National Labor Relations Board Ruling on Joint Employers

The National Labor Relations Board (NLRB) issued a ruling on August 27, 2015 regarding the definition of a “joint employer” for purposes of the application of federal law to a particular dispute concerning collective bargaining. In general, it appears that a company, BFI, had a recycling facility where it contracted with another company, Leadpoint, to provide part of the workforce. BFI’s employees worked outside the facility and the Leadpoint employees worked inside.

The BFI employees were already represented by the Union in labor negotiations, and the Union sought to organize the Leadpoint employees. However, in organizing the Leadpoint employees, the Union wanted to negotiate with BFI as well as Leadpoint, basically because BFI probably controlled more of the substantive issues about how the job was going to be done, what the pay would be and so on, while Leadpoint was essentially in business to give BFI what it wanted as defined in the contract. For example, BFI’s contract with Leadpoint was apparently designed to make it a provider of temporary employees and reserved to BFI certain rights. BFI maintained the right to set standards for the quality of the employees, the work hours for the facility, the wages by how much it would pay Leadpoint for the employees, and the standards for performance by the employees.

In short, while the existing standard the NLRB has employed for defining “joint employers” was basically settled, three of the five NLRB panel felt hampered in its ability to effectuate the goal of the federal law to promote collective bargaining. The NLRB therefore effectively changed the definition of a “joint employer” to be broader to make it easier to determine that even though an employer hires a workforce through another company, in that situation, it still has to show up for labor negotiations and take responsibility for its part in setting up the environment, pay, and so on, for the employees.

There is some good to this, particularly to the extent that some larger businesses are evading their responsibilities regarding their workforce by using sophisticated legal tools to avoid accountability. A larger employer might be able to put pressure on its workforce provider to treat employees unfairly and then evade responsibility.

Unfortunately, the issues are more complex. Not every employer who uses temporary employees has the ability, or desire, to pressure its workforce provider in the same way. In fact, if a provider engages in bad conduct, or even just makes mistakes, it is possible, under the new definition, that the customer business would be held responsible for the problem even when it had nothing to do with it and specifically put the responsibility on the provider to do the right thing.

Of course, there are many questions still unanswered and every situation is different. The NLRB’s change specifically applies to collective bargaining situations, but the concern is that the application of the logic in other areas could have wide-ranging effects for all sorts of business activities involving employees, temporary workers, and independent contractors. These implications could affect both liability for employment law and regulations, as well as tax obligations for withholdings.

In the end, it is a good idea to seek counsel about your situation to determine appropriate risk levels and possible solutions for your business.

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