Somewhere along the way, the NLRB’s use of the Act’s policy of “encouraging the practice and procedure of collective bargaining” to responsibly develop labor law has transformed into a convenient rationalization for rewriting many of the foundational precedents and procedures embedded in the Act for decades. Our most recent victim is the “joint employer” doctrine — a now lethal circumstance in which a contractual relationship may significantly increase your vulnerability to collective bargaining and legal liability.
In Browning-Ferris, the Board was provided the opportunity to either adhere to the longstanding “joint employer” doctrine affirmed by the Third Circuit’s 1982 decision in NLRB v. Browning-Ferris Industries of Pennsylvania, 691 F.2d 1117 (3d Cir. 1982), or revise it to perpetuate the above policy. Not only was the latter avenue chosen, but the Board took such an expansive approach that the doctrine now touches many, if not conceivably all, contractual business relationships currently in place.
Up until last week, the joint-employer doctrine was as follows: the Board may find that two or more statutory employers are joint employers of the same statutory employees if they “share or codetermine those matters governing the essential terms and conditions of employment.” NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117 (3d Cir. 1982). “The basis of the [joint-employer] finding is simply that one employer while contracting in good faith with an otherwise independent company, has retained for itself sufficient control of the terms and conditions of employment of the employees who are employed by the other employer.” Id. at 1123. The aforementioned rule and its supporting policies were expounded upon by the Board in TLI and Laerco Transportation, both which clarified that the putative employer must “meaningfully affect matters relating to the employment relationship, such as hiring, firing, discipline, supervision and direction.” TLI, 271 NLRB 798 (1984).
While the Board’s new Browning-Ferris decision retains the core of the Third Circuit’s above rule, the difference is revealed by drastically expanding the circumstances sufficient to hook the putative joint employer into the bargaining process. According to this decision, no longer will the Board analyze the putative employer’s actual exercise and direct control over another’s employees, but will analyze the source of the relationship, i.e., the contractual text binding the parties (please note the hypocritical stance taken by the Board). Through this expansion, the Board threw away three decades of established federal labor law by overruling TLI and Laerco and inserted a new unpredictability into the hellish mess that is federal labor law.
“We will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry … [T]he question is whether one statutory employer ‘possesse[s] sufficient control over the work of the employees to qualify as a joint employer with another employer.’ Nor will we require that, to be relevant to the joint-employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly—such as through an intermediary—may establish joint-employer status.”
For any employer in similar contractual arrangements — especially those in the healthcare industry where departmental outsourcing is prevalent — the implications of the above reversal are very much real and an opportunity for unions to exert pressure where preexisting CBAs are already operational. Contractual provisions that were once legally sound and allowed companies to manage their services as they see fit now, once again, experience the Obama Board in full force. It is very obvious that this decision is geared towards big-time corporations that possess a need for this style of “services management” and increases their liability for unfair labor practices and collective bargaining obligations. The bottom line is that it is a disruption of business that limits an employer’s autonomy and freedom to freely and efficiently manage its business relationships. The real question is how employers appropriately react to this dubious decision while it makes it way up through the appeal process. Stay tuned…
Andrew J. Lammers, J.D.
Adams, Nash, Haskell & Sheridan