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Separate Companies, Joint Employers?

The National Labor Relations Board recently announced that it's considering making changes in the National Labor Relations Act's long-held standards regarding joint employer relationships. Experts weigh in on what this could mean to the future of doing business.

Monday, July 7, 2014
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Organizations are being advised to pay close attention to the NLRB's recent review of its case against Browning-Ferris Industries of California Inc., which focuses on the standard for determining joint-employer status.

According to attorney G. Roger King, senior labor employment counsel for the HR Policy Association in Washington, and counsel for the JonesDay law firm, changing the decades-long standards regarding joint-employer status is a very significant issue that will impact the majority of employers.

"The law in this area is very subtle and has been for the past 30 years," says King, who testified before the House Subcommittee on Health, Employment, Labor and Pensions on June 24th.  "In the case of Ferris-Browning, the subcontractor had 17 supervisors on-site, a human resources office on-site and was intimately involved in selecting and overseeing its employees. The facts are such that one would not believe there was anything close to a joint employer relationship. Why is the board even looking at this case, let alone changing the law?" He adds that this action is consistent with the current board's activist agenda to change NLRB law and election procedures.

According to the U.S. Chamber of Commerce, "Recent legislative proposals to ‘reform' U.S. labor laws have prompted significant public debate concerning whether such change is necessary and questioning the supposed benefits of the proposed reforms." The Chamber further states that these reforms are targeted to make it easier for unions to organize employees, by significantly curtailing an employer's ability to lawfully communicate to employees about unions and unionization; and reducing employer leverage in dealing with labor unions by providing unions with an unfair advantage in dealing with employers.

This past May, the NLRB invited stakeholder views regarding the scope and definition of "joint employer relationships" under the NLRA, asking them to address whether the Board should adopt new joint-employer standards and what considerations should influence the board's decision. The Board also questions what a new standard might look like and what factors should be examined, as well as what the basis or rationale for such a standard should be.

According to Gregory King, the NLRB's director of the office of public affairs, the NLRB does not comment on current cases. 

Every company is involved in some type of subcontractor employment, Roger King points out. "The potential reach of an expansion of the joint employer doctrine will affect virtually every employer in the country," he adds, noting that subcontractor work is an essential part of doing business these days.

"Hospitals, for example, use a tremendous amount of subcontractors; a lot of government contracts use subcontractors, as well," he says. "It's not [just] a small universe of employers that this would impact."

Since the early 1980s, the NLRB has determined that for two employers to be found joint employers, they must both have considerable control over the same employees' essential terms and conditions of employment.  Employees controlled by two employers are then entitled to the protections provided under the National Labor Relations Act with respect to both employers. According to King, the Browning-Ferris case would add the subcontractor's employees to the host employer's employees for the purpose of representation and collective bargaining in union negotiations.

He says there will be two consequences of such a change: All of the entities that make up the joint employer relationship would be responsible for each other's unfair labor practices, and all employees would be required to become involved in collective bargaining union negotiations.

"The whole concept of joint employer is you have separate and distinct businesses that have come together for the pursuit of some common objectives," says King. "Separate policies, pay ranges, work rules … In other words, they're totally different employers. To melt them together for purposes of union negotiations is exceedingly difficult. The potential result is that it could take a long time to ever come up with a contract because of the difference of the employers."

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In light of the potential change in the law, employers should be particularly careful how they put together business arrangements, advises King. "Additionally, employers should take every necessary and practical step to not become involved in the day-to-day human resource decisions of the other party; such as hiring, firing or disciplining the other parties' employees," he says.

Jay Wallace, an attorney with Dallas-based Bell Nunnally & Martin, says the current board's desire to exert its influence on private employers is as apparent as its favoritism toward unions. He advises employers to avoid having a unionized workforce by being a great place to work. "This means that you have equipment that's properly maintained, proper ventilation and air conditioning control, safety training, you pay fair wages, and you do all the things that would make you not attractive for union activity. If the union comes in and you've done all this, your employees will say they're treated well, and there's no reason to talk to the union."

Wallace further advises employers to stay aware of union activity. "Keep your eyes and ears open for conduct in your workplace among staffing and regular workers who appear that they might be trying to organize a union. Are they collecting people together to meet after work? Are there rumors they're meeting at a hotel on a Thursday night? Are you observing or hearing about activity that means they might be trying to form a union? Get your managers in place try to get the workers to tune union information out before they even have an election. "

Influential workers should be schooled on what the unions may be telling them, Wallace says.

"You ask your workers, ‘What's the union promising you in terms of wages? Has the union told you that if you agree to a collective bargaining unit you won't be paid on merit anymore? The best worker will be paid the same as the worst, and you'll all get the same bonus."


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