The NLRB’s New Joint Employer Test: Why Your Company May Have to Bargain with Workers Who Aren’t on Your Payroll

On August 27, 2015, the National Labor Relations Board (“NLRB”) published Browning-Ferris Industries of California, Inc., 362 NLRB 186 (2015), which redefined the “joint employer” doctrine as it had been known for the last thirty years. In that case, the specific question before the NLRB was whether BFI, a recycling company, was the joint employer of workers employed by a staffing agency to which BFI had subcontracted work.

The joint employer doctrine provides that two or more employers may be joint employers of the same employees if they share or codetermine the employees’ essential terms and conditions of employment. For the last thirty years, the NLRB has interpreted this narrowly to mean that the two employers must directly and immediately exercise control over workers in order to be deemed joint employers. Under the old standard, both employers must therefore actively participate in hiring, firing, disciplining, or otherwise controlling workers’ employment conditions.

The Browning-Ferris decision does away with this standard. Instead, a company could be a joint employer if it merely has reserved authority to control the terms and conditions of employment of the employees of another employer. The Board will look closely at any contractual relationship to see what rights the company may exercise over the outsourced workers, even if the company never actually does so. Additionally, joint liability may be found even where an employer only exercises indirect control over the workers of the other employer. If an entity is a joint employer that controls terms and conditions of employment, the employer may be required to bargain with the outsourced workers’ union on the terms and conditions of employment that it has the authority to control.

Here are the factors that the NLRB found indicative of control in the Browning-Ferris decision:

• Hiring, Firing and Disciplining: BFI reserved a contractual right requiring the staffing agency to follow BFI’s selection procedures and to drug-test all applicants. BFI also retained the right to reject any worker for “any or no reason” or to “discontinue the use of any personnel” that the staffing agency had assigned. Although managers testified that BFI never discontinued use of an outsourced employee and had never been involved in disciplinary proceedings, record evidence showed two specific instances where a BFI manager reported worker misconduct to the staffing agency and “requested their immediate dismissal.” In response, the staffing agency dismissed the employees.

• Supervision and Direction of Work: BFI was found to exercise control over the processes that shaped the day-to-day work of the outsourced employees. Of particular importance was BFI’s unilateral control over the speed of the production lines and specific productivity standards for sorting recyclable materials. It was particularly bothersome to the NLRB that the speed of the line and the resultant productivity issues had been a source of strife between BFI and the outsourced workers.

• Wages: BFI paid the staffing agency via a “cost-plus contract” pursuant to which BFI paid the agency each outsourced worker’s wage plus a specified percentage mark-up. The staffing contract provided that while the staffing agency determined the pay rates paid to its personnel, the staffing agency could not pay an hourly wage in excess of the wage paid to BFI’s own employees. BFI thereby effectively placed a ceiling on the amount of wages that the staffing agency could pay its employees, and required approval for worker pay raises.

• Scheduling and Hours: Although the staffing agency scheduled which employees worked each shift, BFI determined the shift schedules. BFI also determined when the production line stopped running so that outsourced employees could take a break.

Many of the factors that the NLRB found indicative of control are common in situations in which work is performed by the employees of subcontractors, franchisees, or employment agencies. Companies that regularly subcontract work or use outsourced labor should re-examine their practices and policies in light of Browning-Ferris.

On a broader scale, this decision is indicative of a new trend in labor and employment law: courts, administrative agencies, and the plaintiffs’ bar are expanding the joint-employer doctrine to capture ever more “employers.” For example, last year the Washington Supreme Court expanded the joint employer doctrine with regard to wage and hour claims. These decisions may make it easier for plaintiffs to find deeper pockets, or to exert more influence on the putative employer in demanding better work conditions.

On October 27, Karr Tuttle Campbell’s Labor and Employment Department will host a seminar about this topic. Click here to learn more about this seminar or register to attend.