JOINT EMPLOYER DOCTRINE RECYCLED

Transcription

1 JOINT EMPLOYER DOCTRINE RECYCLED Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015) Certainly, we have modified the legal landscape for employers. October 9, 2015

2 Presented by: Jonathan O. Levine Shareholder Milwaukee Adam-Paul John Tuzzo Associate Milwaukee

3 GARBAGE IN... GARBAGE OUT! IBT petition names Leadpoint and BFI as employers of Leadpoint employees working at BFI recycling facility NLRB majority finds that BFI was a joint employer Decision overrules decades of precedent based on economic policy

4 Predictable continuation of NLRB s recent effort to extend coverage of the NLRA CNN America, Inc., 361 NLRB No. 47 (2014)(joint-employer liability imposed) FedEx Home Delivery, 361 NLRB No. 55 (2014)(revised definition of independent contractor )

5 CNN AMERICA, INC., 361 NLRB NO. 47 (2014) CNN found to have violated NLRA as a joint employer Terminating sub and causing discharge of sub s employees for allegedly anti-union reasons Limited the number of sub s employees it hired in order to avoid becoming a successor Failing to bargain over decision to terminate subcontract and its effects

6 FEDEX HOME DELIVERY, 361 NLRB NO. 55 (2014) In evaluating independent-contractor status, Board will look at commonlaw agency principles with no one factor being decisive Board will give weight to actual, not theoretical, entrepreneurial opportunity and the constraints imposed by a company on the individual's ability to pursue this opportunity

7 NEW JOINT EMPLOYER STANDARD The Board may find that two or more entities are joint employers of a single work force if: (1) they are both employers within the meaning of the common law; and (2) they share or codetermine those matters governing the essential terms and conditions of employment

8 Old Rule New Rule Burden of proving joint-employer status is on party asserting it Same Employers must share or co-determine matters related to essential terms and conditions of employment Employers must also meet common law definition of employer Share or co-determine means control is exercised in a meaningful, direct and immediate way Control may be indirect, through intermediary or simply reserved; right to control is probative even if unexercised Limited and routine supervision is not probative of joint employer status Limited and routine supervision may be probative Essential terms and conditions focuses on matters related to hiring, firing, discipline, supervision and direction Broadly looks at almost any mandatory subject of bargaining e.g., wages, benefits, hours, assignment, scheduling, staffing, seniority, overtime, safety, manner/method of work

9 THE COMMON LAW TEST Restatement (Second) of Agency Do employees perform services in the affairs of user employer? Are they subject to user employer s control or right to control? Does the job require a higher education or skill level? Is the employment over a considerable period of time with regular hours? Is the work part of the putative joint employer s regular business?

10 BROAD VIEW OF SHARE OR CO-DETERMINE Employers confer or collaborate directly to set a term One sets wages/hours; the other assigns work and supervises Both affect components of same term - e.g. one defines and assigns work; other supervises how it is carried out One simply retains the right to set a term or condition for the other s employees

11 KEY FACTORS THE NLRB RELIED ON Hiring. BFI allegedly retained and exercised control over hiring by requiring Leadpoint to drug test its employees, prohibiting hiring of employees BFI deemed ineligible for rehire, and retaining a contractual right to reject any Leadpoint employee even if they met Leadpoint s qualifications and hiring standards Firing. BFI allegedly retained the contractual right to require Leadpoint to discontinue the use of any worker and exercised that right by reporting misconduct to Leadpoint who removed the employees

12 KEY FACTORS cont. Direction. BFI allegedly retained and exercised control over the direction of work by dictating stream speeds to Leadpoint and production standards, directly counseling Leadpoint employees for failing to meet standards, assigning specific tasks to employees and engaging in near-constant oversight of employees work performance Staffing. BFI allegedly determined the number of employees Leadpoint supplied Wages. BFI allegedly controlled wages thru its cost-plus contract and by setting a contractual ceiling (no more than BFI paid its workers for similar jobs)

13 KEY FACTORS cont. Work Rules. BFI allegedly required Leadpoint s employees to abide by its safety policies Hours of Work. BFI allegedly dictated the start and end time of shifts Leadpoint employees worked, when/how much OT would be worked, and how breaks were taken

14 IS POTENTIAL/RESERVED CONTROL ENOUGH? Reserved control is probative; not clear if or how much reserved control will be determinative Majority relied on alleged evidence of direct, indirect and reserved control to find joint employer status Bare right to dictate the results of a contracted service or to control or protect its own property is not enough

15 NLRB WILL USE A MULTI-FACTOR TEST Ultimate focus is on how a putative joint employer affects the means or manner of work and other terms of employment NLRB will look at the existence, extent, and object of a putative joint employer's control NLRB will look at how that control impacts terms and conditions and weigh their significance to employees' work life

16 WHO S AFFECTED BY NEW RULE? All employers - union and non-union All industries - especially those who depend heavily on the use of contingent workers and contractors New rule applies to user/supplier, contractor/subcontractor, predecessor/successor, and other business models/relationships

17 PARENT-SUB RELATIONSHIP If potential control" is enough, every parent would be a joint employer with its subs or divisions; not a likely result A parent that exercises direct or indirect control over terms and conditions may be a joint employer under even if control is insufficient to establish single employer status

18 FRANCHISORS-FRANCHISEES Historically, franchisors have been permitted to exercise enough control over the manner and method of work to protect brand and comply with applicable laws NLRB s General Counsel is seeking to change this rule in McDonald s USA, LLC, Cases 02-CA , et al.

19 NUTRITIONALITY INC. D/B/A FRESHII April 28, 2015 Advice Memorandum issued by the Office of the General Counsel found no joint-employer relationship between Freshii and its restaurant franchisees under old standard or the new standard proposed by the General Counsel Browning-Ferris Franchise agreement included normal controls over operations, marketing and other aspects of the franchisee's business consistent with business format No evidence Freshii used its reserved power to terminate as an indirect means to affect terms and conditions or HR decisions Insufficient evidence of direct or control

20 FRESHII FACTORS Typical franchise agreement controls over operations, marketing etc. were present Operations manual included HR suggestions; not requirements No obligation to use sample handbook Point-of-sale software did not include scheduling component No evidence that reserved power to terminate was used as an indirect means to affect employment terms or HR decisions

21 PRIME CONTRACTOR - SUBS Prime contractor now faces greater risk of joint employer status with its subcontractors by... Directing the number of workers to be supplied Managing scheduling and/or overtime Assigning work Determining the manner and method of work performance

22 BIG IMPACT ON small businesses Commerce data applicable to joint employers is combined for NLRA jurisdictional purposes NLRA will now extend to small businesses owners whose operations and employees previously were not subject to the NLRA s jurisdiction

23 INCREASED LIABILITY RISK Browning Ferris increases legal risk for employers by making it much easier for unions/nlrb to establish that nominally separate employers are joint employers

24 CONSEQUENCES OF JOINT EMPLOYER FINDING Joint liability for ULPs Duty to bargain with co-employer s union Successor employer risks Increased risks of union organizing by co-employer s employees Increased risk of exposure to coemployer s labor disputes secondary strikes, picketing etc. - due to loss of neutral status

25 JOINT AND SEVERAL LIABILITY FOR ULPS Each joint employer is generally responsible for the conduct of the other including unfair labor practices Both are jointly and severally liable for the remedy

26 REMEDIES IMPOSED ON JOINT EMPLOYER Sign and post notice Cease and desist unlawful practice Restore status quo Bargaining orders Reinstatement Backpay; other damages 10(j) injunctions GC continues to get creative

27 VIOLATION OF SECTION 7 RIGHTS A joint employer may violate Section 8(a)(1) of the NLRA by direct or indirect interference with Section 7 rights of a co-employer s employees Hyundai Rotem USA Corp. and Aerotek, Inc., 358 NLRB No. 59 (2012) (joint employer liable for overbroad confidentiality agreement maintained by its contractor)

28 DISCRIMINATION AGAINST UNION ACTIVISTS Liability for discriminatory conduct in violation of Section 8(a)(3) may be direct It may also be imputed where the non-acting employer "knew or should have known" co-employer acted with unlawful motive and acquiesced by failing to protest or exercise contractual right to resist it. Capitol EMI Music, 311 NLRB 997 (1993)

29 FAILURE/REFUSAL TO BARGAIN Under Browning-Ferris, joint employer has a duty to bargain only with respect to those terms and conditions over which it possesses sufficient control for bargaining to be meaningful

30 MORE QUESTIONS THAN ANSWERS Buckle up! NLRB majority conceded that there will be plenty of confusion about who the employer is (and with respect to what terms and conditions) and how disputes are resolved when joint employers cannot come to an agreement on what to propose or how to resolve issues with a union

31 DUTY TO PROVIDE INFORMATION Employers are likely to see extensive information requests Requests designed to prove joint employer status Requests with respect to terms that are jointly controlled

32 THE 8(A)(5) V. 8(A)(2) DILEMMA Putative joint-employer risks violating Section 8(a)(5) if it refuses to bargain Risks violating Section 8(a)(2) if it agrees to bargain and/or bargains over the wrong issue and is later found not to be a joint employer

33 TERMINATING AGREEMENTS JUST GOT HARDER Malbaff rule allowing termination of third-party agreement for anti-union reasons (e.g., because contractor s employees are organizing) does not apply to or protect a joint employer Joint employer may have a duty to bargain to the point of impasse over decision and/or effects of decision to amend, terminate, or rebid agreements with union contractor, franchisee etc.

34 SUCCESSOR EMPLOYER RISK Whitewood Maintenance Co., 292 NLRB 1159, (1989) User employer that was found to be a joint employer with union subcontractor and firm that replaced it could not set its own initial terms

35 INCREASED EXPOSURE TO LABOR DISPUTES Section 8(b)(4) prohibitions on secondary strikes, picketing and other coercive union conduct protect neutral employers Neutral status is lost in a labor dispute when joint employer status exists. Teamsters Local 688, 211 NLRB 496 (1974).

36 IS ANYBODY A NEUTRAL ANYMORE? More entities will be found to have primary-employer status in labor disputes that are not directly their own Risk that unions will be allowed to picket all of a user s stores or other facilities even though the supplier only provides services at one Risk that unions will be allowed to picket franchisor and all franchisees even though its real dispute lies with only one

37 UNION ORGANIZING RISKS Unions will seek to organize contingent workers and franchisees Interim bargaining order may be imposed on joint employers for campaign violations. Dorothy l. Moore- Duncan ex rel. NLRB v. Aldworth Company, Inc., 124 F. Supp. 2d 268 (D. N.J. 2000)

38 Stay tuned. A user employer will likely be required to extend to its coemployer s employees the same right to engage in solicitation, distribution etc. that must be extended to its own employees ACCESS ISSUES

39 WILL THE NLRB S DECISION STAND? Teamsters won the election NLRB will likely be forced to pursue claims that BFI refused to bargain in federal court Other employers may test the decision as new joint employer cases are filed Legislation (e.g., Protecting Local Business Opportunity Act) has been introduced to overturn the decision; will not become law anytime soon

40 IS OAKWOOD CARE CENTER NEXT TO FALL? In Oakwood Care Center, 343 N.L.R.B. 659 (2004), NLRB overruled Sturgis and held that a unit combining employees who are solely employed by a user with employees who are jointly employed with a supplier is a multiemployer unit which is appropriate only with the consent of both parties

41 OTHER LEGAL RISKS Expect agencies, unions and plaintiff s lawyers to aggressively use versions of joint employer theory to impose investigatory burdens and liability under federal and state laws OSHA is continuing to expand its focus on host employers and franchisees IC misclassification cases will continue to increase How will joint employers be viewed for ERISA and MEPPA liability purposes?

42 BROWNING-FERRIS RESPONSE PLAN Circuit courts have been following versions of the direct and immediate control standard for decades and may reject the NLRB s new approach Steps can be taken to reduce the risk of being a joint employer Employers should audit their relationships and develop a response plan that fits their risk tolerance level

43 EVALUATE CURRENT/POTENTIAL PARTNERS Given the increased risk of union organizing and joint employer liability, it is important to assess (not dictate) the legal compliance record and employment practices of entities that provide or seek to provide contract labor or become franchisees

44 WEIGH RISKS/REWARDS OF EACH RELATIONSHIP Determine whether certain business models and contractual relationships continue to make sense Balance operational/legal risks associated with giving up certain controls against those associated with reserving and/or exercising such controls

45 WEIGH RISKS/REWARDS OF EACH RELATIONSHIP Review insurance policies that cover employment practices to determine whether potential liability for a third party s employees would be covered

46 REVIEW AND REVISE CONTRACTS WHERE PRACTICAL Review agreements, manuals, handbooks, policies, communications, and other documents to identify areas of potential joint employer risk WHERE PRACTICAL, remove or modify red flag provisions that impose or reserve control over terms and conditions of employment or dictate the manner and method of the work performed

47 REVIEW AND REVISE CONTRACTS cont. Establish pay structures for service providers not based on wage rates and hours of work rendered by non-employees Describe operational and other standards as recommendations Where standards must be mandatory, include language that describes their relationship to a legal requirement or need (e.g., franchisor) to protect a trade name, professional methods, goodwill, or commercial image Disclaim control over other s employees Revise cost-sharing, indemnification, insurance and earlytermination provisions to reflect increased risk of joint employer liability

48 IS A COST-PLUS CONTRACT FATAL? Majority held that this arrangement, on its own, is not necessarily sufficient to create a joint-employer relationship BFI s cost-plus agreement expressly prohibited Leadpoint from paying more than BFI paid its employees in comparable positions BFI also required that Leadpoint employees submit their time records for approval and approved an increase in what it was required to pay Leadpoint for hours worked when a minimum wage hike was passed

49 TAKE STOCK OF DAY-TO-DAY OPERATIONS Periodically review how agreements are actually being implemented Examine actual day-to-day practices to determine what steps can be taken to restructure work arrangements and eliminate or reduce joint employer risks How much direction and control are your managers/ supervisors exercising over third-party employees? Contact with their non-management employees should be very limited Representatives who visit franchisees should interact only with the franchisee or their supervisory personnel; directives should not be issued to franchisee employees

50 TRAIN YOUR TEAM Train managers, supervisors and others involved in drafting or administering agreements on what the joint employer lines are and how to avoid crossing them The Board s lines are not clear so employers will occasionally be forced to make a best guess

51 SUMMARY Scrub the reserved control red flags form your agreements wherever possible Avoid exercising direct control over terms and conditions Avoid exercising indirect control over terms and conditions Expressly disclaim any right of control Limit contact with non-management employees Avoid giving detailed directives Focus dealings with third-parties on the result desired; leave it up them to instruct their employees on how to achieve it

52 Questions? 52

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