NLRB’s Game Changing Decision on Joint Employment Liability | DCR Workforce Blog

NLRB’s Game Changing Decision on Joint Employment Liability

NLRBOn July 31st, DCR blogged about guidance offered by the National Labor Relations Board (NLRB) regarding a liberal definition that would qualify most temporary workers – both agency-supplied contingent workers and freelancers – as employees. These individuals would qualify for many of the benefits previously reserved for “permanent employees”.

The NLRB has now gone a step further. Last Thursday, the NLRB redefined the standard to determine joint-employment status ‘to better effectuate the purposes of the (Nation Labor Relations) Act’, saying its previous standard has failed to keep pace with economic circumstances and changes in the workplace! The NLRB pointed to the fact that an increasing number of U.S. workers are employed through temporary staffing agencies. They cited in their decision a “dramatic growth in contingent employment relationships” that “potentially undermines the core protections of the act for the employees impacted by these economic changes.”

The new standard specifies that two or more entities may be deemed to be joint employers, when:

  • They are both employers within the meaning of the common law, and
  • They share the right to exert direct or potential control (or co-determine) matters governing the essential terms and conditions of employment. To establish which entity has sufficient control over employees to qualify as a joint employer, the Board will – among other factors — consider whether an employer has exercised control over the terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.

In simple language, this means that in the past, companies generally had to share decision-making on employment matters such as firing, hiring and discipline in ways the board said would have a meaningful effect on the workers. Under the revised standard, the NLRB also will consider if a business exercises indirect control through an intermediary, or has reserved the right to do so. While the staffing agencies serve as employer of record to their contingent workers, it is common practice for the staffing agency’s client to select the worker, define the length of the engagement, provide day-to-day supervision, and direct the agency to terminate unsatisfactory workers. Under the new ruling, and of those actions can be viewed as “indirect control”.

This ruling was in response to a suit brought by a local Teamsters union against Browning Ferris Inc. (BFI) and its staffing supplier, Leadpoint. The union claimed that it couldn’t adequately bargain for the workers unless Leadpoint and BFI were both at the bargaining table. The Board found that, BFI possessed indirect and direct control over the essential terms and conditions of employment. This has also made BFI liable for the way Leadpoint treats its contract employees.

Implications of the New Law:

The law could seriously affect a variety of businesses dependent upon temporary workers, including restaurants, retailers, manufacturers, hotels, cleaning services and – last but not the least – staffing agencies. The NLRB is determined to make sure that the person who tells a worker what to do, and shares in the decision with regard to the essential terms and conditions of employment, must take responsibility as a joint employer.

The ruling could prove to be a shot in the arm for organized labor, accelerating the growth of unions. Though the logistics of a three-way negotiation may seem daunting, it is to be expected that most of the employment-related decisions will ultimately be up to the staffing buyer. Possible ramifications of the New Standard:

  • Companies can be held liable if they retain a contractual right to control – even if control is not exercised.
  • The NLRB does not expressly reject the possibility of its ruling being applied to other business models in which non-employees are engaged to conduct work or provide services. The dissenters on the NLRB pointed out that user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer business relationships could be affected by this decision.
  • Most companies do not rely on a single staffing agency to fill positions. The process of ensuring that all parties are represented in a collective bargaining initiative can become an extremely complex one.
  • Contracts between companies and their staffing suppliers will require the agencies to comply with all collective bargaining agreements. This may increase the need for Managed Services Providers to ensure compliance of all agencies.
  • More businesses may turn to Statement of Work (SOW) contracts, veering away from the traditional contingent workforce sourcing model of using staffing suppliers.

As we stated in the earlier blog, the real test of the meaning of the NLRB ruling, and the extent to which this new standard will be applied, is unknown. Rulings on additional litigation may be required for us to truly understand where the NLRB will draw the line. We do offer this advice: this is definitely not the time for any business to risk managing its contingent workforce without the aid of subject matter experts. Would you agree? Please write in and let us know.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.