The National Labor Relations Board (NLRB) recently handed down a decision in a landmark case which effects businesses that hire independent contractors through staffing agencies. This decision may also have a substantial effect on businesses that operate under a franchise agreement.
In 2015, the NLRB ruled on a case involving Browning-Ferris Industries and LeadPoint Staffing regarding whether organizations may be held liable for labor violations committed by a staffing agency through which it subcontracts its labor force. This ruling substantially changes the previous standard by which a company using a staffing agency is determined to be a joint employer of the individuals which comprise its workforce.
The standard resulting from the Browning-Ferris decision is that a company which uses an agency to supply employees can be deemed to be the co-employer of its agency-supplied laborers if it shares in determining the issues which govern the “essential terms and conditions of employment.” According to the NLRB, the matters which constitute the essential terms and conditions of employment are: 1.) deciding the size of the workforce, 2.) determining the work to be performed, how it is to be performed, and to whom it is assigned, 3.) dictating the hours to be worked and allowance of overtime, and 4.) management of seniority status.
This greatly liberalizes the standard by which a company which utilizes an agency for its staffing needs is considered to be a joint employer. Under the previous precedent, it was necessary for the company in question to maintain direct control over the essential terms and conditions of employment to be considered a co-employer. Also, under the previous standard, the essential terms and conditions of employment were limited to: 1.) hiring, 2.) firing, and 3.) supervision of the labor force.
The implications of this decision are also not limited to liability for a staffing agency’s labor violations. The NLRB ruling may also subject companies, which qualify as joint employers under the Browning-Ferris standard, to joint collective bargaining agreements. Disputes regarding insurance policies that did not exist prior to the Browning-Ferris decision may also arise.
Summarily, the new test created by the NLRB for determining whether an organization is a joint employer requires American businesses to carefully consider if and how they will structure their agreements with staffing agencies in the future. Or, in the case of companies already under contract with an agency, they must now consider the legal implications of the agreement and whether it requires restructuring or renegotiation.
This blog was written by law clerk Tyler Kemper.
