Last week, the National Labor Relations Board (Board) issued its decision in a long-awaited case on the issue of joint-employer status under the National Labor Relations Act (NLRA). In a 3-2 decision, the Board in Browning-Ferris announced an expansive new standard for determining which companies are “joint employers” of workers paid by labor contractor and franchisees.

Under the Board’s longstanding test for joint-employer status, employers had been deemed responsible only if they had direct control over working conditions. However the old standard is “increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships,” the Board ruled. As a result, the Board frequently found no joint employer relationship where the contracting company exerted limited and routine control.

The Board split along partisan lines, rejecting the test that had been in place for 30 years, and instead instituted a broader, less predictable standard. The new standard increases the likelihood of a joint-employer finding, making contracting companies liable for labor law violations committed by third party contractors. Additionally, those companies could now be forced to negotiate wages and benefits with their workers.

Applying the new standard, the Board found that Browning-Ferris was the joint-employer of a group of housekeepers and other workers assigned to work at its facility by a staffing agency, even though Browning-Ferris never actually exercised its authority to control the terms and conditions of the workers’ employment. The Board found a number of facts to be determinative, including:

1. the contract between Browning-Ferris and its staffing agency required the staffing agency to  staff only employees who met Browning-Ferris’s standard selection procedures and tests;
2. the contract retained for Browning-Ferris the right to reject any worker;
3. Browning-Ferris’ supervisors controlled the pace of work by setting production standards and providing directions to the staffing agency’s managers;
4. the contract prevents the staffing agency from paying its employees more than what Browning-Ferris employees made performing comparable work; and
5. Browning-Ferris specifies the number of workers that it requires, the timing of shifts and the necessity of overtime work.

Thus, even though Browning-Ferris did not directly dictate the bargaining unit employees’ terms and conditions of employment, the Board nevertheless found joint-employer status because Browning-Ferris indirectly “codetermined” the wages, hours and other conditions of employment for those employees.

According to Western Growers Vice President and General Counsel Jason Resnick, while the decision has no direct impact on laws over which the NLRB does not have jurisdiction, the decision may have ramifications for both unionized and non-unionized employers.

“Browning-Ferris dramatically expands the scope and circumstances upon which a company using staffing agencies can be found liable as joint-employers,” Resnick said. “The new standard is likely to have significance beyond traditional labor law. For example, it would not be surprising if the Department of Labor seizes upon the NLRB’s expanded view of joint employer and begins filing wage and hour claims against companies that use labor contractors and staffing agencies.” Resnick said.

Resnick recommends that companies using third party labor firms to supplement their own staffing needs, including many packinghouse and processing facilities, to examine those contractual relationships and consult with employment law counsel to assess what changes may be made to those agreements to reduce the risk of joint employer liability under the NLRB’s expanded definition.

For more information, contact Jason Resnick at (949) 885-2253.