The NLRB May Have Killed The Staffing Agency Business
Fast on the heels of our last report on the attacks the courts have been mounting on the use of staffing agencies to shield employers from liability to employees comes the decision on August 27, 2015 from the National Labor Relations Board in Browning-Ferris Industries of California. While maybe not the final nail in the coffin, the NLRB has certainly added a keg of nails in an effort to make sure that staffing agencies are buried and stay that way.
Browning-Ferris industries (BFI) had a contract with Leadpoint Business Services to provide temporary labor at a recycling facility operated by BFI. The Teamsters Union attempted to organize these workers, claiming they were in fact employees of BFI. Abandoning its prior precedents, the NLRB found the temporary workers were joint employees of both BFI and Leadpoint, and thus subject to the efforts of the Teamsters Union to organize them as employees of BFI. Most of our clients do no operate in an environment where serious union organizing efforts are likely to be an issue, but it would nonetheless be unwise to ignore this decision. The NLRB has painted with a broad brush here, and its decision will have implications anywhere staffing agencies are used to provide temporary labor.
In reaching its decision, the NLRB adopted a new test for determining whether the user and the supplier of temporary labor are joint employers of that labor:
“Two or more statutory employers are joint employers of the same statutory employee if they share or codetermine those matters governing the essential terms and conditions of employment.” Abandoning its prior decisions, the NLRB concluded it is not necessary that the user of labor actually exercise control over the employee, it is sufficient if it merely has the right to exercise such control, no matter how infrequently it exercises that right. Sounds like so much gobbledygook, right? Below are the factors the NLRB actually focused on in finding that BFI was the joint employer with Leadpoint:
A. Hiring, Firing, and Discipline. While Leadpoint was nominally responsible for recruiting, hiring, and disciplining employees, it did so within strict guidelines laid down by BFI. BFI argued that it did not fire the employees, it merely complained to Leadpoint, and it was up to Leadpoint to decide what to do. The NLRB was not impressed (nor have many courts bought this line of reasoning). That BFI didn’t actually fire employees does not mean it did not have the right to do so. In other words – it had the right to exercise control over the decision, no matter how indirect or rarely done.
B. Supervision, Direction, and Work Hours. Both BFI and Leadpoint provided supervisors at the work site, but BFI’s supervisors were ultimately in charge. In addition, BFI set the hours of work for the employees.
C. Wages. The contract between BFI and Leadpoint provided that no laborer provided by Leadpoint could be paid more than BFI’s employees in the same classification, and BFI had the right to approve pay increases. BFI otherwise did not set the wages for labor provided by Leadpoint (mandatory employment posters provide more information). However, in an argument that defies logic, the NLRB determined that when the local minimum wage was increased by law, and BFI and Leadpoint revised their contract to allow for the increase in the minimum wage, this was evidence that BFI exercised control over employee wages.
These three factors were enough for the NLRB to determine that the temporary labor provided to BFI by Leadpoint could be considered the joint employees of BFI with respect to the efforts of the Teamsters to organize BFI’s employees. Under these facts as applied to the new standard (it is the right to exercise control, not whether the right was exercised), we doubt any staffing agency agreement in use today would protect the user of temporary labor from being found to be the joint employer of that labor.
Much of the commentary on this decision has focused on whether this is a major victory for labor unions or whether it spells trouble for the franchising world because employees of a local franchisee may be determined to be joint employees of the franchiser, as in McDonald’s or Subway. The NLRB, after all, focuses on protecting the rights of workers to unionize. However, we think the decision is much broader. The NLRB’s position on these issues is highly influential even when it does not have direct control over a non-union workplace. When combined with the developing attitudes of the courts towards efforts of employers to minimize their obligations to employees by using “temporary labor,” this is a signal that the hoped-for protections of contracting with staffing agencies have evaporated across the board. If this NLRB decision survives, there is essentially no longer any method for using temporary labor to avoid the expense and consequences of hiring full-time employees. If a business wants to use a staffing agency to provide temporary labor, it should recognize that in the eyes of the law, it is increasingly likely the temporary labor will be viewed as regular employees of the user of the labor in addition to being employees of the supplier of the labor, and it won’t take a union organizing effort for this to be true.