The National Labor Relations Board (“NLRB”) just overturned 30 years of precedent and set out a standard which expanded the zone of employer liability for violations of the National Labor Relations Act (“NLRA”). In yet another flagrant attempt to revitalize dying Unions, the NLRB’s new definition of joint employer could shake the foundations of many Employers across the board, including Ag processors, commercial packing houses, coolers, wineries; and other secondary commercial operations which would fall under the NLRA.
The previous 30-year old standard required that an employer must exercise direct and immediate control over the terms and conditions of employment in order to be considered an employer subject to liability and any bargaining duty under the NLRA. Under the new standard articulated by the NLRB, a company will be considered a joint employer if it merely possesses an unexercised right to directly or indirectly control the terms and conditions of employment even if it has not exercised that right. For example, if a processor contracts with a labor provider/staffing company and the service contract contains provisions which reserve the processor’s right to reject formerly terminated employees, reserve the right to audit timecards, or to directly deal with safety or food safety issues; any of these terms will likely deem the processor a joint employer.
The case which set out this new precedent involved a recycling plant, Browning-Ferris Industries (“BFI”), which used a labor contractor, Leadpoint Business Services (“Leadpoint”) to supply its labor force. Leadpoint independently controlled all human resources functions subject to a limited number of quality control provisions in its service contract. BFI reserved the right to reject employees that it had previously terminated, to directly intervene in cases of safety violations, and to approve and audit timecards billed to it.
The NLRB here found that many of these common sense, practical contractual terms between the companies showed that BFI had at least the indirect right to exercise indirect control over the workers so as to subject them to a duty to bargain under the NLRA. Based on the NLRB’s interpretation of this situation, it is difficult to see how a contract could be written between a labor supplier and a company that would not incur joint employer liability. Most of the contractual provisions in Browning-Ferris were present only to protect Browning’s legitimate business interests in safe, efficient production and to ensure that it is not being defrauded by its labor supplier.
In overturning the existing precedent, the NLRB had to cite treatises and law from a time when the relationship between an employer and employee was described as master and servant. Oblivious to the irony, the NLRB cited changing modern economic circumstances and subcontracting arrangements as one of the reasons the change. While the Board claims that its new standard is based on the old common law standard of an employment relationship, it is only reviving a version of the “economic realities” test previously rejected by the U.S. Supreme Court which states that a party is a joint employer where the economic realities of the relationship would not permit meaningful collective bargaining without that party’s presence. This new standard provides no guidance to real-world employers who need practical guidelines on how to structure labor contracts.
One major complication of this new standard is the practical considerations in collective bargaining between so many putative joint employers. As the dissent pointed out, “no bargaining table is big enough to seat all of the entities that will be potential joint employers under the majority’s new standards.” This new standard provides no guidance as to weighing which factors of control are determinative rather than probative. Defining the parameters of a labor contracting agreement inevitably exercises some manner of indirect control. With no requirement that a supposed joint employer possess control over a certain number of terms and conditions, several tangentially connected parties could be dragged into bargaining based on potential indirect control of a single term of employment. This creates serious opportunities for conflict in bargaining where two or more “employers” are at the bargaining table. It disrupts previously existing bargaining relationships by bringing in new parties and interests and does more to disrupt labor peace than to promote it. The dissent raises several important questions as to the standard’s practical effects:
1. How many contracts will be required?
2. How does this affect secondary boycott doctrine?
3. How does this affect Arbitration agreements?
4. How does this affect contributions to benefit funds?
5. Will the unfair labor practices of one party affect the bargaining relationship or election between two other parties?
Counsel To Management:
The NLRB has taken the immediate action of amending ULP’s already in process to name joint employers. Browning-Ferris came to the NLRB as a representation case which means the board decision is not directly appealable to the courts. On September 4, 2015 the Teamsters Local 350 won the election for certification as the employee’s bargaining representative. Browning-Ferris will need to refuse to bargain with the Teamsters in order to have a court review the underlying certification. However, this is a process that could take years and would do nothing in the meantime to prevent the NLRB from proceeding based on its new standard.
With so many businesses facing liability, the NLRB will find enemies everywhere except organized labor. The new standard threatens businesses of all sizes that use labor contractors, and staffing solutions of any kind. With such a broad standard, it is extremely difficult to advise companies on how to avoid being considered a joint employer for the purposes of the NLRA. While specific facts will drive all such cases; levels of discretion and oversight reserved will now drive the analysis rather than whether such oversight and discretion was ever exercised. Let’s face it….even in the most disciplined “arms-length” relationship under one roof, interaction and discussion happens regularly and consistently to drive result oriented NLRB in this regard. We therefore have to plan to defend all actions from the beginning of our contractual relations and walk in lock-step on compliance, HR safety, food safety and most of all….UNION AVOIDANCE.