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NLRB Says Staffing Firms and Clients Are Jointly Liable for Workplace Violations

Sept. 15, 2015
Companies using staff leasing firms share joint liability for labor law violations even if they don’t exert any direct control over the leasing firms’ employees.

A recent decision by the National Labor Relations Board (NLRB) has implications that reach far beyond the arena of labor law to impact workforce regulations in many other areas.

On Aug. 27 the board in a 3-2 decision ruled that companies using staff leasing firms share joint liability for labor law violations even if they don’t exert any direct control over the leasing firms’ employees, simply because it is possible that at some point in the future they could do so.

The case grew out of a 2013 union representation election conducted for employees of a Browning-Ferris Industries subsidiary which included about 240 workers supplied to BFI by a staffing firm called Leadpoint Business Services. The Teamsters union, which was seeking to organize the workers, argued that BFI and Leadpoint were joint employers of those employees, who should be included in the vote.

An NLRB regional director disagreed, applying established legal precedent that because BFI did not exercise “immediate and direct” control over the workers’ employment terms and conditions, it should not be considered their joint employer. The Aug. 27 board vote reversed the regional director, holding that the mere potential of one firm to directly or indirectly control employment terms of another’s workers is now enough to establish joint liability.

The two-member NLRB minority opposing the new standard predicts, “This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have [and] to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements.”

Attorneys Mark Kisicki and Elizabeth Townsend of law firm Ogletree Deakins note that the sort of relationship BFI had with Leadpoint “is typically reserved or exercised by parent companies over subsidiaries, franchisors over franchisees, leasing employers over leasing or temporary services providers, contractors over subcontractors, and, indeed, any company that contracts with another to perform work necessary to its operations.”

While the board was mulling the BFI case, the Equal Employment Opportunity Commission urged the NLRB to abandon its prior standard and adopt the common law agency test currently used by EEOC under federal civil rights law.

A group of labor law attorneys at the Seyfarth Shaw LLP law firm observe, “The EEOC will almost certainly see it as an opportunity to expand its own definition of joint-employment and to take a more aggressive enforcement stance against potential joint employers—both at the administrative level and in litigation.”

They also predict that the Office of Federal Contract Compliance Programs, which supervises government contractors, will use the decision to bolster the five-factor “single entity” analysis it uses to exercise jurisdiction over businesses that do not hold federal contracts but work with companies that do.

Some employer groups also believe the decision will bolster an effort by OSHA and its parent agency, the U.S. Department of Labor, to actively promote unionization of franchises, particularly in the fast food industry.

“This is further evidence that the NLRB has given up its position as an objective arbiter of workplace issues and sees itself as an advocate for organized labor as a means of imposing new workplace obligations and legal liabilities on well-known corporations,” says David French, senior vice president for government relations with the National Retail Federation.

NRF is backing legislation that was introduced recently by Republican legislators in the House and Senate to overturn the Browning-Ferris decision. However, as has been the case with similar legislation aimed at reversing other NLRB decisions, it is a virtual certainty that if passed President Obama would veto it.

Another group supporting the legislation is the International Franchise Association, which filed a Freedom of Information Act suit with OSHA on Aug. 31 seeking an explanation of the rationale behind some of its actions. IFA sued after it obtained an internal OSHA memo that directs investigators to ask franchisees questions aimed at finding if joint liability exists.

IFA vice president of government relations Elizabeth Taylor accuses the Labor Department of conducting “a witch hunt” that exceeds the statutory authority under which OSHA operates. “At worst it is engaged in a conspiracy to destroy the franchise model in cooperation with the Service Employees International Union and the supposedly-independent unelected bureaucrats at the NLRB and its General Counsel,” she declares.

When it comes to the prospect of employer groups mounting legal challenges to the NLRB decision, they would be doing so in the face of a string of court defeats for similar challenges to other NLRB decisions, such as the “ambush” election rules.

In addition, following the Aug. 27 NLRB decision, the votes cast in the BFI union election—which were impounded since April 2014 while the case was being heard—were counted and it turned out that the workers had voted by more than a 4-1 margin in favor of Teamsters representation.

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