The Browning-Ferris Decision of August 27, 2015
The Obama administration is redefining what it means to be an employer and the implications of that broadening definition will be felt by nearly every employer. On August 27, 2015, the National Labor Relations Board dramatically expanded its joint-employer standard, potentially making it easier for unions to organize employees of franchisees and subcontractors by essentially forcing large corporations to the bargaining table. The NLRB handed down one of the biggest labor decisions of the Obama administration, ruling that a company is equally responsible for labor violations committed by its contractor and possibly for workers of franchisees.
The issue presented in the underlying petition was whether the garbage company Browning-Ferris was responsible for the treatment of its contractor’s employees. In order to staff a recycling facility in California, the Houston-based waste-disposal company hired Leadpoint Business Services (a Phoenix-based staffing agency) to staff the facility. The NLRB, in a 3-2 decision, determined that Browning-Ferris should be considered a joint-employer with Leadpoint. Consequently, Browning-Ferris could be forced to engage in collective bargaining negotiations with the Leadpoint employees and could also be held liable for any purported labor violations committed against those employees.
The new ruling is a sharp departure from prior labor laws which held companies responsible only for employees if they had direct control over the setting of their wages, hours or job responsibilities. Previously, companies could get around such concerns by hiring staffing agencies and subcontractors who would interact with workers more closely. There is no doubt that today’s ruling maps out a completely new definition of what it means to be a “joint-employer”. Further, the ruling seeks to redefine what constitutes an “employer” in the USA and, in that regard, could have large implications on how companies currently operate and will operate in the future.
The implications of the NLRB ruling can and most likely will go far beyond the Browning-Ferris case. Under its former standard, a company was considered a joint-employer if it had direct control over the working conditions for the employee. Under today’s newly announced standard, which the NLRB said was “necessary to protect today’s workers”, a company is considered a joint-employer if it exercises indirect control over working conditions or if it reserves the authority to do so.
The Browning-Ferris ruling could have a substantial impact on a myriad of businesses beyond the garbage disposal industry, ranging from companies in the technology, healthcare, restaurant, retail, hospitality, construction, cleaning, staffing agency and other businesses. Even prior to today’s ruling, the impact of the broader definition of “employer” is already being felt. Businesses are threatening to stop working with staffing agencies that assist in recruiting temporary workers and subcontractors who provide security and janitorial services, since they do not want to risk being responsible for another company’s employees. Instead, hiring for such services internally might incur added payroll expenses but protects against a possible latent claim of being a joint-employer, a label that might eliminate or decrease the savings associated with hiring through a staffing agency.
The ruling could have wide-reaching effects in light of the increased number of temporary and contract workers hired in many industries. As but one example, in 2014, 2.87 million workers were employed through temporary agencies, more than double the prior number of temporary workers in 1990 of 1.1 million.
Today’s NLRB ruling is but the latest in a string of major victories for labor groups under the Obama administration, part of a unified effort which has already taken multiple efforts on numerous fronts to make it easier for employees to unionize and to challenge employers on virtually every front. In light of this and other recent employee-favored rulings, companies should carefully review their current and future business plans and employment practices and implement effective, proactive strategies for avoiding potentially costly future employment claims and litigation.
Article by Peyton Smith, a former Partner at Reed & Scardino. For further information about labor and employment law and human resources, please contact us.