The NLRB Just Changed the Standard for Joint Employer Relationships; How Does This Impact Staffing Agencies?

In August, a divided (3-2) National Labor Relations Board (NLRB) handed down a decision that fundamentally changes the employee-employer relationship for staffing agency employees, independent contractors, and their clients.

In the case of Browning-Ferris Industries of California, the NLRB dramatically expanded the joint-employer standard. What does this mean for staffing agencies and their employees? Will this decision have broader implications for independent contractors, franchise owners, and vendor relationships?

The Restated Joint-Employer Relationship Standard

Joint-employer relationships are as ancient as our common law. Until Browning-Ferris, courts and administrative agencies considered a variety of factors, including how much actual and direct control each party exercises over an employee, to determine if a joint-employment relationship exists.

In Browning-Ferris, the majority board members asserted that they’re not creating a new joint-employer relationship standard. Instead, they’re “restating” the standard. Now, instead of showing actual direct and immediate control over workers and terms and conditions of employment, it’s enough to show that a company potentially can exercise control over a worker’s wages and working conditions, regardless of whether that control is exercised.

The Facts

Browning-Ferris (BFI) operates a recycling facility. BFI subcontracts with a staffing agency, Leadpoint. Leadpoint employees sort recyclables and perform housekeeping functions.

The case began when the Teamsters union filed a petition to represent approximately 240 Leadpoint employees who worked as sorters, housekeepers, and screen cleaners inside the plant. The Teamsters already represented 60 BFI employees who worked on the exterior of the plant.

Originally, the NLRB’s regional director found that BFI was not a joint employer because it did not share or codetermine matters that governed the essential terms of employment. BFI controlled the production line and set work schedules, but it did not directly control the pay rates, hiring, or supervision of Leadpoint employees.

The NLRB overruled the determination of the regional director. It found that BFI was a joint employer because, even though it had mostly indirect interaction with Leadpoint employees, it still had enormous influence over the terms and conditions of their employment. An election was held, and the Teamsters won the right to represent the Leadpoint employees.

This decision has far-reaching implications for both staffing agencies and their employees.

The New Economy

The Browning-Ferris decision takes direct aim at the American contingent workforce. The majority presented statistics to support their position:

– As of August 2014, 2 percent of the nation’s workforce was employed through temporary agencies. 

– The latest Bureau of Labor Statistics survey — from 2005 — indicates that contingent workers account for as much as 4.1 percent of all employment, or 5.7 million workers.

Th data cited is 10 years old, and it doesn’t account for the rise of independent contractors who service the “sharing” economy. And let’s not forget about the 9 million Americans who work at more than 780,000 franchised businesses.

Who’s the Boss?

The joint-employer relationship is fact-sensitive. Here are some of the factors that gave rise to a joint-employer relationship in the Browning-Ferris decision, along with questions that staffing agencies should ponder:

1. Hiring

In the NLRB case, BFI supervisors were not involved in hiring Leadpoint employees. However, the agreement required Leadpoint to ensure that its employees met BFI hiring standards. Leadpoint also administered drug screening and background checks to comply with BFI’s hiring standards and gave prospective employees a test run on the plant floor.

Does your client make you ask prospective employees if they ever previously worked for the client company? Does the client set a standard for background investigations or drug screens?

2. Schedules

Leadpoint set schedules and distributed them directly to its employees. However, BFI determined which schedules it would operate, and Leadpoint had no impact on scheduling. If BFI needed people to work overtime, Leadpoint in turn determined which employees would work it. BFI similarly scheduled breaks. Leadpoint employees had to get their timesheets signed by an authorized BFI representative. Clearly, Leadpoint was merely acting as an intermediary between BFI and the Leadpoint employees.

Are schedules and breaks established by your company, or by the client? Who signs time sheets?

3. Staffing and Disciplinary Action

BFI determined how many Leadpoint employees were required for each shift. Leadpoint and BFI management held meetings before each shift to coordinate the operating plan. BFI management instructed Leadpoint supervisors to move employees around during each shift to maximize productivity. On occasion, BFI managers directly counseled Leadpoint employees on their job tasks and quality.

Does your agency determine staffing levels, or does the client? Who provides feedback on your employees’ work product?

4. Wages

Leadpoint was prohibited from paying a rate in excess of the rate BFI paid its full-time employees who performed a similar task. Since BFI could potentially set wages in this manner, it was deemed to be a joint employer.

Does your agency have a ceiling on wages that meets the client’s guidelines?

5. Training

Leadpoint conducted initial training, but BFI provided follow-up educational and safety meetings with Leadpoint employees and supervisors.

Beyond basic safety training, are your employees required to attend mandatory meetings or ongoing training? Who conducts it?

6. Service Length

The agreement between Leadpoint and BFI stated that no Leadpoint employees should be assigned to BFI for longer than six months. This was never enforced.

Many companies impose maximum timelines for staffing agency employees. The longer your employees work at a client’s location, the more likely it is that a joint-employer relationship may exist.

What’s Next?

Browning-Ferris fundamentally changed the way that the NLRB evaluates joint employer relationships. It remains to be seen whether other agencies will follow suit. The decision probably won’t be challenged in court since the BFI case has already been decided and the company is now subject to statutory time limits. Congressional action is also an option, but that would require collaboration and consensus. Given the current gridlock in Washington, this probably isn’t an option unless the Republicans win the 2016 presidential election and retain Congressional control.

In the meantime, the NLRB is now following the restated joint-employer standard, and this will impact union elections and unfair labor practice charges. Temporary agency employees will be considered part of a potential bargaining unit.

Other government agencies may follow suit. The EEOC filed an amicus brief in the Browning-Ferris case, OSHA already is focused on franchises, and the Department of Labor indicated that it also wants to expand the definition of joint employers. The IRS is always happy to help reclassify independent contractors.

So, What Should I Do?

Start by reviewing your contracts carefully so that control of terms and conditions of employment fall squarely on the agency, and not on the contacting company. Think about day-to-day operations in terms of Browning-Ferris, and make sure agency management directly supervises agency employees. This may require adding additional management staff.

If you operate a franchised organization, try to have as little influence as possible on the franchisee’s hiring practices and systems. Make suggestions and recommendations instead of imposing rules. Audits are important in the franchise world, but try to keep them limited to tasks that influence the brand and not the employment relationship.

Finally, make sure you consult carefully with legal counsel, since this article is only provided as a guideline and doesn’t constitute legal advice. Remember that every situation is case-sensitive and requires a separate analysis.

This article originally appeared on the HR Virtuoso blog.