In Browning-Ferris, Businesses Lose As the Board Crafts a Solution in Search of a Problem

Marking a sea-change in labor law and a departure from decades of settled precedent, the National Labor Relations Board formulated a new joint employer standard in August 27’s Browning-Ferris Industries of California, Inc. decision.

For the past three decades, whether a joint employer relationship existed turned on the “single employer” test, that is, whether “two nominally separate entities are part of a single integrated enterprise so that, for all purposes, there is in fact a ‘single employer.’” NLRB v. Browning-Ferris Industries, Inc., 691 F.2d 1117, 1112-23 (3d Cir. 1982); adopted by the Board in TLI, Inc., 271 NLRB 798 (1984) and Laerco Transportation, 269 NLRB 324 (1984). Under the settled framework, an entity could only be found to be a joint employer if it exercised actual control over the terms and conditions of employment of another entity’s employees.

Last week’s decision injects a great deal of uncertainty into an area of labor law which was, up until now, quite predictable. Under the new rule, an entity that maintains any degree of indirect or reserved control over any of the terms or conditions of employment (such as wages, hours, hiring, firing, discipline, or direction of work) of another entity’s employees may suffice to trigger joint employer status.

This change is not to be understated, and will have immediate impacts in some industries:

  • Franchisors.  Although the Board has traditionally not held franchisors to be joint employers with franchisees, many (if not all) franchisors may be found to be joint employers with franchisees under the new rule.
  • Staffing Agencies and Contractors.  Although staffing agencies and contractors did not have the indicia of control over employees placed with their customers to be considered joint employers, many staffing agencies and contractors may now be considered joint employers under the new standard.

This is, however, by no means the full extent of the new rule. As the Board’s dissenting members pointed out, the Board’s new standard “appears to be virtually unlimited” and may also apply to a host of other scenarios, such as insurance companies that require employers to maintain safety or security standards, banks or other lenders who require performance measurements in their financing terms, consumers or small businesses who dictate the time, manner, or some method of performance of contractors, or indeed, “[a]ny company that is concerned about the quality of the contracted services.”

In their newfound capacity as joint employer, affected companies may now be held responsible for unfair labor practices committed by a contractor. In the collective bargaining context, the joint employers’ employees may be included in the bargaining units of employees of a contractor. Furthermore, litigation unfolding around the uncertainty created by the amorphous newly crafted test will prove costly.

An appeal of the Board’s decision is likely forthcoming, and it is still possible congress may weigh in. If the decision stands, maintaining economic viability in the wake of Browning Ferris for some companies may require nothing short of a fundamental change to their business models. For others, changes to certain terms in contracts between putative joint employers may be necessary to limit this new area of potential liability. For now, all businesses should carefully examine their contractual relationships with customers and contractors to stay informed of how this change in the law may apply to their operations.

This article was included in the Benesch Law @Work Newsletter. Please click the link to read more.

Chris Lalak focuses his practice on representing employers in employment litigation and counseling, as well as representing employers in traditional labor law matters. He has experience litigating discrimination claims, covenants not to compete, trade secrets, worker’s compensation cases, and matters before the National Labor Relations Board.

NLRB Declares “Conflict-of-Interest” Policy to be Unlawful on Its Face

In a controversial decision, the NLRB found that a conflict-of-interest policy in an employee handbook is unlawful on its face.  This ruling could deem many current conflict-of-interest policies unenforceable, creating harsh consequences for employers.

On June 18, 2015, the National Labor Relations Board held that an administrative law judge was correct in determining that a policy in the employee handbook that prohibited a “conflict of interest with the hotel or company” was facially unlawful.[1]  Chairman Pearce agreed that the policy, on its face, would have a chilling effect on the employees’ Section 7 rights. Continue reading

Big Changes to Indiana’s Wage Statute

For many years, it has been the case that Indiana is a progressive, pro-employee state when it comes to wages. Employees who were not paid wages on a timely basis were entitled to treble damages and attorney fees.  A new law passed in the 2015 General Assembly, House Enrolled Act 1469 means that Indiana is a little less pro-employee. The new law, which is effective July 1, 2015, says that employees may receive double and not treble damages.  The law also allows employers to assert a “good faith” defense, and amends the 13 specific items which employers may deduct from an employee’s pay check. Continue reading

Webinar | Guns on Employer Property: Legal and Practical Concerns in Mitigating Workplace Violence

Nearly half of the states have enacted, and many more are considering, laws that prohibit employers from banning guns and firearms on their property. For employers concerned with reducing the potential for workplace violence to erupt, these “parking lot laws” create a conflict between an employee’s right in most states to own and carry a concealed weapon and the employer’s right to control its property and maintain a safe workplace. Advocates of these laws contend that people have the right to self defense, and at a minimum should be able to keep firearms in their cars without punishment from the employer. Employers, however, are concerned about the risks and potential harm to people and property that could come from allowing firearms at work, along with the potential for significant liability should harm transpire. Although some state laws immunize the employer from liability should an employee’s use of a firearm at work or on the property result in harm, others do not. Even with immunity afforded by these laws, it is unclear if many of the common liability concerns that arise in workplace violence litigation, namely negligent screening, hiring, and supervision issues, would still apply.

Please join Mark R. Waterfill as he discusses the employer’s responsibilities regarding workplace violence. He will outline the employer’s key responsibilities to create a safe workspace, and how gun-related laws complicate the equation when it comes to mitigating the risk of liability should violence take place.

Learn more and register.

Bankers Should Take Another Look At Their Employment Contracts

A careful bank executive should reconsider the use of non-compete and non-solicitation agreements for its upper level employees.  In 2014, Indiana courts decided a handful of cases which display a reluctance to enforce these agreements.

Please take a look at pages 24-25 of the May issue of Hoosier Banker Digital to view an article authored by Mark Waterfill, titled, “ Banks Should Take a Careful Look at Employment Contracts.”

Indiana’s RFRA Battle Highlights Sexual Orientation Discrimination

The current controversy in Indiana surrounding the Religious Freedom Restoration Act (“RFRA”) highlights the issue of whether an employer may discriminate against its employees due to their sexual orientation. The amended RFRA may not be used to discriminate against individuals due to their sexual orientation. The purpose of this article is to inform employers that discrimination against employees due to their sexual orientation may, in many circumstances, already be illegal. The EEOC contends, and several courts have concluded, that such discrimination can be unlawful gender-based treatment. Continue reading