On Oct. 28, 2015, in a party line vote, the House Committee on Education and the Workforce advanced a bill to overturn the National Labor Relations Board’s Browning-Ferrisdecision. To understand the significance of the bill, it is critical to understand the Browning-Ferris decision and its implications for employers.
On Aug. 27, 2015, the National Labor Relations Board departed from 30 years of NLRB precedent to adopt a broader and looser standard for determining joint-employer status. Under this new standard, a putative employer is no longer required to exercise “direct and immediate” control over workers’ terms and conditions of employment. Now, “indirect” or even “reserved” control is potentially sufficient to establish a joint-employment relationship.
In Browning-Ferris, the NLRB considered whether Browning-Ferris Industries of California, Inc. (BFI) was a joint employer with the staffing agency, Leadpoint, which provided BFI with workers under a temporary labor services agreement. The NLRB took the opportunity to reevaluate the joint-employer standard in light of the recent trend in the use of “contingent workers.”
The NLRB has long held that two or more entities will be deemed joint employers where they “share or codetermine those matters governing the essential terms and conditions of employment.” However, in Browning-Ferris, the NLRB abandoned its historic requirement that a putative joint employer exercise “direct” and “immediate” control over workers. Under its new standard, the NLRB will also consider “indirect” control exercised through an intermediary employer (such as a staffing agency), as well as an entity’s “reserved” contractual rights that may affect essential terms and conditions of employment, even if that control is not actually exercised.
Additionally, the NLRB stated that it will not limit its review to control over hiring, firing, discipline, and supervision; rather it will also consider a putative employer’s control over other matters such as the number of workers to be supplied, scheduling, seniority, overtime approval, and the assignment of work.
Applying this new standard, the NLRB found that BFI and Leadpoint were joint employers of Leadpoint’s employees. Among other factors, the NLRB considered whether BFI specified minimum hiring qualifications, retained the right to reject any Leadpoint worker, set productivity standards, communicated work directives through Leadpoint, and set a minimum wage “ceiling” by specifying that Leadpoint could not pay its employees more than BFI employees performing similar work.
Employers are understandably wary of the new standard’s far-reaching implications. The expansion of the joint-employer standard risks entangling countless industries in joint-employer issues, including franchisor-franchisees and any business that relies upon third-party employees (such as the healthcare industry). Under Board law, a joint employer may be subject to joint and several liabilities for unfair labor practices, may be subject to bargaining obligations, may be liable for breaches of a collective bargaining agreement, and may be the target of economic pressure by unions.
Responding to this backlash, on September 9, 2015, House Republicans proposed the “Protecting Local Business Opportunity Act” to overturn Browning-Ferris by amending the NLRA to provide: “Notwithstanding any other provision of this Act, two or more employers may be considered joint employers for the purposes of this Act only if each employer shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate.”
Although this bill has advanced through House Committee, it is unlikely that it will become law. Even if the bill makes it through Congress, it will likely be vetoed by President Obama, and will lack sufficient support to override the veto.
Harriet Lipkin is a partner in DLA Piper’s labor & employment practice in Washington, D.C. Kevin Harlow, an associate in the firm’s San Diego office and Rachelle Llontop, an associate in the Washington, D.C. office, also contributed to this piece.
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