NLRB ruling against Browning-Ferris Industries of California could have big impact on franchisors
The National Labor Relations Board’s (NLRB) ruling last summer to refine the standard for determining joint-employer status could have far-reaching consequences for companies that, until now, have largely avoided the thornier responsibilities of employers by using workers provided through temporary agencies
In August 2015, the NLRB held that Browning-Ferris Industries of California (BFI), a waste management company, and Leadpoint Business Services, a staffing agency that supplied some workers at BFI facilities, were joint employers. The 3-2 decision overturned about 30 years of NLRB’s own precedent, holding that the power to control terms and conditions of employment, by itself, is sufficient to be an employer and that the putative joint employer – BFI in this case -- need not exert that control. For its part, the US Department of Labor revised its guidelines on joint employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act on January 20, 2016.
While overturning several precedents normally signals a radical change—and the dissenting Board members argued this decision does that—the majority characterized the decision as one that restored the Board’s original interpretation, which, in turn, was upheld by the Third Circuit precedent in a 1982 case involving Browning-Ferris of Pennsylvania.. Citing the fact that as of August 2014, 2.87 million US workers were employed through temporary agencies, the Board said ‘its previous joint-employer standard has failed to keep pace with changes in the workplace and economic circumstances.’
After the August decision, workers at BFI voted to form a union, and the Teamsters attempted to negotiate with management on their behalf. However, BFI refused to recognize the union, which then filed an unfair practices complaint with the NLRB. On January 12, 2016, the Board ruled against BFI, which then appealed the ruling to the District of Columbia Circuit, challenging the ‘new’ joint-employer rule.
But Paul Rooney, a partner at Ellenoff Grossman & Schole who focuses on labor and employment law, cautions employers not to ‘get overly excited’ about this appeal. Though the staffing industry has grown dramatically, ‘we’re talking about a relatively small number of employees out of the 135 million people working in the US.’ He agrees, however, that if the NLRB dissenters are right and the ‘new’ rule makes it more likely that McDonalds and other franchisors will be held to be joint employers, it will have a large impact.
As a general matter, ‘there’s clearly an effort by the Board as currently composed to expand the reach of the joint-employer principle,’ Rooney says.
He points out that the majority was very clever in framing the joint-employer rule it announced as a restoration of the law, rather than a new direction, because appellate judges generally are less sympathetic to dramatic changes in longstanding doctrine. In addition, appellate courts have a duty to defer to agencies’ interpretations of the laws they enforce, up to a point. Because of the framing and agency deference, Rooney gave the NLRB an edge on appeal. Rooney would not predict a winner in the appellate case, however.
Christian Schreiber, a partner at Chavez & Gertler who litigates joint-employer class action cases on behalf of workers in California., says the ‘new’ joint-employer rule brings federal law more in line with California law, which ‘has been faster to adapt to how many companies do business now.’ He adds that the new test ‘recognizes that workers are really subject to two different masters; the placement agency that controls their fate and their job site manager that decides whether they can continue working.’
Temporary staffing agencies, he explains, have a ‘symbiotic relationship’ with employers, whose requirements they are trying to match. That results in their serving as proxies for the key decision makers at their client companies.
‘This puts workers in a really difficult position,’ Schreiber says. ‘If they fall out of favor with the staffing agency, the temporary assignment will have ongoing consequences because they won’t get placed on the next job. They have to please two different bosses.’
Schreiber agrees with the majority’s framing of the rule as announced: “I see it as a restoration of [workers’] rights as they were traditionally understood.’ He also agrees with Rooney about the likely impacts of the appeal. ‘I think the appeal will be narrowly construed. So I am not reading the decision or its implications broadly enough to impact the McDonalds [application].’
He laments the slow path to certainty. ‘You can win at the NLRB but lose in real life.’ The rulings of the administrative law judge go to the Board, and then get challenged in court, a process that takes several years, he explains. In this case, ‘maybe there’s a decision in 2016, maybe early 2017. That’s when we can really tout the decision in litigation. The appeal introduces enough insecurity in the mix that it’s difficult for workers to rely on it without reservation.’
