2015

Late last month the National Labor Relations Board ruled that in many instances a contractor can be the employer of its subcontractor’s employees. In Browning-Ferris Industries of California NLRB Case No. 32-RC-10968, the Board considered a contractual arrangement between Browning-Ferris Industries, a waste management company operating in California, and Leadpoint Business Services, a temporary employment agency. Under the staffing agreement between the two companies, Leadpoint provided temporary employees to BFI. While the agreement stipulated that Leadpoint was the temporary employees’ “sole employer,” the Board nonetheless concluded that a joint employment relationship existed and compelled BFI to collectively bargain with the staffing company’s employees’ union. Underlying that strange conclusion is a three to two decision along party lines whereby the Board rejected decades long precedent and greatly expanded the legal definition of an “employer.” The Board ruled that any company that exercises “direct operational and supervisory control” over employees of another company can be considered a “joint employer”. Moreover, the Board stated that a company that “reserves authority” to supervise an employee may be considered a joint employer even if it never actually exercised such control. Prior to actually finding a joint employer relationship, the Board held that it would be necessary to engage in a fact finding mission to evaluate the extent to which a contractor shared control over and “co-determined” the terms and conditions of an employee’s employment. In the Browning-Ferris case, the Board found that BFI was a joint employer because it “indirectly co-determined” wages, hours and other conditions of employment through its contract with the staffing agency and also through its enforcement of production standards that the temporary employers were compelled to meet. 

This ruling may well find its way to the United States Supreme Court but if it stands it will undoubtedly result in increased enforcement activities against contractors by government agencies, including the Department of Labor, the EEOC and OSHA. Moreover, contractors may find themselves on the hook for social security and Medicare taxes, workers’ compensation premiums and unemployment taxes which previously were solely the responsibility of their subcontractors. The additional implications are equally disturbing. Those implications include:

• Exposure to unfair labor practice violations by subcontractors;
• Non-union contractors can be held to have collective bargaining obligations with respect to employees of totally separate independent subcontractor employers;
• Non-union contractors can now expect to encounter more strikes, picketing and union organizing drives;
• Wage and hour violations may be asserted even if the violation was committed by a separate company;
• Employment discrimination claims may now be brought on a joint employer’s basis; and
• OSHA violations by subcontractors may be expanded to include fines against their contractor counterparts.

Looking forward, any staffing or subcontractor agreement that reserves to the contractor the right to control wages, hours and working conditions will probably subject the contractor to rigorous scrutiny not only by the NLRB but by any and all federal and state government agencies with regulatory powers over employment issues. In addition, HR policies and supervisory practices should be modified, if necessary, to bring them into line with the BFI decision.

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