In a much anticipated decision issued on August 27, 2015, the National Labor Relations Board (“NLRB” or “the Board”) set forth its new and much more inclusive test for determining joint employer status (BFI Newby Island Recyclery, 362 NLRB No. 186). As a result, many employers may find themselves in an employment relationship for National Labor Relations Act (“NLRA” or “the Act”) purposes with a group of employees where no such relationship had existed before. This decision will have a particular impact on industries where employers contract with employment agencies to provide labor.
That was the situation that confronted the Board in BFI. BFI directly employs about 60 employees to work outside its recycling facility, moving the tons of materials it receives and getting them ready to be sorted inside the facility. The employees inside the facility sorted the materials as they moved along a conveyor belt. BFI had a contract with Leadpoint to provide the labor for the sorting employees inside the facility. The contract provided, among other things, that:
- Leadpoint would recruit, interview, test, select, and hire personnel to work as sorters in BFI’s facility, but BFI retained authority to set the standards of the hires;
- Leadpoint had sole authority to counsel, discipline, review, evaluate, and terminate personnel, but BFI also had the authority to discontinue the use of any personnel for any or no reason;
- Leadpoint had the sole authority to determine what it would pay its workers, but it could not pay those workers a rate higher than what BFI paid its workers without BFI approval;
- Leadpoint alone would schedule which employees worked each shift, but BFI alone established the facility’s shift schedule;
- BFI alone set productivity standards for material streams and provided Leadpoint with a headcount of how many workers were needed; and
- BFI would require Leadpoint to hold its employees to BFI’s safety standards.
The Leadpoint employees petitioned for representation and asked the Board to determine that BFI and Leadpoint were their joint employers. The Board reversed the administrative law judge and held that they were joint employers under its new, more inclusive standard, which it stated this way:
“The Board may find that two or more entities are joint employers of a single work force 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.”
They quoted the Restatement of Agency to determine when a common law employment relationship exists. It said that a “servant is a person employed to perform the services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other’s control or right to control.” In keeping with this definition, the Board held that it would no longer require a putative employer to actually exercise such control, as long as it could exercise it if it so chose. Further, control need no longer be direct or immediate; indirect control now suffices to establish joint employer status.
There was evidence in BFI that, as a practical matter, BFI never exercised the authority it could have under the contract in several areas. That no longer matters, says the Board. The fact that BFI could have exercised that authority is all that matters. Further, the fact that BFI exercised indirect control over the employees in several areas, like setting the safety standards that Leadpoint was responsible for holding its employees to, was sufficient control to show an employment relationship. Thus, BFI and Leadpoint were joint employers under the NLRA.
In today’s world where contracted labor arrangements are becoming more common, employers will have to pay much closer attention to whether or not they are joint employers with the contracted employees’ employer. This decision makes it much easier for employees to show that status, and thereby force certain employers into a bargaining relationship or assert rights against it under the Act. This is bound to be tricky ground to navigate, so stay tuned for further updates.
For more information about this or any related matter, please contact any member of the KDDK Labor & Employment Law Practice Team.