NLRB Joint Employment Ruling Creates Risks for Companies Utilizing "Temps" or Staffing Agencies

By of Simpson Delmore Greene LLP posted in Employment Law-Employer on Friday, October 30, 2015.

Summary: On August 27, the National Labor Relations Board ("NLRB") issued its decision in Browning-Ferris Industries of California, Inc. (362 NLRB No. 186), which departs from its long-standing joint employer test in favor of a far more expansive view of joint employment. The decision will likely have substantial implications for companies that utilize temporary staffing agencies and contractors.

Browning-Ferris Industries ("BFI") operated a waste recycling facility and employed approximately 60 employees who worked outside the facility. BFI also had a temporary labor service agreement with Leadpoint Business Services ("Leadpoint"), under which Leadpoint provided BFI with approximately 240 workers. The workers were sorters, housekeepers, and cleaners who worked inside the facility. Leadpoint's agreement with BFI contained provisions that required the staffing agency to hire, train, compensate, manage, discipline, review, and terminate its employees. Teamsters Local 350, which already represented the 60 BFI employees, petitioned to represent the 240 workers in negotiations with both Leadpoint and BFI, which the Teamsters argued were joint employers of the workers. Upon review, the NLRB evaluated (1) whether a common-law employment relationship existed and (2) whether the putative joint employers "possessed sufficient control" over employees' essential terms and conditions of employment. In rendering its decision, the NLRB established a new joint employer standard, whereby "sufficient control" can be established directly or indirectly based on contractual provisions between the two putative joint employers.

Based in part on the following factors, the NLRB found that BFI maintained sufficient control over Leadpoint workers to establish a joint employment relationship:

  • BFI set qualification levels for Leadpoint employees; could reject any worker the company referred to its facility; could prohibit Leadpoint from hiring workers BFI previously terminated;
  • BFI restricted Leadpoint from paying its employees more than BFI employees who performed the same or similar work;
  • BFI maintained control over specific Leadpoint worker employment conditions, such as productivity standards, shift schedules, and employee breaks.

Due to these factors, the Browning-Ferris decision ultimately makes it easier for labor unions and employees to establish joint employer status in situations involving temporary employees or staffing agencies. Once joint employment status is established, a company's "temp" workforce can force that company to the collective bargaining table to negotiate the terms and conditions of their employment.

For these reasons, it is imperative that companies supplementing their workforce with contingent workers review their contractual relationships to determine whether those contracts contain provisions that grant the company "sufficient control" over the staffing company's employees. Given the NLRB's recent decision and the Department of Labor's recent memorandum on independent contractors, the savings of utilizing staffing companies should be weighed against the probability of litigation and severity of liability.

Practice Pointer:
Review Contracts With Staffing Agencies. Never assume that your contract with a staffing agency will protect your company. The NLRB's recent decision is consistent with the trend of finding that a joint employer relationship exists, regardless of contracting parties' intent. Seek counsel to review all staffing contracts.