JOINT EMPLOYER DOCTRINE RECYCLED
Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015) “Certainly, we have modified the legal landscape for employers.”
October 9, 2015
Jonathan O. Levine Shareholder Milwaukee
Adam-Paul John Tuzzo Associate
Milwaukee [email protected]
Presented by:
GARBAGE IN . . . GARBAGE OUT!
IBT petition names Leadpoint
and BFI as employers of
Leadpoint employees working at
BFI recycling facility
NLRB majority finds that BFI was
a “joint employer”
Decision overrules decades of
precedent based on economic
policy
Predictable continuation of NLRB’s recent effort to extend coverage of the NLRA
CNN America, Inc., 361 NLRB No. 47 (2014)(joint-employer liability imposed)
FedEx Home Delivery, 361 NLRB No. 55 (2014)(revised definition of “independent contractor”)
CNN AMERICA, INC., 361 NLRB NO. 47 (2014)
CNN found to have violated NLRA
as a joint employer
Terminating sub and causing
discharge of sub’s employees for
allegedly anti-union reasons
Limited the number of sub’s
employees it hired in order to
avoid becoming a successor
Failing to bargain over decision to
terminate subcontract and its
effects
FEDEX HOME DELIVERY, 361 NLRB NO. 55 (2014)
In evaluating independent-contractor
status, Board will look at common-
law agency principles “with no one
factor being decisive”
Board will give weight to actual, not
theoretical, “entrepreneurial
opportunity” and “the constraints
imposed by a company on the
individual's ability to pursue this
opportunity”
NEW JOINT EMPLOYER STANDARD
The Board may find that two or
more entities are joint
employers of a single work
force if: (1) they are both
employers within the meaning
of the common law; and (2)
they share or codetermine
those matters governing the
essential terms and
conditions of employment
Old Rule New Rule
Burden of proving joint-employer status is on party asserting it
Same
Employers must “share or co-determine” matters related to “essential terms and conditions of employment”
Employers must also meet “common law” definition of employer
“Share or co-determine” means control is exercised in a meaningful, direct and immediate way
Control may be indirect, through “intermediary” or simply reserved; “right to control” is probative even if unexercised
Limited and routine supervision is not probative of joint employer status
Limited and routine supervision may be probative
“Essential terms and conditions” focuses on matters related to hiring, firing, discipline, supervision and direction
Broadly looks at almost any mandatory subject of bargaining – e.g., wages, benefits, hours, assignment, scheduling, staffing, seniority, overtime, safety, manner/method of work
THE “COMMON LAW” TEST
Restatement (Second) of Agency
Do employees perform services in the affairs of user
employer?
Are they subject to user employer’s control or right to
control?
Does the job require a higher education or skill level?
Is the employment over a considerable period of time with
regular hours?
Is the work part of the putative joint employer’s
regular business?
BROAD VIEW OF “SHARE OR CO-DETERMINE”
Employers confer or collaborate
directly to set a term
One sets wages/hours; the other
assigns work and supervises
Both affect components of same
term - e.g. one defines and
assigns work; other supervises
how it is carried out
One simply retains the right to set
a term or condition for the
other’s employees
KEY FACTORS THE NLRB RELIED ON
Hiring. BFI allegedly retained and exercised control over
hiring by requiring Leadpoint to drug test its employees,
prohibiting hiring of employees BFI deemed ineligible for
rehire, and retaining a contractual right to reject any
Leadpoint employee even if they met Leadpoint’s
qualifications and hiring standards
Firing. BFI allegedly retained the contractual right to
require Leadpoint to discontinue the use of any worker
and exercised that right by reporting misconduct to
Leadpoint who removed the employees
KEY FACTORS cont.
Direction. BFI allegedly retained and exercised control over
the direction of work by dictating stream speeds to
Leadpoint and production standards, directly counseling
Leadpoint employees for failing to meet standards,
assigning specific tasks to employees and engaging in
“near-constant oversight of employees’ work performance”
Staffing. BFI allegedly determined the number of
employees Leadpoint supplied
Wages. BFI allegedly controlled wages thru its cost-plus
contract and by setting a contractual ceiling (no more than
BFI paid its workers for similar jobs)
KEY FACTORS cont.
Work Rules. BFI allegedly required Leadpoint’s employees
to abide by its’ safety policies
Hours of Work. BFI allegedly dictated the start and end
time of shifts Leadpoint employees worked, when/how
much OT would be worked, and how breaks were taken
IS POTENTIAL/RESERVED CONTROL ENOUGH?
Reserved control is probative;
not clear if or how much
reserved control will be
determinative
Majority relied on alleged
evidence of direct, indirect and
reserved control to find joint
employer status
“Bare right to dictate the results
of a contracted service or to
control or protect its own
property” is not enough
NLRB WILL USE A MULTI-FACTOR TEST
Ultimate focus is on how a putative
joint employer affects the means or
manner of work and other terms of
employment
NLRB will look at the “existence,
extent, and object of a putative joint
employer's control”
NLRB will look at how that control
impacts terms and conditions and
weigh “their significance to employees'
work life”
WHO’S AFFECTED BY NEW RULE?
All employers - union and
non-union
All industries - especially those
who depend heavily on the use of
contingent workers and
contractors
New rule applies to user/supplier,
contractor/subcontractor,
predecessor/successor, and other
business models/relationships
PARENT-SUB RELATIONSHIP
If “potential control" is enough, every parent would be a joint employer with its subs or divisions; not a likely result
A parent that exercises direct or indirect control over terms and conditions may be a joint employer under even if control is insufficient to establish “single employer” status
FRANCHISORS-FRANCHISEES
Historically, franchisors have been permitted to exercise enough control over the manner and method of work to protect brand and comply with applicable laws
NLRB’s General Counsel is seeking to change this rule in McDonald’s USA, LLC, Cases 02-CA-093893, et al.
NUTRITIONALITY INC. D/B/A FRESHII
April 28, 2015 Advice Memorandum issued by the Office of the General Counsel found no joint-employer relationship between Freshii and its restaurant franchisees under old standard or the new standard proposed by the General Counsel Browning-Ferris
Franchise agreement included normal controls over operations, marketing and other aspects of the franchisee's business consistent with business format
No evidence Freshii used its reserved power to terminate as an indirect means to affect terms and conditions or HR decisions
Insufficient evidence of direct or control
FRESHII FACTORS
Typical franchise agreement controls over operations, marketing etc. were present
Operations manual included HR suggestions; not requirements
No obligation to use sample handbook
Point-of-sale software did not include scheduling component
No evidence that reserved power to terminate was used as an indirect means to affect employment terms or HR decisions
PRIME CONTRACTOR - SUBS
Prime contractor now faces greater
risk of joint employer status with its
subcontractors by . . .
Directing the number of workers to
be supplied
Managing scheduling and/or
overtime
Assigning work
Determining the manner and method
of work performance
BIG IMPACT ON small businesses
Commerce data applicable to joint employers is combined for NLRA jurisdictional purposes
NLRA will now extend to small businesses owners whose operations and employees previously were not subject to the NLRA’s jurisdiction
INCREASED LIABILITY RISK
Browning Ferris increases legal risk for employers by making
it much easier for unions/NLRB to establish that nominally
separate employers are “joint employers”
CONSEQUENCES OF JOINT EMPLOYER FINDING
Joint liability for ULPs
Duty to bargain with
co-employer’s union
Successor employer risks
Increased risks of union
organizing by co-employer’s
employees
Increased risk of exposure to co-
employer’s labor disputes –
secondary strikes, picketing etc. -
due to loss of neutral status
JOINT AND SEVERAL LIABILITY FOR ULPS
Each “joint employer” is generally
responsible for the conduct of
the other including unfair labor
practices
Both are jointly and severally
liable for the remedy
REMEDIES IMPOSED ON JOINT EMPLOYER
Sign and post notice
Cease and desist unlawful practice
Restore status quo
Bargaining orders
Reinstatement
Backpay; other damages
10(j) injunctions
GC continues to get creative
VIOLATION OF SECTION 7 RIGHTS
A joint employer may violate Section 8(a)(1) of the NLRA by direct or indirect interference with Section 7 rights of a co-employer’s employees
Hyundai Rotem USA Corp. and Aerotek, Inc., 358 NLRB No. 59 (2012) (joint employer liable for overbroad confidentiality agreement maintained by its contractor)
DISCRIMINATION AGAINST UNION ACTIVISTS
Liability for discriminatory conduct in violation of Section 8(a)(3) may be direct
It may also be imputed where the non-acting employer "knew or should have known" co-employer acted with unlawful motive and acquiesced by failing to protest or exercise contractual right to resist it. Capitol EMI Music, 311 NLRB 997 (1993)
FAILURE/REFUSAL TO BARGAIN
Under Browning-Ferris, joint
employer has a duty to bargain
“only with respect to those
terms and conditions over
which it possesses sufficient
control for bargaining to be
meaningful”
MORE QUESTIONS THAN ANSWERS
Buckle up!
NLRB majority conceded that
there will be plenty of confusion
about who the “employer” is
(and with respect to what terms
and conditions) and how disputes
are resolved when joint
employers cannot come to an
agreement on what to propose or
how to resolve issues with a
union
DUTY TO PROVIDE INFORMATION
Employers are likely to see
extensive information requests
Requests designed to prove
joint employer status
Requests with respect to terms
that are jointly controlled
THE 8(A)(5) V. 8(A)(2) DILEMMA
Putative joint-employer risks
violating Section 8(a)(5) if it
refuses to bargain
Risks violating
Section 8(a)(2) if it agrees
to bargain and/or bargains
over the wrong issue and is
later found not to be a
joint employer
TERMINATING AGREEMENTS JUST GOT HARDER
Malbaff rule allowing termination of
third-party agreement for anti-union
reasons (e.g., because contractor’s
employees are organizing) does not
apply to or protect a joint employer
Joint employer may have a duty to
bargain to the point of impasse over
decision and/or effects of decision to
amend, terminate, or rebid
agreements with union contractor,
franchisee etc.
SUCCESSOR EMPLOYER RISK
Whitewood Maintenance Co., 292
NLRB 1159, 1168-1169 (1989)
“User” employer that was found
to be a joint employer with union
subcontractor and firm that
replaced it could not set its own
initial terms
INCREASED EXPOSURE TO LABOR DISPUTES
Section 8(b)(4) prohibitions
on secondary strikes,
picketing and other coercive
union conduct protect
“neutral” employers
Neutral status is lost
in a labor dispute
when joint employer
status exists.
Teamsters Local 688,
211 NLRB 496 (1974).
IS ANYBODY A “NEUTRAL” ANYMORE?
More entities will be found to have
“primary-employer” status in labor
disputes that are not directly their
own
Risk that unions will be allowed to
picket all of a user’s stores or other
facilities even though the supplier
only provides services at one
Risk that unions will be allowed to
picket franchisor and all franchisees
even though its real dispute lies with
only one
UNION ORGANIZING RISKS
Unions will seek to organize
contingent workers and
franchisees
Interim bargaining order may
be imposed on joint
employers for campaign
violations. Dorothy l. Moore-
Duncan ex rel. NLRB v.
Aldworth Company, Inc.,
124 F. Supp. 2d 268
(D. N.J. 2000)
ACCESS ISSUES
Stay tuned. A “user”
employer will likely be
required to extend to its co-
employer’s employees the
same right to engage in
solicitation, distribution etc.
that must be extended to its
own employees
WILL THE NLRB’S DECISION STAND?
Teamsters won the election
NLRB will likely be forced to pursue claims that BFI refused to bargain in federal court
Other employers may test the decision as new joint employer cases are filed
Legislation (e.g., Protecting Local Business Opportunity Act) has been introduced to overturn the decision; will not become law anytime soon
IS OAKWOOD CARE CENTER NEXT TO FALL?
In Oakwood Care Center, 343
N.L.R.B. 659 (2004), NLRB overruled
Sturgis and held that a unit
combining employees who are solely
employed by a user with employees
who are jointly employed with a
supplier is a multiemployer unit
which is appropriate only with the
consent of both parties
OTHER LEGAL RISKS
Expect agencies, unions and plaintiff’s
lawyers to aggressively use versions of
joint employer theory to impose
investigatory burdens and liability
under federal and state laws
OSHA is continuing to expand its focus
on “host employers” and franchisees
IC misclassification cases will continue
to increase
How will joint employers be viewed for
ERISA and MEPPA liability purposes?
BROWNING-FERRIS RESPONSE PLAN
Circuit courts have been following
versions of the “direct and
immediate” control standard for
decades and may reject the NLRB’s
new approach
Steps can be taken to reduce the risk
of being a joint employer
Employers should audit their
relationships and develop a
response plan that fits their risk
tolerance level
EVALUATE CURRENT/POTENTIAL PARTNERS
Given the increased risk of
union organizing and joint
employer liability, it is
important to assess (not
dictate) the legal
compliance record and
employment practices of
entities that provide or seek
to provide contract labor or
become franchisees
WEIGH RISKS/REWARDS OF EACH RELATIONSHIP
Determine whether certain
business models and
contractual relationships
continue to make sense
Balance operational/legal
risks associated with giving
up certain controls against
those associated with
reserving and/or exercising
such controls
WEIGH RISKS/REWARDS OF EACH RELATIONSHIP
Review insurance policies that cover employment
practices to determine whether potential liability for a
third party’s employees would be covered
REVIEW AND REVISE CONTRACTS WHERE PRACTICAL
Review agreements, manuals,
handbooks, policies,
communications, and other
documents to identify areas of
potential joint employer risk
WHERE PRACTICAL, remove or
modify red flag provisions that
impose or reserve control over
terms and conditions of
employment or dictate the
manner and method of the work
performed
REVIEW AND REVISE CONTRACTS cont.
Establish pay structures for service providers not based on
wage rates and hours of work rendered by non-employees
Describe operational and other standards as
“recommendations”
Where standards must be mandatory, include language that
describes their relationship to a legal requirement or need
(e.g., franchisor) to protect a trade name, professional
methods, goodwill, or commercial image
Disclaim control over other’s employees
Revise cost-sharing, indemnification, insurance and early-
termination provisions to reflect increased risk of joint
employer liability
IS A COST-PLUS CONTRACT FATAL?
Majority held that “this arrangement, on its own, is
not necessarily sufficient to create a joint-employer
relationship”
BFI’s cost-plus agreement expressly prohibited Leadpoint
from paying more than BFI paid its employees in comparable
positions
BFI also required that Leadpoint employees submit their
time records for approval and “approved” an increase in
what it was required to pay Leadpoint for hours worked
when a minimum wage hike was passed
TAKE STOCK OF DAY-TO-DAY OPERATIONS
Periodically review how agreements are actually being
implemented
Examine actual day-to-day practices to determine what
steps can be taken to restructure work arrangements and
eliminate or reduce joint employer risks
How much direction and control are your managers/
supervisors exercising over third-party employees? Contact
with their non-management employees should be very
limited
Representatives who visit franchisees should interact only
with the franchisee or their supervisory personnel; directives
should not be issued to franchisee employees
TRAIN YOUR TEAM
Train managers, supervisors
and others involved in drafting
or administering agreements
on what the joint employer
lines are and how to avoid
crossing them
The Board’s lines are not clear
so employers will occasionally
be forced to make a “best
guess”
SUMMARY
Scrub the reserved control red flags form your agreements wherever possible
Avoid exercising direct control over terms and conditions
Avoid exercising indirect control over terms and conditions
Expressly disclaim any right of control
Limit contact with non-management employees
Avoid giving detailed directives
Focus dealings with third-parties on the result desired; leave it up them to instruct their employees on how to achieve it
Questions?
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