The Board's New Math: Browning-Ferris And How 2=1
Labor Day has come and gone but organized labor is still celebrating its significant victory in the NLRB’s Browning-Ferris decision of August 27, 2015, which held that the individuals employed through Leadpoint were joint employees of both Leadpoint and Browning-Ferris for the purpose of collective bargaining. To make matters worse, the NLRB election ballots were opened recently at the Browning-Ferris facility and the Teamsters buried the now joint employer BFI/Leadpoint by a tally of 73 to 17. The Teamsters announced in something of an understatement that they are looking forward to “negotiating a contract” with the new joint employer “that will ensure the best working conditions” for its members. Given that the member-employees in question were considered employees of Leadpoint until the NLRB’s decision, the process of deciding which component of the new joint employer is responsible for which of the terms and conditions of employment shall assuredly regress into a circus. It does not appear that the Board’s thinking has evolved quite this far ahead. Even the shape of the bargaining table (2-sided or 3-sided) has yet to be sorted out.
The practical meaning of this expansion of the joint employer definition is significant. An employer (“host”) contracting with a staffing agency is almost certainly a joint employer if that relationship bears much resemblance to BFI and Leadpoint as described in the Browning-Ferris decision. There, the staffing agreement between the parties was a traditional one: Leadpoint screened, tested, hired, compensated, and disciplined its employees assigned to BFI. Leadpoint also provided some supervisory control of its employees at the BFI worksite. BFI established the work processes to be followed, the hours of work, specific work assignments, and productivity and safety standards to be observed. In short, the relationship was a common one. In its Browning-Ferris decision the Board was not terribly interested in which party to the agreement was formally responsible for the employees’ terms and conditions of employment. Rather the Board chose to focus on the degree of control each party had relating to those terms and conditions of employment. “Discipline” of employees was one of many examples seized upon by the Board. BFI did not discipline Leadpoint employees but in at least two instances effectively did “request their immediate dismissal.” As a result, both employees were immediately removed from their line duties and dismissed from further work at the BFI facility. Bad facts make for bad law. Moreover, the Board found that this outcome was “preordained” by BFI’s contractual right in the staffing agreement to dictate who works at its operation.
“Wages and Benefits” was yet another area where the Board moved beyond formalities and focused on its version of degree of control. Yes, Leadpoint directly compensated its employees, but the Board determined that BFI played a significant role in fashioning those wages. The “cost-plus” contract by which BFI reimbursed Leadpoint for labor costs plus a percentage mark-up was one factor demonstrating real control by BFI. It was also left to BFI to first approve of any Leadpoint employee wage increases. And, Leadpoint was specifically prohibited from paying its employees more than BFI employees performing comparable work. Suffice it to say, the Board’s Browning-Ferris decision ignored the legal niceties attendant to these staffing or temporary employee circumstances and made its case for joint employer status by casting aside existing law and skewing its factual analysis to fit its own “preordained” direction.
So what does this mean? First, the obvious: staffing companies and so-called host employers alike must carefully review their agreements and, in all probability, revise and create new ones with an eye toward the Browning-Ferris decision. This is the opportunity to distance the terms of the operating agreement as far as possible from many of those enunciated in the Board’s opinion. For example, the agreement should succinctly spell out the staffing agency's role as decision maker in the disciplinary process. The host employer may report an employee issue, but the staffing agency must control the investigation and ultimate resolution of the issue presented. This includes the staffing agency deciding on discipline and imposing that discipline, which may include reassignment of the employee and discharge, if necessary, or no discipline at all.
It is also plain that the standard cost-plus method of doing business is not one to duplicate or continue in place. Nor are provisions which forbid staffing agency employees from earning more than host employer employees performing substantially comparable work. The same can be said about a clause in the agreement requiring the host employer's approval of any wage increases for staffing employees. All of these elements and more were targeted by the Board in Browning-Ferris as demonstrating BFI's significant degree of control over Leadpoint's employees.
These are just a few of the "takeaways" from the Board's opinion. Additional distinctions to be made must be sifted from the operative facts identified by the NLRB as demonstrative of joint employer status. The nature of the work to be performed should be analyzed. If the work to be performed by the staffing agency employees can be realistically differentiated from that of the host employer's employees, this could prove to be an important distinction. In essence, the agreement could spell out and compartmentalize the scope of the staffing employees’ work as separate from that otherwise performed by the host employer. And, although the Board was not impressed with the fact that Leadpoint employed supervisors on the job at BFI, those separate supervisors with a hands-on supervisory role may prove to be representative of something other than a joint employer. Also, a broad indemnification provision taking into account the Browning-Ferris decision is imperative. Existing boilerplate language in this regard may be insufficient to account for the Board’s new direction.
On a final note regarding the review and revision process to the underlying agreement, it requires a mutual understanding, or at least an inclination to agree, that this is a two way street. Both the host employer and the staffing agency must understand that each is compelled to make real modifications to the relationship to avoid a joint employer determination. There is no silver bullet, but a new operating agreement crafted to define the relationship in a manner distinguished from that in BFI/Leadpoint is a critical step.
The proposed modifications to the disciplinary process addressed herein should be incorporated into the staffing agency’s employee handbook. The host employer’s policy manual should also restate that its policies apply to only its employees and then clearly define eligibility. Again, this is yet another opportunity to enunciate and underscore the independence of the staffing agency from the host employer and vice versa. Work for the host employer is an “assignment” subject to the terms and conditions established by the staffing agency’s handbook. Staffing agency policies governing holidays, vacations, bereavement leave, personal leave, benefits, even work schedules, can and should be created to emphasize the objective and subjective lack of control over these terms and conditions by the host employer. The concept at work here is to emphasize the relative independence of the two employers.
The NLRB’s decision in Browning-Ferris strongly suggests a very similar outcome in an upcoming decision where the relationship is that of franchisor-franchisee. And some legal analysts view Browning-Ferris to extend to even contractor-subcontractor relationships. To most, however, this is too much of a stretch. Alarmists aside, the EEOC and other government agencies have already moved in the direction of the Browning-Ferris Board without significantly disturbing the traditional contractor-subcontractor arrangement.
If nothing else, Browning-Ferris signals the willingness of the NLRB to peer behind the curtain and evaluate the facts based on its view of what it identified as “industrial realities” as opposed to legal precedent. And now, the BFIs and Leadpoints within this industrial reality are exposed to liability for the unfair labor practices of each other and to the union organizing drives against them both. It is a matter of necessity to respond proactively to this seismic shift in labor law. Revisiting the staffing agreement in place and reframing an employment handbook to clearly define independent employment policy and practice are essential first steps.
For more information, contact Mark W. Ford or any member of Ice Miller’s Labor, Employment and Immigration Group.
This publication is intended for general information purposes only, does not, and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.