Just about one year ago, the National Labor Relations Board (NLRB) dramatically changed the rules on how companies are allowed to contract with other businesses without assuming joint employer liability. By greatly expanding when two companies are jointly responsible for labor violations and bargaining responsibilities, thousands of businesses across the United States may be exposed to increased costs and liability.
Prior to Browning-Ferris, the decision that overturned the NLRB’s longstanding joint employer precedent, a company had to exercise direct and immediate control over another employer’s employees. Now, a company that exhibits indirect control over another employer’s workforce can establish joint employer liability.
The primary concern with the decision is that employers are now held liable for employees they do not directly control or employ. This makes it a risky endeavor to contract with another business and, as I’ve explained previously, may disproportionately harm small business.
In the past year, the NLRB has done next to nothing to clarify what they consider indirect control or explain how they plan to apply the new standard. This has created immense uncertainty for employers. No one is quite sure how the NLRB is going to enforce its new extremely broad and vague joint employer standard.
Only this week, on August 16, the Board issued another decision using the new joint employer precedent established in Browning-Ferris.
In the case, the NLRB determined that Retro Environmental, an asbestos abatement company in Maryland, was a joint employer with the temporary staffing firm, Green JobWorks.
Below are the facts of the case described in the decision:
When Retro needs temporary labor, Gurecki contacts Green JobWorks and requests a certain number of laborers. Green JobWorks recruits and hires employees. Consistent with the parties’ expired contract, Green JobWorks prescreens and drug tests each applicant, provides safety training, ensures that asbestos abatement laborers have current EPA AHERA certification and have passed a physical exam, and represents that all employees are qualified to perform the services. Additionally, Green JobWorks performs background checks and administers safety and general knowledge tests to applicants for demolition positions. Green JobWorks maintains a database of employees and assigns employees to project sites based on Retro’s need. Green JobWorks determines the rate of pay for each position and issues employee paychecks. Green JobWorks also provides the employees with personal protective equipment.
At the project site, Retro’s superintendent determines the sequence of work, oversees the work, and directs the day-to-day activities of both Retro’s solely employed employees and those employees leased to Retro by Green JobWorks. Retro’s foreman provides more detailed instructions. Retro determines the start and end times of breaks, and Retro is responsible for keeping track of the employees’ hours. Retro also provides the necessary equipment to perform the assigned work on site. Green JobWorks’ field supervisor is on site some days (he visits all project sites). He ensures that employees are present, handles concerns regarding particular employees, communicates with the office, and manages injuries and near misses. Green JobWorks is responsible for disciplining and terminating employees. However, if Retro is unsatisfied with an individual’s performance, it can request a replacement, and Green JobWorks President Lazaro Lopez testified that Green JobWorks would acquiesce to Retro’s request. (At the time of the hearing, Retro had not exercised this right in the previous 6 months.) Green JobWorks may consult with Retro when reassigning employees to other sites.
Unfortunately, at least in this case, the NLRB has decided to broadly apply its new joint employer standard. As shown above, Green JobWorks determines its employees’ pay, supplies them with equipment, is responsible for employee discipline and has a supervisor that visits work sites to ensure the temp workers are doing their job. Green JobWorks also recruits its workers, performs background checks, provides safety training, and ensures that employees are certified when they need to be.
Normally, this would be evidence of Green JobWorks independence, but not under the Obama administration’s NLRB.
The Board has decided that one company merely placing basic conditions on another employer may establish joint employer status. In the Board’s analysis of the facts:
The agreement imposes conditions on whom Green JobWorks can hire, including requirements that employees must be prescreened, drug-tested, and qualified to perform the services; must have completed safety training; and asbestos abatement laborers must have EPA AHERA certification and have passed a physical exam.
Retro is primarily responsible for determining the number of workers to be supplied, determining employee hours and scheduling, and supervising the employees on the job. As in BFI, Retro alone determines the number of workers to be supplied by Green JobWorks.
The above is how the Board determined Retro is in a joint employment relationship with Green JobWorks. Retro placed conditions on the workers that Green JobWorks hires to ensure that the work site was safe and that the workers being supplied were fit to do the job. Such a qualification does not establish control over workers, but merely places a condition on another company that they must meet in order to go into business together.
In the same vein, Retro requiring Green JobWorks to supply a certain number of workers does alter work conditions. In addition, Retro controlling scheduling does not necessarily establish control. Retro must exhibit some control in the matter of scheduling. Every business has certain hours of operation, and that is when they need the temp workers to be present.
Employers should not be exposed to joint employer liability simply for requiring a certain level of quality from another employer. In all, the NLRB’s joint employer standard is going to wreak havoc on common business to business relationships. The Wall Street Journal recently reported that many franchisors are pulling support from franchisees due to joint employer liability concerns. It is only a matter of time before larger companies start refusing to do business with temporary staffing agencies to avoid joint employer status. This is an unfortunate result. The franchise model and temp firms provide great opportunity for workers and entrepreneurs.
Now it is up to Congress to rein in the NLRB and bring stability back to job creators.