Legal and Regulatory Compliance

NLRB Expands ‘Joint-Employer’ Concept

November 10, 2015 3:30 pm

The NLRB recently concluded that two organizations that share or co-determine the essential terms and conditions of employment are joint employers and thus responsible for each other’s labor practices.

The National Labor Relations Board (NLRB) recently increased large employers’ potential liability for other employers’ actions. The case involved Browning-Ferris Industries of California (BFI), the owner/operator of a recycling facility, but the precedent it sets could apply to any large employers—including hospitals and other healthcare providers—who contract with outside agencies to augment their workforce. The recent NLRB case concluded that organizations found to be “joint employers” are required to bargain jointly with a union and may be liable for each other’s unfair labor practices.


BFI is a trash hauler and processor in the San Francisco Bay area; it handles approximately 1,200 tons per day of waste materials and recyclables. The key to BFI’s operation is the sorting of trash inside its facility on various conveyor belts called “material streams.” BFI employs about 60 heavy equipment operators who move materials outside the building to prepare them for sorting, but it contracts with Leadpoint Business Services (Leadpoint) to supply the workers who manually sort the material on the streams, clean the screens on the equipment, and perform various housekeeping services.

A Teamsters local sought to represent approximately 240 full-time, part-time, and on-call sorters, screen cleaners and housekeepers who work at the facility, including employees of both BFI and Leadpoint. The union’s petition was denied by the NLRB regional director who, using a narrow definition of the term “employer,” found that BFI and Leadpoint do not jointly determine the essential terms and conditions of employment and, therefore, are not “joint employers.” An appeal to the national office ensued.

The Facts and Decision

The services agreement between BFI and Leadpoint stated that Leadpoint is considered the sole employer of the personnel it supplies and that nothing in the agreement should be construed as creating an employment relationship between BFI and the Leadpoint personnel. Nevertheless, by a 3-2 vote, the NLRB reversed the regional director and concluded that the two companies “share or co-determine … the essential terms and conditions of employment” and thus are joint employers. In reaching its decision, the majority relied on these salient facts, among others:

  • BFI sets the standards for which employees Leadpoint may hire, and it retains the right to terminate any worker “for any or no reason.”
  • Although Leadpoint controls the details of daily work, BFI sets the facility’s schedule; determines which material streams run each day and at what speed; sets overall quality, safety and productivity standards; dictates the number of employees and the times of their shifts, and controls various other aspects of the day-today work.
  • BFI prevents Leadpoint from paying its employees more than BFI employees receive for similar work, and BFI must approve any employee pay increases.

In reaching their decision, the three-member majority reviewed a number of NLRB decisions that they felt had “effectively narrowed the joint-employer standard” to the detriment of employees’ rights. In those decisions, rendered during the past 30 years, the NLRB had required that a company must exercise actual, direct, and immediate controlover the workers in question for it to be considered a joint employer. But according to the majority, this standard had been set “without any explanation … and without overruling a single prior decision” and is significantly narrower than the common law would permit. In the majority’s view, the result was that “employees may be deprived of their statutory right to bargain effectively over wages, hours, and working conditions, solely because they work pursuant to an arrangement involving two or more employing firms, rather than one.”

The majority thus restated the joint-employer standard to include not only actual control of the terms and conditions of employment but the authority to control them, even in a limited and routine manner. “The right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect.”

Differing Philosophies

Both the majority and the dissent say they were applying common law principles to further the purposes of labor law, and each side viewed the facts through the lens of their predilections toward the labor/management dichotomy.

The dissenters argue that the majority’s broader test for joint-employer status “will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have.” They argue that the former test (actual exercise of control) “provided certainty and predictability” while the new standard is “fatally ambiguous,” will cause “grave instability,” and will impose “unprecedented bargaining obligations on multiple entities in a wide variety of business relationships.”

Regardless of whether one agrees with the BFI decision, the new definition of joint employer “could lead to sweeping changes,” according to Jim Trivisonno, president of IRI Consultants, Troy, Mich. “If a union wins an election among employees, the union now has the right to bargain not only with the contractor, but with the employer who engaged the contractor even if it does not actively supervise the contractor’s employees,” Trivisonno says. He adds that they will share joint liability for any unfair labor practices committed by either company.

The BFI decision can only be reviewed by the courts if the union wins an election and the employer refuses to bargain; it will thus be a long while before the issues are fully settled. In the meantime, the joint-employer concept may also have implications in the fields of tort law (respondeat superior), workers compensation, equal employment opportunity, occupational safety and health, fair labor standards, and others.

Meaning for Healthcare Providers

Although joint-employer status depends on the facts of individual situations, one can generalize some lessons to be learned from the BFI case. For example, Trivisonno says, “Hospitals and other healthcare providers that use outside agencies to bring in nurses, housekeeping staff, food/nutrition workers, and lab and other services could be considered joint employers.  No longer can they consider themselves distanced from those agencies’ labor disputes.”

And if a nurse staffing agency becomes unionized, both the hospital and the agency may have to negotiate with the union that represents the “travelers” (the staffing agency’s nurses). And if a hospital is already unionized, managers may have to follow one set of rules for the hospital’s employees and a different set of rules for the agency’s travelers. The management difficulties this would cause are easy to imagine.

According to former NLRB member Charles I. Cohen of the Morgan Lewis law firm in Washington, D.C., “Employers that have contractors who work on-site, operate on a cost-plus basis, or perform mission-critical operations will be attractive targets for application of the new joint-employer standard.” He recommends that legal counsel review any contracts with staffing agencies and other vendors.

“Together with the HR team, they should help evaluate how much actual and potential control the healthcare employer has over the terms and conditions of employment and whether they truly need the reserved powers they hold.” The terms of the contracts and actual day-to-day practices should be compared to the factors the NLRB considered important in the BFI case. “You need to decide whether your reserved powers are worth the risk of joint-employer status,” Cohen says.

With “ambush elections” a possibility, this contract review may take on added urgency.

See related article: New NLRB Election Rule May Increase Union Activity

Labor-relations issues aside, there are basic liability concerns. Both joint employers may be vicariously liable for the torts a dual employee commits, and work-related injuries may be the responsibility of both employers as well. If the staffing agency does not provide workers compensation coverage, a finding of joint employment could have significant financial implications for the hospital. Considering defense costs and potential liability, it would seem prudent for the hospital to make sure, contractually or otherwise, that they have liability and workers’ compensation insurance to cover these employees.

See related tool: Checklist: Minimizing Joint-Employer Status

Finally, Trivisonno says, “If you conclude that your organization is a joint employer, you should take a lead role in developing and executing the labor relations strategy and educate all managers about the organization’s position on labor law issues and their own management responsibilities.”

Continued Attention and Awareness

In the penultimate paragraph of their opinion, the majority in the BFI case practically accuse employers of trying to skirt the labor laws by trying to “insulate themselves from their legal responsibility to workers, while maintaining control of the workplace.” Although this may be an overly broad and unfair criticism if applied to healthcare employers, it does show the attitude of the current majority of the NLRB.

Healthcare leaders, human resources professionals, and labor relations counsel in particular, should pay close attention to developments in this field.

J. Stuart Showalter, JD, MFS, is a contributing editor for HFMA.

Interviewed for this article:
James Trivisonno is president, IRI Consultants, Troy, Mich.

Charles I. Cohen is a partner in Morgan Lewis, Washington, D.C.

Discussion Starters

Forum members: What do you think? Please share your thoughts in the comments section below.

  • How do you anticipate this broadening of joint-employer responsibilities to affect your hospital or health system?
  • What strategies have been effective in reducing your hospital’s or health system’s liability under joint-employer requirements?


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