Legal News

Intro

The National Labor Relations Board (“NLRB”) recently issued a major decision making headlines everywhere that both advocates and opponents say greatly expands workers’ right to unionize. The decision, Browning-Ferris Indus., restated the standard for determining whether a joint-employer relationship exists where more than one entity exercises some degree of control over workers. In a joint-employer relationship, employees have more than one employer and can exercise their rights against both employers. Because workers only have the right to collectively bargain (unionize) with their employer, by expanding the definition of a joint-employer relationship, the NLRB expanded the rights of employees to unionize. Given the recent decision and other pending actions before the Board, there is much speculation as to the scope of the impact the Browning-Ferris restated rule will have.

What Exactly is a Joint-Employer Relationship?

In a joint-employer relationship, two or more entities that have a business relationship each exercise a certain degree of control over a set of employees such that they should each be considered their employer. A common example of a joint-employment relationship is where a temporary placement agency provides employers to an employer; under such circumstances, both the agency and the business where the employees are placed would be considered employers. Determining whether or not a joint-employer relationship exists does not rely one a single concrete definition, but rather requires analyzing several factors relating to the control and supervision of employees. Overall, the general idea is that while two business entities that are involved with one another may be separate, when they share or codetermine matters governing the essential terms and conditions of employment, they should both be considered employers. What the NLRB did in Browning-Ferris was alter the factors used in the joint-employer analysis such that they expanded the relationship’s definition.

So What Exactly Happened in Browning-Ferris?

Browning-Ferris Industries was the operator of a recycling plant. BFI maintained their own employees who were responsible for operating forklifts and other machinery within the plant, but they hired a separate company, Leadpoint, to provide workers to operate conveyor belts within the plant that sorted recycled materials. The Leadpoint workers also performed other tasks, such as cleaning the facility. Eventually, the union that represented the BFI workers tried to represent the Leadpoint workers as well. Since employers may only unionize against their employer, this raised the issue as to whether or not BFI should be considered the Leadpoint employees’ employer as well, thus creating a joint-employer relationship.

In its decision, the Board explained that the rapid growth of the employment placement services industry required that it revisit its previous standard for assessing whether or not a joint-employer relationship exists. The Board emphasized that it has the obligation to apply the law to the “complexities of industrial life,” and to adapt the law “to the changing patterns of industrial life,” and that given the record numbers of workers employed through temporary agencies and other placement services, the Board was compelled to restate the joint-employer standard to address its shortcomings.

Under the previous rule, a company like BFI who was not the primary employer would only be considered a joint employer if it exercised “direct and immediate” control over certain working conditions if the employees. Under the “new” rule, which advocates claim already existed prior to the 1980s, the Board will determine that two or more entities are joint employers 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.

The Board retained an “inclusive” approach to defining the essential terms and conditions of employment, which contain, hiring, firing, discipline, supervision, direction, setting wages and hours, dictating the number of workers, controlling scheduling, seniority, and overtime, assigning work, and determining the manner and method of work performance. However, the Board expressly held that it would no longer require an entity to actually directly exercise control over workers to be considered a joint employer, but rather that the essential determination would be based upon whether the entity had the right to exercise such control, directly or indirectly. To put it more plainly, an entity that has the right to indirectly control the essential terms and conditions of employment of certain workers should be considered their joint employer.

In the Browning-Ferris case, Leadpoint had its own supervisors at the plant, managed its employees schedules, evaluated its employees’ work, had its own HR, made all hiring decisions, made discipline and determination decisions, and set pay rates. However, Leadpoint’s control was limited and/or influenced by BFI in that BFI set the job qualifications and criteria, required drug and skills tests, insisted on some discharges, set an indirect cap on pay by limiting the amount it would reimburse Leadpoint, and set the hours or operation of the plant and shift times. The Board found that because of the control BFI held over the Leadpoint employees, whether direct or indirect, authorized or not, BFI was a joint-employer under the restated rule.‍

Why This is Such a Big Deal‍

One of the biggest areas of business that pundits are speculating the Browning-Ferris decision will have the greatest impact is over the franchise-franchisee relationship. Prior to Browning-Ferris, a franchisor, such as McDonald’s, would not be considered the employer of each franchise’s employees because McDonald’s the corporation did not exercise direct and immediate control over the working conditions of the employees. Under the new rule, most analysts assert that McDonald’s would be considered the joint-employer of all of its franchises’ employees, thus granting the employees the right to collectively bargain with McDonald’s itself. Previously, franchise employees had no such right, and if they tried to form a union, it was perfectly legal for the parent corporation, such as McDonald’s, to have the franchise such down.

Generally, analysts see the Board’s ruling as an opening for employees across many industries to attempt to unionize where it was previously forbidden, which would expand the rights of workers everywhere to collectively bargain. Naturally, advocates see this ruling as a welcome expansion of workers’ rights and opponents argue that the ruling will be disastrous for business and destroy the franchise model altogether.

‍Conclusion‍

Perhaps the most poignant argument the Board put forth in defending its decision attacked the disparity that arises when an entity can retain a certain degree of control over workers without workers having any rights against the entity: “It is not the goal of joint-employer law to guarantee the freedom of employers to insulate themselves from their legal responsibility to workers, while maintaining control of the workplace.” Given the rise of employment placement agencies by businesses, the Board was concerned that far too many employees would be left powerless against entities that profited from their labor and exercised control over them, which, it argues, the National Labor Relations Act was put in place to prevent. While time will tell what the true impact of the decision will have, especially given that it will almost certainly be approved, the Board did sent a clear message to employers that it would no longer tolerate business who seek to reap the benefits of labor it controls without any corresponding obligations.