Are You a Joint Employer of Your Subcontractor’s Employees?
Business Law Articles
Iseman, Cunningham, Riester & Hyde LLP
Albany/Poughkeepsie, New York
On August 27, the National Labor Relations Board (“the Board”) overturned 30 years of precedent when it ruled that a contractor can be deemed a joint employer of a subcontractor’s employees for purposes of the National Labor Relations Act (“the Act”) merely because the contractor reserved the authority to exercise control over certain terms and conditions of those employees’ employment. The impact of this decision is significant because joint-employer status can be conferred on a contractor even if it does not exercise the reserved authority. As a joint employer under the Act, the contractor becomes obligated to collectively bargain with the subcontractor’s union employees, and may also be exposed to liability for unfair labor practices committed by the subcontractor.
The Board handed down its decision in Browning-Ferris Industries of California, Inc. (32‑RC‑109684). Browning-Ferris Industries (“BFI”) owns and operates a recycling facility where various mixed materials and mixed recyclables are sorted. BFI employs approximately 60 people, most who work outside the sorting facility. BFI subcontracts with Leadpoint Business Services (“Leadpoint”) to perform the majority of the sorting work, which is handled by approximately 240 Leadpoint employees. The contract between BFI and Leadpoint has an indefinite duration, but is terminable by either party upon 30 days’ notice.
Teamsters Local 350 sought to represent the sorters who work at the BFI facility, and petitioned the Board to have Leadpoint and BFI declared joint employers of those employees. With respect to the Leadpoint sorters, the Board reviewed numerous facts related to the management structure between BFI and Leadpoint; hiring; discipline and termination; wages and benefits; scheduling and hours; work processes; and training and safety. In virtually all instances the Board found that Leadpoint exercised the vast majority of control over those terms and conditions of employment. Recognizing that under long-existing authority BFI could not be deemed a joint employer, the Board overruled its prior decisions and declared BFI a joint employer of the Leadpoint sorters. The Board based its decision on a finding that BFI had the contractual right to assert control over several of those terms and conditions of employment. As a result, employer status will no longer be based on what actually happens in the workplace, but will be determined by what may happen.
The Board acknowledged that this new standard is “inherently nuanced” and all but agreed with the dissent that its ruling is void of “certainty or predictability regarding the identity of the employer.” Unfortunately, the standard announced by the Board seems to beg numerous questions, while possibly cloaking unsuspecting contractors with employer status. It remains uncertain how the Board will apply, and possibly shape, this decision in the future.
This decision drastically changes the landscape for contractors. It is critical to review subcontract agreements to determine what, if any, employment terms and conditions applicable to subcontractors’ employees may be subject to the contractor’s control. Contractors should anticipate having to significantly curtail their right to have input concerning who a subcontractor may employ and how it employs them. As the Browning-Ferris decision leaves open the issue of how extensive the right to control needs to be in order to cast the contractor as a joint employer, contractors would be best to err on the side of conservatism, even if that means relinquishing rights traditionally enjoyed in certain subcontractor relationships.
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