Are Employers Now Responsible for Their Contract Workers?

Maybe so, according to the latest pronouncement of the National Labor Relations Board (NLRB).   In Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), the NLRB dramatically expanded their definition of “joint employers,” so that businesses may now be responsible for the terms and conditions of employment of their subcontractors, franchisees and temp agencies.

What Used to be a Business Contract . . .

Browning-Ferris Industries (“BFI”) retained a staffing agency (Leadpoint) to supply temporary workers to its recycling facility in California.  The contract between the two companies specifically stated that Leadpoint was the workers’ sole employer and set forth the following assignment of responsibilities:

  • Leadpoint handled all the hiring (but the contract required that they make “reasonable efforts” to not assign former BFI workers who had been deemed ineligible for rehire at BFI);
  • Leadpoint was responsible for disciplinary matters (but there were a couple of occasions where BFI insisted that a temp be disciplined);
  • Leadpoint set wages (but could not pay more than what a BFI employee would get for similar tasks); and
  • Leadpoint handled all terminations (although BFI could bar any worker from continuing to work at BFI facilities).

A union then petitioned the NLRB to represent both the BFI employees and the Leadpoint temporary workers under the theory that the two companies jointly employed the Leadpoint workers.   This theory required that the supposed joint employer (1) possessed authority to control the terms and conditions of employment, and (2) actually exercised that authority.

. . . Is Now an Employment Agreement

The NLRB ruled for the union, choosing to adopt a new and scaled-back version of the joint employer test.  Now, for the first time, an employer need only possess the authority to control the working conditions but does not have to have actually exercised that control.  The NLRB declared that the explosive growth of the contingent workforce meant that continuing to follow the old test would represent a failure “to adapt the [National Labor Relations] Act to the changing patterns of industrial life.”

In determining whether an employer possessed control over the working conditions of contract workers, the NLRB acknowledged that “direct, indirect, and potential control” were all relevant to the joint-employer inquiry, as was the “way the separate entities have structured their commercial relationship” because it determines whether the putative employer might have the authority to govern working conditions.

Under the new, relaxed standard, BFI was deemed to be a joint employer of the Leadpoint workers because:

  • BFI “codetermined” the outcome of the hiring process by imposing specific conditions on Leadpoint’s ability to hire certain workers.
  • BFI essentially had the ability to terminate Leadpoint employees because of their “unqualified right to ‘discontinue the use of any personnel.’”
  • BFI managers actually assigned specific tasks that needed to be completed, specifed where Leadpoint workers needed to be positioned, and exercised “near-constant oversight of employees’ work performance.”
  • BFI played a “significant role in determining the employees’ wages” because contract specifically prevented Leadpoint from paying employees more than BFI employees performing similar work.

Bottom Line

Pay attention to this decision if you use independent contractors.  If you are considered a joint employer of the people working at your company from staffing agencies, subcontractors, etc., the value of using those resources is greatly diminished.  Therefore, you should try very hard to minimize your involvement in decisions affecting contract workers in the areas of hiring, discipline, termination and all the others that are typically associated with employers.  Hire a good contractor and let them make those decisions.

Incidentally, the NLRB is not the only government agency looking at these issues.  The Department of Labor recently announced that is also is exploring an expansion of liability for OSHA violations by joint employers, as is the Equal Employment Opportunity Commission in regard to discrimination liability.