable to non-union employers.

But three of the five board members were appointed by President Obama on January 4, 2012, when the Senate was supposed to be in "recess."  (The federal Constitution empowers the president to make recess appointments.)

The only thing is, the Senate was not in recess, according to the D.C. Circuit.  A "recess," the court reasoned, requires a lengthy period, not just a day or two, which was the case in early 2012.

If this decision stands, the NLRB's decisions issued in 2012 likely are invalid.  All of 'em.

If you want to read the opinion in Noel Canning v. NLRB, it is here.  Otherwise, just take my word for it, k?