Surprise! Your Company May Just Have Unknowingly Become a Joint Employer

The very business need that temporary labor services satisfy is providing clients with workers which the clients do not have to retain permanently.  Likewise, general contractors hire subcontractors to perform certain work to avoid the need to employ tradespeople beyond the end of a specific construction project.   Consider as well franchisees, who offer franchisors the ability to expand a business at a lower cost and risk than would occur if the franchisor directly opened a new location.  Each of these business relationships is a ubiquitous feature of the modern American economy, but a new ruling by the National Labor Relations Board (“NLRB”) has the potential to dramatically change the status quo by converting franchisors and companies utilizing temporary services or subcontractors into joint employers of the workers whose services they are using.

In Browning-Ferris Industries of California, Inc. v. Sanitary Truck Drivers and Helpers Local 350, 362 NLRB 186, the NLRB ruled that Browning-Ferris Industries of California, Inc. (“BFI”), the trash removal company, was the joint employer of approximately 240 laborers supplied by Leadpoint Business Services (“Leadpoint”), a temporary labor service, to a BFI recycling center.  In reaching this decision, the NLRB found that the agreement between BFI and Leadpoint required Leadpoint to provide workers who met BFI’s qualifications and/or standards, including a drug screen, authorized BFI to reject workers furnished by Leadpoint and barred Leadpoint from paying its workers more than full-time BFI workers performing similar tasks.  Moreover, under the agreement between BFI and Leadpoint, BFI had the sole authority to schedule work shifts and to determine where workers should be placed and the speed at which work must be performed.  The NLRB concluded that BFI was a joint employer based upon its substantial ability to impact the working conditions of the employees furnished by Leadpoint.

The significance of the Browning-Ferris ruling lies in the NLRB’s determination that it did not matter whether BFI actually exercised any control over the terms and conditions of employment of temporary workers – potential control was sufficient.  The NLRB has now indicated that an agreement between a company and temporary service allowing the company to have any amount of direction over the work of temporary workers can itself create a joint employment situation, even if the company chooses never to use this power.  As the NLRB itself noted, the ruling departs from thirty-two years of prior NLRB decisions requiring a showing of actual exercise of authority before a company using temporary employees would be found to be a joint employer.      

Following the Browning-Ferris decision, joint employment situations may arise in any contractor/subcontractor, franchisor/franchisee or employer/temporary service relationship.  The NLRB stated that if a company can control any aspect of an employment relationship, be it hiring, firing, discipline, compensation, the number of employees used, work assignment and scheduling, or the manner and method by which work is performed, it may be a joint employer.  Of course, any company using a temporary service will determine when, where and how temporary workers perform work, and it will want the power to remove any temporary worker whose work is unsatisfactory.  Form subcontracts often grant a general contractor the power to schedule when a subcontractor performs work on a construction project, to promulgate safety rules, to ensure that a subcontractor properly staffs the project, and similar functions.  Similarly, a franchisor will generally have control over when and how a franchise operates, including, for example, requiring the franchisee’s employees to wear uniforms or dictating how frequently a premises is to be cleaned.

In light of the Browning-Ferris ruling, the NLRB is more likely to view a company that operates franchises or utilizes temporary workers or subcontractors as a joint employer.  Under the ruling, it is possible that even if a company is not unionized, it may be required to negotiate with a union on a collective bargaining agreement applicable to the temporary workers whose services it is utilizing.  Before requesting the removal of temporary workers who may be disrupting the workplace, companies may need to determine if the disruption is related to attempts to unionize or otherwise take collective action.  If that is the case, correcting the disruption just might be deemed an unfair labor practice by the NLRB.  Furthermore, rulings predating the Browning-Ferris decision indicate that companies could be bound by collective bargaining agreements that are only signed by a co-joint employer and that one joint employer can be found liable for the wrongdoing of the other joint employer.  Therefore, not only do companies need to be cautious about their own actions, they must be aware that they could be bound by the actions of any franchisees, temporary services or subcontractors that they use.

It is also possible that the Browning-Ferris rationale may be invoked by government agencies aside from the NLRB.  For example, the Occupational Safety and Health Administration (“OSHA”) is paying much closer attention to the work conditions of temporary employees, and it may find the reasoning of the Browning-Ferris decision convincing in the occupational health area.  OSHA and other government agencies will undoubtedly closely examine the reasoning of Browning-Ferris.

Based on the significantly expanded exposure suggested by the Browning-Ferris ruling, companies should carefully review their contracts with staffing agencies, subcontractors and/or franchisees and determine what, if any, additional protection may be warranted.