NLRB Changes Joint Employer Standard with Major Implications for General Contractors
The National Labor Relations Board (“NLRB”) recently issued its decision in Browning-Ferris Industries of California, Inc. In a 3-2 decision (along party lines), the NLRB changed the standard for who may be considered a joint employer under the National Labor Relations Act. In the construction industry, this decision could make it more likely that general contactors will be considered joint employers of their subcontractors’ employees under the National Labor Relations Act (or subcontractors with their sub-subcontractors, and downward through the construction pyramid). If this decision stands, it would increase the number of employers who will be subjected to potential unfair labor practices charges, breach of collective bargaining agreement charges, and may create joint bargaining obligations.
The new joint employer standard established by the NLRB:
The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment
In applying this new joint employer standard, the NLRB will now determine whether an entity affects the means or manner of work and terms of employment, either directly or indirectly. The control no longer needs to be direct or immediate. The NLRB majority held it is not critical that the entity actually exercise such authority to control, as long as it possesses or reserves the right to do so. Contractual language will be crucial. The NLRB majority also held the old joint employer standard, which required direct and actual control over the workers, was no longer relevant due to the increased use of subcontractors and temporary staffing agencies in the workplace.
Application of the New Joint Employer Standard in Browning-Ferris
In the Browning-Ferris decision, the NLRB was considering whether BFI, which operated a recycling facility, was a joint employer with Leadpoint, a company which provided temporary staffing employees for the recycling facility. The NLRB relied on the following factors in evaluating the contract between BFI and Leadpoint before reaching its conclusion:
A. Hiring, Firing & Discipline
- BFI and Leadpoint could terminate their agreement at will
- BFI could require Leadpoint to meet or exceed BFI’s hiring standards for employees
- BFI required all Leadpoint employees to undergo drug testing
- BFI retained the right to reject any worker Leadpoint sent to the recycling facility “for any or no reason”
B. Supervision, Direction of Work & Hours
- BFI controlled the pace of work of Leadpoint employeers
- BFI determined breaktime and safety standards
- BFI specified where Leadpoint employees were stationed and exercised oversight over their work
- The fact that many of the BFI work directives were communicated through Leadpoint supervisors “disguises the fact that BFI alone was making the decisions”
- BFI held on-site meetings with Leadpoint employees
- BFI specified the number of workers it required, dictated the timing of the workers’ shifts and determined when overtime was necessary
- Leadpoint determined its own employees’ pay rates. However, the contract prevented Leadpoint from paying its employees more than BFI paid its employees
All of these factors together lead the NLRB to conclude BFI and Leadpoint were joint employers of Leadpoint’s workers.
Impact on the Construction Industry
The main concern for the construction industry coming from the Browning-Ferris decision is that a contractor’s indirect control over terms and conditions of its subcontractors (or a subcontractor with a sub-subcontractor, etc.) may now be enough to create a joint employer relationship. However, the Browning-Ferris decision does not really provide any real guidance on how much indirect control is enough to create a joint employer relationship.
Do your subcontract agreements exercise any indirect control over your subcontractors (or sub-subcontractors, etc.)? Do you have terms in your contract similar to the BRI – Leadpoint contract? While we wait for more decisions from the NLRB on how much indirect control is sufficient to create a joint employer relationship, you should closely evaluate the terms and conditions in your subcontractor agreements. Pay particular attention to the sections of your subcontract agreements related to control over the work – scheduling, means & methods, hours of work, location of the work, etc. We should fully expect the NLRB’s decision to be challenged in Federal court. In the meantime, contractors and subcontractors entering into subcontractor agreements should seek the advice of counsel on how to respond to the NLRB’s decision.
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