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Browning Ferris Industries: What Does It Mean and What Now?

September 9, 2015 by

By now you will have read about the NLRB’s Browning Ferris (BFI) decision, which restates the “joint employment” standard under the National Labor Relations Act.  The decision has been described as a “game changer” and a “seismic shift.”   In essence, it means that “behind the scenes” employers that contract for labor from staffing, temp or labor agencies — or through broker or franchisor arrangements — must bargain with a union that represents these employees.  Many of the news reports include bombastic, sky-is-falling arguments advanced by employer groups, including the Chamber of Commerce, National Franchisee Association and the National Manufacturers Association.  These arguments were presented to the Board, considered and rejected in a detailed decision that upheld the arguments advanced by us and supportive amici.

The employer associations have moved their debate to the court of public opinion, and the press has indulged some of their outlandish doomsday claims.  For a clear-eyed assessment of the Board’s decision and the urgency of the Board’s need to address the fissured, fractured, on-demand workplace under the NLRA, we recommend the New York Times Editorial Board’s statement, and the detailed coverage by the Huffington Post, Los Angeles Times and Washington Post.  Here we offer our assessment of this important and much-needed decision.

Why the Need to Fix the Joint Employment Standard?
At the outset, the Board correctly notes its “joint employment jurisprudence [was] increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.”  In fact, over the past thirty years and without reasoning or explanation, the standard for determining when two separate entities are employers of the same group of workers drifted and narrowed.  This “doctrinal drift” meant that the NLRB was inadvertently excluding more and more workers from the right to engage in meaningful collective bargaining.  At the same time, the use of contingent, on-demand, temp, staffing and labor-contractor workforces has proliferated.  In real numbers, employment through staffing agencies is growing, and its rate of growth has been exponential since the Great Recession, becoming the fastest growing component of the American workforce.  As noted by the Board, this sector is on track to employ 4 million workers by 2022.

Consequently, in its BFI decision the Board stated, “[i]f the current joint employer standard is narrower than statutorily necessary, and if joint-employment arrangements are increasing, the risk is increased that the Board is failing in what the Supreme Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial life.’”  This mirrors our position, as noted by the Board:  “the Union asserts that absent a change in the joint-employer standard, a putative employer, like BFI, that is a necessary party to meaningful collective bargaining will continue to insulate itself by the ‘calculated restructuring of employment and insertion of a contractor to insulate itself from the basic legal obligation to recognize and bargain with the employees’ representative.’”

The Board’s Restated Joint Employment Standard
The BFI decision “restates” the joint-employment standard.  The “new” standard is simply a reaffirmation of the rules applied by the Board during its first fifty years.  In reaffirming the standard, the Board adds explanation so that practitioners can clearly understand the principles that will be applied to determine when a workforce with two taskmasters is jointly employed.

The Board summarized the restated standard as: “two or more statutory employers are joint employers of the same statutory employees if they share or codetermine those matters governing the essential terms and conditions of employment.”

Crucially, the Board affirmed that the analysis is founded on “common-law” principles, which have defined the employment relationship for hundreds of years, and have been consistently applied by states and other agencies.  In that regard, until BFI, the Board has been the outlier, by narrowing and ignoring the common-law test when analyzing joint employment.

Returning to the standard reaffirmed in BFI, if a common-law employment relationship exists between a group of employees and the company that contracts for their labor, the Board will then consider whether the entity “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.”  Both the “employment” analysis and “meaningful bargaining” analysis center on “the existence, extent, and object” of the control that is or may be exercised by the employers.

How is the restated BFI standard different than the standard of the past few decades?  Under the Board’s prior approach, and in contrast to the common law, a joint employer must have had authority directly over the employees’ person and, essentially, must have directly supervised them.  In BFI, we urged the Board to go a step further and ask: “Who supervises the supervisor?”

Under the new standard, the level of control exercised by a joint employer need not be “immediate or direct” and, importantly, need not be exercised:  “reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry,” the Board stated.

We summarize the BFI standard with the following questions:

  1. Is the company that has contracted for the provision of labor or services a private entity covered by the NLRA?;

  2. Are the employees “statutory employees” — meaning they are employees other than public employees, agricultural workers, or supervisors?;

  3. Can or does the company exercise control to an extent that it impacts the contractor’s or franchisor’s employees to such a degree as to establish common-law employment?; and

  4. Is the level of control that is or may be exercised over any essential terms of employment significant, such that its participation will enable meaningful collective bargaining?

If the answer to each of these questions is “yes,” then the company engaging the staffing, temp or labor agency, franchisor or broker is a joint employer and must comply with the duty to bargain in good faith with respect to the terms of employment over which it has control.

The Board’s “new” standard applies retroactively.

Control Over What?
A joint employer’s “control” over the employees no longer must be “immediate and direct,” and need not be actually exercised on a regular basis, if at all.  But to give rise to joint employment, the joint employer’s indirect right of control must involve  the employees’ “essential terms” of employment.  We take “essential” to broadly mean any mandatory subjects of bargaining.  The Board recognizes an “inclusive approach in defining essential terms and conditions of employment” that “indisputably include[s] wages and hours,” and may “include dictating the number of workers to be supplied; controlling scheduling, seniority, and overtime; and assigning work and determining the manner and method of work performance.”  The Board noted that this list provides examples and is not exhaustive.

Of course, the devil is in the details, and we are able to assist in assessing any scenario or worksite under the restated standard.

Does the BFI Decision End Franchising?
Much news coverage echoes the alarmist statements of industry groups, particularly the franchise fast-food industry.  The BFI decision itself does not involve a franchising model, rather it entails a labor-only, cost-plus staffing contract under which BFI has subcontracted the employment relationship — and nothing else — to a staffing agency named Leadpoint.  Unlike a franchise model, BFI owns the facility and equipment on which Leadpoint’s employees work, directs the quality and quantity of work performed by Leadpoint employees, oversees the operations with its own personnel and retains authority to approve or reject Leadpoint’s employees.  Further, Leadpoint can only pay to its workers amounts that comply with its staffing agreement with BFI.

On the other hand, a traditional franchise agreement is simply a licensing agreement under which business owners license the right to use a franchisor’s brand or to sell the franchisor’s products.  The BFI decision is significant to franchisors and the employees of franchisees because it will be applied to analyze the relationship between them and whether it gives rise to joint employment.  Many franchise agreements go well beyond simple licensing, with substantial quality controls and financial terms that directly impact the franchisee’s employees.  The BFI decision means that franchisors, like other employers, can no longer operate as de facto employers without the legal obligations that come with an employment relationship.  If they want to make franchising arrangements while retaining control over operations, they must comply with the laws like any other employer.

Does the Decision Affect Independent Contractors?
The NLRA specifically excludes independent contractors from its definition of “employee” and so true independent contractors are not “statutory employees.”  However, the principles set forth in BFI for joint employment will also apply to an analysis of whether an individual has been misclassified as an independent contractor when two or more businesses exercise control in a coordinated manner over the independent contractor.  For example, truck drivers classified as independent contractors may be considered employees with respect to the control exercised by both the driver’s broker and the company that engages the broker.  The Board’s more expansive view of the types of control exercised or reserved over an independent contractor by multiple entities will be applied to determine if the independent contractor is an employee entitled to the protections of the NLRA.

What’s On the NLRB’s Horizon On the Joint Employment Issue?
The Board has issued a request for briefing from interested parties on the question of whether, in the joint-employment context, an appropriate collective bargaining unit can combine both the employees of the staffing agency and the employees of the company that contracts with the staffing agency, or whether each group must comprise a separate bargaining unit, as illustrated in this diagram:

In 2000 the Board in M.B. Sturgis, Inc. (331 NLRB 1298) held that a unit consisting of both groups was appropriate even if the joint-employers did not consent.  In 2004 the Board reversed that decision, in Oakwood Care Center (343 NLRB 659), disallowing inclusion of “solely employed” employees in a unit of jointly employed employees.

The Board will be deciding that issue and considering the extent to which a staffing agency’s employees’ rights under the NLRA can be secured if they are separated from the employees with whom they share a community or interest.

The material on this website is provided by Beeson, Tayer & Bodine for informational purposes only and does not constitute legal advice. Readers should consult with their own legal counsel before acting on any of the information presented. Some of the articles are updated periodically, and are marked with the date of the last update. Again, readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented.