The American Staffing Association (ASA) recently reported that the trend to hire temporary and contract employees through staffing agencies continues to grow. In 2013 staffing companies employed three million workers per day on average, an increase of 4 percent from 2012. Their sales totaled $109.2 billion, a 4.3 percent gain from the prior year.

Typical Factual Scenario

Staffing Inc. (Staffing) has a contractual arrangement with A Corporation (A), whereby A notifies Staffing of its hiring needs and Staffing recruits and interviews applicants to determine whether they satisfy A’s needs. Staffing then sends applicants to A for interviewing. If A accepts the applicants after interviewing them, it sends them back to Staffing for formal hiring. 

Employees hired by Staffing and placed at A’s workplace are considered temporary employees for a period of 90 days. Thereafter, A has the right to hire them as permanent employees. 

Staffing pays the wages and provides benefits to the employees placed at A. While working at A, the employees’ day-to-day duties are directed solely by A. Those employees are supervised and provided with tools and safety equipment by A. With respect to discipline, A may give said employees verbal warnings without consulting with Staffing. For more severe disciplinary action, A contacts Staffing and requests that the employee be removed.

Pursuant to the above contractual arrangement, Staffing interviewed several employees and had them complete the necessary application forms. Thereafter, Staffing informed the employees that they were “good candidates” and should be expecting a phone call from A’s interviewers. Upon contacting A’s interviewers to arrange for the interviews, A asked Staffing to find out whether the applicants were union. Staffing then asked the applicants, was informed that they were union and notified A accordingly. Immediately thereafter, Staffing informed the employees that A’s needs had been filled and would not need to interview them.

The employees filed unfair labor practices charges with the National Labor Relations Board (NLRB).

A Committed Unfair Labor Practices

The NLRB administers and enforces the National Labor Relations Act, 29 U.S.C. 151 et seq. which, in essence, protects employees’ rights to engage in union activities and concerted (group) activities. Faced with the above facts, the NLRB inferred that, given the abrupt cancellation of the interviews, A had rejected the applicants because of their union status. 

An employer may not unlawfully direct an employment agency to affect an individual’s employment status for discriminatory reasons.^[1] Accordingly, the NLRB held that A had committed unfair labor practices when it declined the interviews upon receipt of information that the applicants were union.

Joint Employers

It is well established that when two or more employing entities determine matters governing essential terms and conditions of employment, they are “joint employers.”^[2] Accordingly, based on the above facts, the NLRB concluded that Staffing and A were joint employers, since Staffing determined the wages, benefits and initial qualifications of the applicants and A supervised, directed and disciplined them.

Staffing Committed Unfair Labor Practices

Inasmuch as Staffing and A were joint employers, the NLRB found both jointly liable for the unfair labor practices. 

It is established NLRB law that when one employer supplies employees to another, both would be liable for unlawful conduct of either, whenever the record permits an inference that: (1) the non-acting employer knew or should have known that the other employer acted against the employees for unlawful reasons; and (2) that the non-acting employer acquiesced to the unlawful action, by failing to contest or exercise any contractual rights it may possess to resist it.^[3]

Conclusion

In general, the above described facts are typical of the relationship between staffing companies and their clients. With the growth in the use of contingent workers, hired through staffing companies, one can anticipate that, in the foreseeable future, the NLRB will confront factual scenarios that require application of its joint employers’ doctrine with frequency. Staffing companies should review the language in their contracts with clients, with an awareness of the above described legal risks.

Jerry Morales is Of Counsel in the Phoenix office of Snell & Wilmer. His practice is concentrated in labor, employment and construction law.

Notes

^[1] Capitol EMI Music, 311 NLRB 997 (1993), enfd. 23 F 3d 99 (4th Cir 1994).

^[2] Laerco Transportation 269 NLRB 324 (1984).

^[3] EMI, supra; AIM Royal and Jacobson Staffing 359 NLRB No. 91 (2012).