NLRB Reformulates the Legal Standard For Finding a Joint Employer

In Browning-Ferris Industries of Cal., Inc. and Sanitary Truck Drivers & Helpers Local 350, 362 NLRB No. 186 (2015), the National Labor Relations Board (Board) rejected 30 years of precedent and held that when deciding whether two separate companies can be treated as joint employers that are required to jointly bargain with a union under the National Labor Relations Act (Act), the Board will continue to consider whether the two companies "share or codetermine those matters governing the essential terms and conditions of employment." However, in making that determination, the Board will focus on the putative joint employer’s right to control the employees’ terms and conditions of employment, and not whether it actually exercised that right.

For the past 30 years, a joint employer finding required proof that the putative joint employer exercised actual control over the subject employees’ terms and conditions of employment (and not merely had the right to exercise such control), and that such control was "direct and immediate," as opposed to "limited and routine."

In adopting this new test, the Board observed that, "[w]here the user firm owns and controls the premises, dictates the essential nature of the job and imposes the broad, operational contours of the work and the supplier firm, pursuant to the user’s guidance, makes specific personnel decisions and administers job performance on a day-to-day basis, employees’ working conditions are a byproduct of two layers of control." The Board added that it will consider various forms of joint control, including (1) whether the companies genuinely share decision-making, (2) whether each company exercises comprehensive authority over different terms and conditions of employment and (3) whether one company retains a contractual right to set a term or condition of employment.

The Board emphasized that a joint employer would be required to bargain only with respect to such terms and conditions which it possesses the authority to control. The Board also limited its holding to the issue before it – a supplier-user joint employer relationship - and disclaimed any attempt to address the joint employer standards in other contexts, such as lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor and contractor-consumer relationships. However, the Board’s General Counsel is pursuing a similar expansion of the joint employer doctrine in the franchisor-franchisee context in the McDonalds’ cases.

Applying its newly-announced test to the facts presented, the Board held that Browning Ferris (BFI) and Leadpoint Business Services (Leadpoint) were joint employers of employees that Leadpoint had hired and assigned to work at BFI’s site and, as a result, it would open the Leadpoint employees’ ballots to determine whether they wished to be represented by a union that would negotiate jointly with BFI and Leadpoint on their behalf.

BFI owned a recycling facility where various refuse was sorted into separate marketable commodities. BFI employed 60 employees, who were responsible for preparing the material for sorting. Leadpoint’s 240 employees performed the actual sorting of the streams of material, along with ancillary cleaning duties within the facility. Leadpoint hired and drug tested its employees, set their schedules, paid them, provided their benefits, supervised them and disciplined them.

BFI retained the contractual right to reject any personnel Leadpoint hired and effectively set a ceiling on the wages Leadpoint could pay its employees. BFI also controlled the speed of the recycling streams (a point of dissatisfaction among the Leadpoint employees), determined when the streams would operate and established productivity standards for sorting. The record also contained evidence of sporadic involvement by BFI managers in setting Leadpoint staffing levels and training Leadpoint employees.

On these facts, the Board found that BFI retained sufficient control over the Leadpoint employees’ essential terms and conditions of employment to be considered a joint employer with Leadpoint. The Board cited the following factors as evidence of BFI’s control:

BFI retained control over hiring, because it imposed conditions on Leadpoint’s hiring process, such as requiring Leadpoint to drug test its employees, prohibiting Leadpoint from hiring employees BFI had deemed ineligible for rehire and retaining a contractual right to reject any Leadpoint employee;
BFI retained control over firing by retaining a contractual right to require Leadpoint to discontinue the use of any worker, and periodically reporting misconduct to Leadpoint supervisors, who in turn disciplined the Leadpoint employees, essentially at BFI’s behest;
BFI retained control over the direction of the work by dictating the times and speed by which product was fed to the Leadpoint workers, by setting the number of employees Leadpoint should supply and by directing Leadpoint supervisors to tell the Leadpoint employees what tasks to complete;
BFI retained control over wages by setting a contractual ceiling (no more than BFI paid its workers for similar jobs); and
BFI exercised other control by requiring, in the parties’ contract, that Leadpoint’s employees abide by BFI’s safety policy.

Board Members Miscimarra and Johnson joined in a lengthy dissent. They argued that the majority exceeded the Board’s authority by reversing decades of practice to enunciate a standard that was both vague and unworkable. The dissenters noted that the majority’s test would actually undermine collective bargaining by potentially requiring many separate employers, with conflicting interests, to bargain together as joint employers.

In simple terms, the Board’s decision in Browning Ferris undermines many strategies employers have used over the past 30 years to help avoid a joint employer finding. Moreover, as the Board’s decision itself notes, the full contours of this sea change in the law have yet to be determined. In the short-term, however, employers who use workers supplied by third parties should reexamine their contractual relationship and actual practices to determine whether they would be considered joint employers under this new test and, if so, whether they should take steps to help avoid such a finding.