Browning Ferris Industries

On February 26, 2018, in a unanimous decision by Chairman Marvin Kaplan and Members Mark Pearce and Lauren McFerren, the National Labor Relations Board (“NLRB” or the “Board”) reversed and vacated its December 2017 decision in Hy-Brand Industrial Contractors, Ltd. (“Hy-Brand”), which had overruled the joint-employer standard set forth in the 2015 Browning-Ferris Industries (“Browning-Ferris”) decision. The decision followed the release of a finding that a potential conflict-of-interest had tainted the Board’s 3-2 vote. What this means, at least for the moment, is that the lower standard for determining joint-employer status in Browning-Ferris is the law once again.

What Is The Browning-Ferris Standard?

As we previously reported, under the Browning-Ferris standard, “[t]he Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”  Under Browning-Ferris, the primary inquiry is whether the purported joint-employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the company has in fact exercised such authority.  This standard is viewed as employee and union-friendly, and led to the issuance of complaints alleging joint-employer status in an increased number of circumstances.

What Did Hy-Brand Set As the Test for Joint-Employer Status?

Later, in Hy-Brand, as we noted, the Board rejected the Browning-Ferris standard and returned to a more employer-friendly standard, based on the common law test for determining whether an employer-employee relationship exists as a predicate to finding a joint-employer relationship and adding more than just the right to exercise control.  Under Hy-Brand, a finding of joint-employer status would require proof that putative joint employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control), the control must be “direct and immediate” (rather than indirect), and joint-employer status will not result from control that is “limited and routine.”  This decision had stopped at least some cases relying on Browning-Ferris in their tracks.

What Happens Next?

While Hy-Brand has been reversed for the time being, we expect the Board, once the Senate acts on President Trump’s nomination of John Ring to fill the seat vacated this past December by then Chairman Philip Miscimarra, to reinstate the joint-employment standard articulated in Hy-Brand or a similar standard.

As noted above, the reversal of Hy-Brand follows the ethics memo published by NLRB Inspector General David Berry finding that Member William Emanuel should have abstained from the decision in Hy-Brand because of the fact that the law firm of which he was a member was involved in the case.  There are a number of other cases in which similar conflict issues have arisen, also arguing that Member Emanuel should recuse himself.

Congress May Act

Separate and part from a future Board decision, as we noted in November, the House of Representatives passed the Save Local Business Act (H.R. 3441) which, if enacted, would amend the National Labor Relations Act and the Fair Labor Standards Act to establish a Hy-Brand-like direct control standard for joint employer liability.  The reversal of Hy-Brand may now put increased pressure on the Senate to pass the bill.

What Should Employers Do Now?

Employers and other parties with matters before the Board involving joint-employer issues now, whether in the context of unfair labor practice cases or representation cases, now will need to focus on both the Browning-Ferris standard and the Hy-Brand test to ensure that they preserve all arguments and issues recognizing the likelihood that sooner rather than later the Board will adopt a test that requires more than is required under Browning-Ferris to establish the existence of a joint-employer relationship, with all of the attendant responsibilities.  We will continue to follow this issue and report on developments.

The House of Representatives recently passed the Save Local Business Act (H.R. 3441), which marks an important step in the campaign to reverse the Board’s controversial loosening in Browning Ferris Industries of the long standing tests for determining whether two businesses are joint employers expansion and share bargaining obligations and liability for each other’s actions.  The measure seeks to protect businesses with staffing, franchise and other contractual relationships from liability and union bargaining obligations for another business’ workers unless one business exercises direct control over the employees of the other.

Browning Ferris Expanded Liability for Franchises and Contractors

As we have previously reported, the Board fashioned a new joint employer standard in its 2015 Browning Ferris decision, which expanded joint employer status to any entity that merely possesses, but does not actually exercise, direct or indirect control over the working conditions of another business’ employees.   Browning Ferris jettisoned decades of Board precedent, which formerly required putative joint employers to not only possess the means to control terms and conditions of employment, but to also exercise that control in some meaningful way.  This decision widely impacted franchises as well as businesses that utilize contractors or retain personnel employed by staffing or temporary employment agencies.  If found a joint employer, the business can be required to bargain with any union representing its contractors employees and found liable for any unfair labor practices it or the contractor commits.

Citing a statistic that more than 2.87 million workers are now employed through temporary employment agencies, the Board and labor unions hailed the decision as a critical refinement that better reflects the economic realities of the modern workplace given the rise of nontraditional employment arrangements and complex franchise and contractual relationships  in which two or more independent businesses often arguably co-determine working conditions.  Opponents, however, say the revised standard hurts small businesses and creates liability for employers who, in reality, have absolutely no actual influence over the other employer’s employees’ working conditions.  In just the short time since Browning-Ferris, some of these fears have ostensibly materialized as the Board has sanctioned mixed bargaining units comprised of “solely employed workers” and “jointly employed workers,” and now requires separate businesses to bargain jointly over working conditions even though one or more of the businesses may have no actual influence or control over the working conditions of the other business’ employees.

Next Steps For The Save Local Business Act

Although Browning-Ferris is currently on appeal before the United States Court of Appeals for the District of Columbia, the Save Local Business Act represents an attempt to forge a path forward by amending the Act itself to clarify who may be considered a joint employer.   The bill passed the House with a vote of 242-181, with eight Democrats voting in favor of the measure.  Republicans have been touting the bill as a bipartisan success, but the measure may have a difficult road ahead in the Senate.  A similar bill died in the Senate last year after it failed to garner enough support from Democrats.  There is a good chance that the Save Local Business Act will meet a similar fate if it fails to secure bipartisan support in the Senate, which it is not likely to receive.  That is because although Republicans would have the votes to pass the Act, if it reached the floor for a vote, they do not at this time have the 60 votes they would need to overcome an effort to filibuster by Senate Democrats.

Since the National Labor Relations Board’s (“NLRB” or the “Board”) 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186, in which it adopted a new, far less stringent test for determining joint-employer status under the National Labor Relations Act (“NLRA”),  employers have been left wondering whether they may be held to be a joint employer of temporary or contract workers that they retain through staffing and temporary agencies.

These concerns have been echoed by employers in other contexts as other agencies, such as the United States Department of Labor (“DOL”) and the Equal Employment Opportunity have taken similar positions, seeking to expand the concept of joint employer with respect to statutes and regulations they enforce. Notably, both the DOL and the EEOC filed amicus briefs in support of the NLRB’s position with the D.C. Circuit Court of Appeals, which is considering whether the NLRB exceeded its statutory authority in Browning-Ferris.

While the loosened standards for determining joint employment remain under consideration by the courts, members of Congress are now seeking to use the power of the purse strings to force the NLRB to discontinue its use of the relaxed standards it adopted in Browning-FerrisLegislation considered yesterday by House Republicans would do away with this expansion of joint employer liability and provide much needed clarity for employers on this issue.

What is the NLRB’s Browning-Ferris Standard for Finding Joint-Employer Status?

The Browning-Ferris decision expanded the definition of joint-employer to hold that if an employer, referred to as the primary employer, merely possesses, but does not exercise, the right or ability to directly or indirectly codetermine the terms and condition of employment of the employees of another employer, referred to as the secondary employer, the primary employer will be held to be the joint-employer of the secondary employer’s employees.

This holding impacts a wide range of workers, such as employees of business arrangements including the use of contractors, retention of personnel through staffing agencies and temporary employment services, and, if the “primary employer is a franchisor, personnel employed by the franchisor’s franchisees. As the Board pointed out when it decided Browning-Ferris, in its view “the current economic landscape,” which includes some 2.87 million people employed by temporary agencies, warrants a “refined” standard for assessing joint-employer status. As the majority put it: “If the current joint-employer standard is narrower than statutorily necessary, and if joint-employment arrangements are increasing, the risk is increased that the Board is failing what the Supreme Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial life.’”

While the National Labor Relations Board’s ruling in Browning-Ferris is now before the United States Court of Appeals for the District of Columbia Circuit, where the court has been asked to find that the NLRB’s test is not supported by the terms of the NLRA or the common law definition of employer, which is an element of the Browning-Ferris standard itself, recent activity from House Republicans may result in legislative action establishing a new, far narrower standard for determining joint-employer status.

Congress Seeks to Use the Appropriation Process to Force the Board to Discard Browning-Ferris’s Indirect Control Standard

House Republicans have introduced new language in a draft spending bill – that among other things, would set the NLRB’s appropriation for 2018 – to direct the Board to set aside what many in the business community find to be one of the most objectionable parts of Browning-Ferris.

The House Education and Workforce Committee held a hearing on Wednesday, July 12, 2017 to discuss the barriers to job and business growth created by the “indirect control” standard of joint employer liability. Small business owners and other employer representatives testified that the joint employer standard threatens their ability to expand, and encouraged the committee to introduce legislation that would define employees as those workers that the employer has direct or actual control over.

On Thursday, July 13, 2017, the House Appropriations Committee on Labor, Health and Human Services, and Education voted along strict party lines to approve a markup of their draft spending bill for FY 2018, which would prohibit the NLRB from using the “indirect control” standard in making joint employer determinations and would require the Board to revert to the “direct control” standard. The Appropriations Committee describes the legislation in its press release and on its website as including

two policy provisions to stop the NLRB’s harmful anti-business regulations. The provisions include: A provision that prohibits the NLRB from applying its revised “joint-employer” standard in new cases and proceedings; A provision that prevents the NLRB from exercising jurisdiction over Tribal governments.

This provision, along with the Committee’s proposal to reduce the NLRB’s budget by $25 million (from $274 million to $249 million) will face strong opposition from the Democratic minority, organized labor, unions, and employee lobbying groups. Of course at this point it is not at all clear whether in fact there will actually be a budget for the new fiscal year or, instead, Congress will again adopt a continuing resolution to keep the government running.

What Should Employers Do Now?

Employers and their representatives should of course continue to pay close attention to the budget process and other legislative action, while waiting for Congress to take action on the President’s nominees to the two vacant seats on the NLRB.   There is every reason to believe, assuming Willian Emanuel and Marvin Kaplan are confirmed and take their seats on the Board, that they, like Chairman Philip Miscimarra, who wrote a vigorous dissent in Browning-Ferris, will share the Chairman’s belief that the standard adopted in that case was incorrect and should be set aside. At this time, however, it would be nothing more than speculation to predict when the new Board majority will have an actual case before it in which these issues are present.

In the meantime, employers are advised to review the full range of their operations and personnel decisions, including their use of contingent and temporary personnel supplied by staffing and similar agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical, employers should carefully evaluate their relationships with suppliers, licensees, and others with which they do business to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.

This post was written with assistance from Sean Winker, a 2017 Summer Associate at Epstein Becker Green.

The National Labor Relations Board (NLRB or Board), which continues to apply an ever expanding standard for determining whether a company that contracts with another business to supply contract labor or services in support of its operations should be treated as a joint employer of the supplier or contractor’s employees, is now considering whether a company’s requirement that its suppliers and contractors comply with its Corporate Social Responsibility (CSR) Policy, which includes minimum standards for the contractor or supplier’s practices with its own employees can support a claim that the customer is a joint employer.

Unions are Pursuing Joint Employer Claims Based On CSR Policies

My colleague Dan Green and I recently examined a case  in an article published in Epstein Becker Green’s most recent Take Five in which the Temporary Workers Of America, (TWOA) argued just that, seeking to require the client of the Lionbridge Technologies, the company that actually employs the workers it represents, to participate in negotiations for an initial collective bargaining agreement after the TWOA was certified by the NLRB as the representative of a unit of agency temporaries. Notably, TWOA describes itself as “a start up union devoted to defend and promote the interests of workers classified as ‘temporary.’” Notably, when the TWOA filed its petition for a representation election, it did not claim at that time that the temporary employer’s client was a joint employer with it and only did so after it won the election and was certified.

When the client declined the union’s request to participate because it was not an employer, the TWOA filed unfair labor practice (ULP) charges alleging that the client was unlawfully refusing to bargain. The Board has been aggressively investigating that assertion, including issuing investigative subpoenas to the alleged joint employer demanding extensive documentation and information from it concerning its business relationship with its supplier.

The NLRB Is Aggressively Using Its Subpoena Power to Investigate Joint Employer Allegations

While the customer moved to revoke the investigative subpoenas, the Board denied its motion to revoke the investigative subpoena, noting its “broad investigative authority, which extends not only to substantive allegations of a charge, but to ‘any matter under investigation or in question’ in the proceeding.” (emphasis in original).  Referring to its broad investigative powers, Members Hirozawa and McFarren went on to say that nothing in the Board’s Rules “can be read to impose a requirement that the Regional Director articulate ‘an objective factual basis’ in order to compel the production of information that is necessary to investigate” a pending ULP charge.

Dissenting, Member Miscimarra challenged the use of investigative subpoenas by the Regional Director to pursue the TWOA’s bare faced assertion that the contractor-employer’s client was a joint employer of its personnel. “I believe that a subpoena seeking documents pertaining to an alleged joint-employer and/or single employer status of a charged party requires ‘more . . . .than merely stating the name of a possible single or joint employer on the face of the charge,’” and that, as Section 10054.4 of the Board’s own Casehandling Manual holds, documentary evidence such as that which the Board’s subpoena called for should only be pursued if “consideration of the charging party’s evidence and the preliminary information from the charged party suggests a prima facie case.” (emphasis in original).  Here Member Miscimarra points out the TWOA merely claimed Lionbridge Technologies and its client were a “’joint employer’ without additional factual information about the joint employer allegation.”

What This Means For Employers Now

Since the Board issued its decision in Browning Ferris Industries last August, lowering the threshold for finding a joint employer relationship, it has continued to open the gates for increased organizing and union activity, including announcing it will hold elections and certify unions to represent units made up of both directly employed and secondarily employed employees in its Miller & Anderson, Inc. decision this past June.

As with the TWOA and its pursuit of Lionbridge and its client as joint employers, unions are now taking advantage of these opportunities in a number of ways, both in representation cases and by demanding that putative joint employers come to the table for bargaining.

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

The National Labor Relations Board (“NLRB” or “Board”) announced in its 3-1 decision in Miller & Anderson, 364 NLRB #39 (2016) that it will now conduct representation elections and require collective bargaining in single combined units composed of what it refers to as “solely employed employees” and “jointly employed employees,” meaning that two separate employers will be required to join together to bargain over such employees’ terms and conditions of employment.” To understand the significance of Miller & Anderson, one must consider the Board’s August 2015 decision in Browning Ferris Industries (“BFI”), in which the Board adopted a new and far more relaxed standard for holding two entities to be joint employers.

As the Board explained in its press release trumpeting the Miller & Anderson decision, it will now hold elections and require bargaining in “petitioned-for units combining solely and jointly employed workers of a single user employer,” in those cases in which a union asks for such a mixed employer unit so long as the Board finds the jointly and solely employed workers “share a community of interest,” under the Board’s “traditional community of interest factors for determining unit appropriateness.”

Oakwood Care Center Overruled – Employers’ Consent No Longer Required

Board has overturned its 2004 decision in Oakwood Care Center, 343 NLRB 659 and held that when a union petitions for a representation election in a unit that includes both “solely employed” and jointly employed employees of a single “user employer” the Board will no longer require the consent of the employer or employers before directing such an election and certifying a union to represent such a unit. What this means essentially is that unions alone will now have the right to decide when and where they will require such mixed units.

Like it did in BFI, the Board again justified overruling precedent in part based on “changes in the American economy,” finding “Oakwood imposes additional requirement that are disconnected from the reality of today’s workforce and are not compelled by the Act.”

“User Employers” and “Supplier Employers” Will Be Required to Bargain Together

In BFI, the Board held that a business will be held to be a joint employer of another employer’s employees where it has the ability to impact the terms and conditions of the other employer’s employees even if it never exercises that right. Under the new standard enunciated by the Board majority in that case, “[t]he Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”

Now, under Miller & Anderson, such a user employer will be required to bargain over the terms and conditions of a supplier employer’s employees as to whom the Board finds it to be a joint employer.  Additionally, the supplier employer will also have to bargain over the jointly employed employees’ terms and conditions.  In overruling precedent and imposing a new combined unit bargaining obligation, the Board reasoned that requiring consent of both employers for a combined unit of jointly and non-jointly employed employees did not afford employees “the fullest freedom” to “self-organization.”  However, as Member Miscimarra’s dissent points out, the Board majority attempts to explain away the specific language of Section 9(b) of the NLRA and applicable legislative history limiting the broadest units the Board can impose to “employer units” as opposed to multi-employer units.

The potential for confusion and uncertainty is enormous. In an attempt to minimize these concerns, the Board majority stated that the so-called user employer’s bargaining obligations will be limited to those of such workers’ terms and conditions that it possesses “the authority to control.”

What Does All of This Mean?

As we pointed out, the Board’s decision in Miller & Anderson, which has been anticipated for more than one year, is another critical link in the current Board’s efforts to make it easier for unions to successfully organize and obtain bargaining rights.  It should be seen as the next step in the progression that began with the Board’s change in its representation election rules that were designed for quicker elections and representation proceedings in which employers lost their right to litigate critical unit and supervisory status issues before an election is directed, and to appeal of a Regional Director’s decision and direction of election before an election is conducted, and the time they have traditionally had to communicate with employees before they vote in an election.

When employers voiced their concern that the new election rules would mean that they would in many instances not have any meaningful opportunity to present counterarguments to a union’s promises before a vote took place, the Board and other advocates for the expedited rules countered that this was an empty argument and that employers were almost always aware of union activity long before a petition was filed. That argument now looks particularly empty given Miller & Anderson’s dictates allowing petitions for user and supplier employers’ employees in the same unit, where at least one of the two joint employers will likely be totally aware of what is occurring among a group of another employer’s employees.

Similarly, while the Board suggests that the supplier and user employer will only have an obligation to bargain over those terms and conditions they possess the authority to control, the fact is that this is an invitation to extensive litigation and disagreement over which entity has the “authority” to control which terms and conditions.

What Should Employers Do Now?

At a minimum, a detailed risk assessment of an employer’s workforce and its reliance upon its own employees and temporaries, leased and contract labor employed and controlled, in whole or in part, by so-called supplier employers is in order. “User” employers should determine the goals and risks associated with a relationship and determine whether it is possible and/or desirable to avoid a joint employer relationship or embrace it but attempt to control liability.  Both “supplier” and “user” employers should look for contractual provisions regarding defining the relationship, including who controls and does not control certain aspects, indemnification provisions, provisions related to responses and responsibilities related to union organizing and collective bargaining and similar concerns.  Experienced labor counsel should be consulted to assist in these issues.

Unions no longer will need to gather employees’ signatures on authorization cards before they can file a petition with the National Labor Relations Board (“NLRB” or “Board”) for a representation election.  General Counsel Richard F. Griffin, Jr. has issued Memorandum 15-08 (pdf) announcing that effective immediately unions filing petitions will be allowed to submit and the Board will “accept electronic signatures in support of a showing of interest if the Board’s traditional evidentiary standards are satisfied.”

Acceptance of Electronic Signatures Flows from the Amended Election Rules

As the General Counsel points out, when the Board voted to adopt its Amended Election Rules in December 2014, it made clear that additional changes to the election procedures and rules were likely.  The Board held at that time that its regulations, as they then existed, were “sufficient to permit the use of electronic signatures” to form the basis for the 30% showing of interest required when a petition for an election is filed.  At that time the Board assigned to the General Counsel the responsibility “to determine whether, when and how electronic signatures can be practically accepted” and to “issue guidance on the matter.”

The Minimum Requirements for Electronic Signatures

For an electronic signature to be acceptable and considered authentic and reliable by the Board’s Regional Offices, the General Counsel has ruled that it must include the following information

  1. the signer’s name;
  2. the signer’s email address or other known contact information (e.g., social media account);
  3. the signer’s telephone number;
  4. the language to which the signer has agreed (e.g., that the signer wishes to be represented by ABC Union for purposes of collective bargaining or no longer wishes to be represented by ABC Union for purposes of collective bargaining);
  5. the date the electronic signature was submitted; and,
  6. the name of the employer of the employee

The Memorandum also explains the procedures for submission of a showing of interest based on electronic signatures as follows:

A party submitting electronic digital signatures must submit a declaration (1) identifying what electronic signature technology was used and explaining how its controls ensure: (i) that the electronic signature is that of the signatory employee, and (ii) that the employee herself signed the document; and (2) that the electronically transmitted information regarding what and when the employees signed is the same information seen and signed by the employees.3

When the electronic signature technology being used does not support digital signatures that lend itself to verification as described in paragraph 2, above, the submitting party must submit evidence that, after the electronic signature was obtained, the submitting party promptly transmitted a communication stating and confirming all the information listed in la through lf above (the “Confirmation Transmission”).

  1. The Confirmation Transmission must be sent to an individual account (i.e., email address, text message via mobile phone, social media account, etc.) provided by the signer.
  2. If any responses to the Confirmation Transmission are received by the time of submission to the NLRB of the showing of interest to support a petition, those responses must also be provided to the NLRB.
  3. Submissions supported by electronic signature may include other information such as work location, classification, home address, and additional telephone numbers, but may not contain dates of birth, social security numbers, or other sensitive personal identifiers. Submissions with sensitive personal identifiers will not be accepted and will be returned to the petitioner. They will not be accepted until personal identifiers are redacted

Questions Remain About Authentication

GC Memorandum 15-08 lays out the General Counsel’s instructions to the Board’s Regional Offices and to unions seeking to file elections under the new rules as to the nuts and bolts of collecting and verifying electronic signatures in place of actual signatures on cards that have been the norm since the NLRB began conducting elections 80 years ago and appears on its face to establish procedures for the agency’s employees to follow to verify the authenticity of electronic signatures submitted in support of a petition for an election, as anyone who has had even cursory experience with the Board’s handling of a union’s showing of interest knows, employers have little if any opportunity to meaningfully challenge a showing of interest even where it has substantial doubts as to its authenticity.  While the processes described in the Memorandum appear robust on their face, the fact remains that an employer or other interested party will never really know whether and to what degree the processes are being followed.

What Allowing Electronic Signatures Means

Although the General Counsel and the Board suggest that the decision to allow use of electronic signatures for a showing of interest is not significant and is consistent with the Board’s opinion that it is Congress’s intent that “that Federal agencies, including the Board, accept and use electronic forms and signatures, when practicable—i.e., when there is a cost-effective way of ensuring the authenticity of the electronic form and electronic signature given the sensitivity of the activity at issue, here the showing of interest,” it would be a mistake to view this development in isolation.

Rather, it should be seen as yet another demonstration of the fact that the Board and the General Counsel share the view that the purpose of the Act and the agency is to encourage and promote collective bargaining and make it easier for employees to unionize. The decision to allow electronic signatures should be viewed alongside the Board’s decision last week in Browning Ferris Industries jettisoning its long standing test for determining joint employer status for a that looked to whether the entity claimed to be a joint employer had exercised direct and immediate control over the terms and conditions of employment of the workers in question, for a new far looser test that simply  asks whether the purported joint-employer possesses the authority to control the terms and conditions of employment, either directly or indirectly.”. As the Board puts it, “reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry.”

Given the lowering of the bar for a union to obtain an election that is augured by the move to accept electronic signatures, effective immediately, we can certainly expect a continued increase in organizing and the filing of petitions, followed by ever faster elections.