The Labor Board Signals Change to the Joint-Employer Doctrine - The New NLRB Rule Will Likely Require Businesses to Bargain as to Workers They Do Not Actually Employ

by Holland & Knight LLP
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HIGHLIGHTS:

  • The National Labor Relations Board, on May 12, 2014, solicited amicus briefs on whether the board's current joint-employer standard should be changed. It is unmistakable that the Democratic majority on the board has its sights set on a significant change to what is now 30-year-old precedent.
  • The new rule will likely require businesses to bargain as to workers they do not actually employ. This expansion of the joint-employer doctrine would impair existing relationships among separate businesses that use different workforces to achieve common objectives.

In a portent of things to come, the National Labor Relations Board (NLRB), on May 12, 2014, solicited amicus briefs on whether the board's current joint-employer standard should be changed. Since this request comes from a decision that is eminently correct in its application of existing law to rather straightforward facts, it is unmistakable that the Democratic majority on the board – which has now been duly appointed – has its sights set on a significant change to what is now 30-year-old precedent. As things currently stand, the new rule will likely require businesses to bargain as to workers they do not actually employ.

The Current Joint-Employer Standard

The NLRB and courts have for decades recognized that two entities constitute a "joint-employer" under the National Labor Relations Act (the "act") only if they share the ability to directly and immediately control or "co-determine" essential terms and conditions of employment, such as, hiring, firing, discipline, supervision and direction. In the case prompting the board's invitation for briefs, the union sought to represent lower-paid blue-collar workers at a waste recycling plant who worked for a subcontractor of the plant's operator, which itself directly employed higher-paid workers who held more highly skilled jobs. In seeking review of the regional director’s conclusion that the subcontractor was the only employer of the workers in the intended bargaining unit, the union argued that the board's current standard was flawed because (in the union's view) it allowed the plant operator to engage in a "calculated restructuring" of employment and "insert" a contractor to "insulate" itself from its "basic legal obligation" to recognize and bargain with the employees' representative. The union also argued that meaningful bargaining was impossible without the owner's participation, as it was the business that actually determined the terms and conditions of employment at the facility (presumably by what it chose to pay the subcontractor). The writing, as they say, is on the wall.

Joint-Employer Standard: Envisioning the New by Resurrecting the Past

What a new joint-employer standard might look like can be gleaned from opinions of Wilma Liebman, a longtime NLRB member and, most recently, its chair. Member Liebman has long complained about "the sharp limits of the Board's joint-employer doctrine, which may prevent employees from bargaining with the company that, as a practical matter, determines the terms and conditions of employment." Airborne Freight Co., 338 NLRB 597 (2002) (concurring) (emphasis added). She questioned "the Board's current, narrow standard" because it"hasevolved without full explanation of why it was chosen, without careful exploration of possible alternatives ... ." id. (emphasis added) – rhetoric Member Liebman frequently employed as the justification for radical departures from long-standing precedent. Citing academics, she criticized the existing joint-employer standard because (in her view) it allows "the real party in interest – the entity that provides the capital that employees, in turn, make productive – to avoid the bargaining table." Id. (emphasis added). Most succinctly, as Member Liebman sees it, "the basic flaw in the Board's [current] joint-employer doctrine ... is the emphasis on the question of supervisory control, rather than on the provision of capital."AM Prop. Holding Corp., 350 NLRB 998, 1012 (2007) (dissent). 

Member Liebman's preferred joint-employer standard is the one used in the 1960s and 1970s, when the board was "prepared to find joint employer status in cases where the putative joint-employer exercised indirect control over the contractor's wages and discipline ... and in cases where industrial realities made one company a necessary party to meaningful collective bargaining even though it played no role in hiring, firing, or directing employees." Id. at 598 (emphasis added). It is not hard to imagine that the preference of the current board majority will be to ensure that "the provide[rs] of capital" sit across from those who "make [capital] productive" when it comes to bargaining over terms and conditions of employment and, accordingly, will likely revert to the old "indirect control"/"industrial realities" approach.

Practical Implications for Established Business Relationships

The board's impending lowering of the bar on the joint-employer determinations will disrupt long-standing business relationships - for example, the relationships between owners and contractors who employ operators and subcontractors, respectively, to provide workers and services in heavily unionized industries, including hospitality, construction, cleaning and transportation. Similarly, businesses involved in joint-ventures with other employers, using staffing agencies to supply workers, hiring subcontractors to perform work, leasing space at its facilities to concessionaires, or even in the position as franchisor to franchisee might, under a new joint-employer standard, find themselves required to bargain with a union over the employment terms of workers they see as employed by someone else, depending solely on whether the NLRB concludes that doing so is "necessary ... to meaningful collective bargaining."

The NLRB will likely broadly expand the joint-employer doctrine in ways that would impair existing relationships among separate businesses that economically cooperate to achieve a mutually desired objective. Unions – which claim to represent the people who "make [capital] productive" – will assuredly submit amicus briefs supporting their preferred approach. Those who "provide capital" would be well-advised to do so as well. Time is short. Amicus briefs must be filed by June 26, 2014.

To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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