By Laurie E. Meyer
Late last month, the National Labor Relations Board (NLRB) issued the long-awaited Browning-Ferris Industries of California, Inc. opinion in which it changed the standards for assessing a joint-employer status. With this opinion, the NLRB returned to the traditional test and held that joint-employer status may be found if two or more entities 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.”
While this opinion may not impact all employers, it does impact over 5.7 million private employees across the country, and implicates three major categories of employers: (1) those who utilize staffing services or temporary employment agencies, (2) those who use subcontractors, and (3) franchisors.
Under the new (old) test, the NLRB no longer requires that a joint employer both possess and exercise authority to control employees’ terms and conditions of employment. Rather, the NLRB now requires that a joint employer merely have the ability, whether by agreement or through practice and procedures, to exercise a minimum amount of authority to control the terms and conditions of employees hired by these outsourcing companies. The NLRB is focused on the indirect or potential right to control, which can happen any time a company uses or contracts out to a third party service that it needs—whether that be temporary workers for its operations, janitorial services for its offices or locations, or a franchisee. The ramifications of this opinion could result in employers being held responsible for discrimination or other unlawful acts in hiring, firing, and treatment of workers hired by an outsourcing company, not to mention being forced to collectively bargain with such individuals.
For employers who outsource workers through a third party, the following checklist may assist in determining if the NLRB decision will impact their contractual relationships and potential joint employer status with outsourcing companies.
✓ Control Over Hiring. The company has control over how many and which individuals are hired to work at its facilities, including control over individuals hired by an outsourcing company. This means that the company has control over and/or has the ability to establish standards that individuals hired by the outsourcing company must meet or exceed for their positions (e.g., selection procedures, tests, and hiring/employment requirements established by my company).✓ Right To Reject. The company has the right to reject or terminate any individual hired to work at its facilities by an outsourcing company. This means that if the company is not satisfied with the performance of an individual hired by an outsourcing company, the company has the right and/or ability to reject that employed individual for any reason, or for no reason at all.
✓ Control Over Employed Individuals. The company has control over the processes that shape the day-to-day work of individuals hired to work in its facilities by an outsourcing company. Control does not need to be unilateral or result in “ultimate control.” Rather, control can be direct or indirect, meaning that the company has the ability to assign specific tasks that need to be completed, the ability to design and control the schedules of the employed individuals, can specify the assignments of the employed individuals, and can exercise oversight of all employee work performance.
✓ Control Over Wages. The company has a role in determining the wages paid to individuals hired by an outsourcing company. This means that the company can set or has the ability to negotiate a wage ceiling or minimum wage paid to individuals hired to work in its facilities by an outsourcing company. The company may also have input into the determination and establishment of seniority.
✓ Training and Safety. The company either solely, or periodically, trains and counsels individuals hired by outsourcing companies.
✓ Access to Personnel Documentation. The company has access to view or inspect the personnel records maintained by outsourcing companies.
The Browning-Ferris decision may create tension between employers and outsourcing companies over contractual provisions that have traditionally been included in agreements. Because of this NLRB opinion, agreement provisions previously used giving some discretion to companies using outsourcing may now lead to joint employer status. For that reason, if an employer checks any of the above boxes, it is recommended that the employer coordinate with labor & employment counsel to review and evaluate their outsourcing agreements and determine if they need to surrender any control or risk joint employer status. If you have any questions or need assistance, please contact your Davis & Kuelthau attorney or the author, Laurie E. Meyer at 414.225.1419 / laurie.meyer@dkattorneys.com.