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NLRB’s Joint Employer Decision Adds Complexity to Legal Landscape

The National Labor Relations Board’s recent ruling in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), lays out a new standard for the meaning of “joint employer.” 

Before Browning-Ferris, the NLRB recognized a joint employer relationship where “two separate entities share or codetermine those matters governing the essential terms and conditions of employment.” TLI, Inc., 271 NLRB 798, 798 (1984); Laerco Transportation, 269 NLRB 324, 325 (1984). In short, an employer had to play a direct role in decisions like hiring, firing, discipline, supervision, and direction. In a substantial redefinition, the NLRB concluded that a joint employer relationship could exist, even if the organization had only indirect control of the employee. In broadening the standard to include employers who may only have an indirect affect on an employees’ terms and conditionsthe Browning-Ferris decision will sweep many more entities under the “joint employer” category. 

Background and Decision

Browning-Ferris Industries of California, Inc., operates a waste recycling facility in Milpitas, California and subcontracts employees from Leadpoint Business Services to sort recyclables and perform basic housekeeping functions inside the facility. The Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters, a union that represented 60 of Browning-Ferris’ direct employees, petitioned to represent Leadpoint Business Service’s 240 subcontracted workers.  Browning-Ferris countered, arguing they did not directly set pay rates or provide benefits for those 240 employees. The Teamsters' petition was rejected by the NLRB’s regional director.

However, the Board reversed that decision, and with it, announced a new standard redefining the term “joint employer” to include any company that exercises direct, indirect, or potential control over employees’ working conditions, or where “industrial realities” make the participation of the putative joint employer necessary for meaningful bargaining to occur. The new standard evaluates: (1) whether a common-law employment relationship exists; and (2) whether the putative joint employer “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.” Control can be established either directly or indirectly, such as through an intermediary or through contractual provisions that preserve the right to control, whether or not that right is ever exercised. The NLRB acknowledges these standards will have to be evaluated on a case-by-case basis.

In evaluating Browning-Ferris’ relationship to the subcontracted employed, the Board found it to be a joint employer, because they maintained several controls:

  • Browning-Ferris could reject any worker Leadpoint referred to its facility.
  • Although it did not make work assignments, it had unilateral control over specific productivity standards, which the Board described as a “clear and direct connection between BFI’s decisions and employee work performance.”
  • Leadpoint was contractually restricted from paying more than Browning-Ferris employees who performed the same work.
  • Browning-Ferris set safety standards for onsite Leadpoint employees.

Implications for Public Employers in Washington

In Washington State, the Public Relations Employment Commission (PERC) continues to apply a direct control test when determining if a joint employer relationship exists. That test examines the amount and extent of control the entity exerts over the final position on subjects of bargaining. For PERC, the test for “control” involves factual questions. North Mason School District, Decision 2428-A (PECB, 1986). In short, the entity must have “the final say” over the core subjects of bargaining.  Tacoma School District, Decision 3314-A (PECB, 1990). PERC case law has maintained that control test for two decades, and thus far, has shown little inclination to change course. It should be noted, however, that PERC has not revisited the joint employer test for nearly a decade and the Commission has routinely followed NLRB precedent in this and other matters. As we await the full implications the Browning-Ferris ruling – including whether PERC will adopt this approach - public employers might consider possible steps to reduce risk, including:

  • Ensure that any contract for services dictate the ends, and not the means, of the assigned task and specifically do not dictate the wages, work quality, number of employees or work processes for contractor’s employees.          
  • Any employment action – to evaluate the employee, discipline, or terminate termination - should be the responsibility of the contractor. An agreement may require removal for performance or safety issues, but the determination of termination or disciplinary action should remain with the contractor. 
  • Avoid contracting for work that is similar to the duties performed by the public employer’s employees.

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About Sarah I. Hale

Sarah I. Hale writes for MRSC as a HR Advisor.

Sarah I. Hale is an attorney with Summit Law Group, Seattle. Summit Law Group is concentrated on representing management in the entire range of employment law matters.

The views expressed in Advisor columns represent the opinions of the author and do not necessarily reflect those of MRSC.