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NLRB Green-Lights Union Expansion with Broadened “Joint Employer” Rule

Construction companies may find themselves with “new” employees eligible for union organizing

By Stephen L. Wright, Esq.

The National Labor Relations Board (NLRB) took a major step toward making it easier for labor unions to organize with its recent decision in the Browning-Ferris Industries of California case issued on August 27, 2015.[1] The decision loosens the criteria for treating the employees of one organization as employees of another when the organizations are found to be “joint employers.” The decision reverses a decades-old practice and promises significant impacts on many parts of the U.S. economy, including construction.

What Does This Mean for the Construction Industry?
The decision is particularly important for construction companies that outsource their labor needs. Due to the reduced impediment to organizing as indicated by the NLRB, labor unions may seek to soon broaden the scope of companies subject to organizing far beyond the current setting. The decision may also result in both organizations being held liable for unlawful labor practices, even when only one of the organizations is actually engaged in the practice.

What Was the NLRB Decision?
In Browning-Ferris, the NLRB agreed with the union’s arguments that if one company has the potential to control the employees of another based upon a set of criteria, the two can be found to be joint employers for purposes of the National Labor Relations Act even if that “control” is not actually exercised. The following are the key parameters the NLRB examined to make its determination:

  • Hiring, firing, and discipline;
  • Supervision and direction of work;
  • Hours of work; and
  • Setting of wages.

In the case, Browning-Ferris operated a recycling processing facility in the state of Washington and used labor supplied by the temporary employment firm Leadpoint to staff a portion of the plant. The NLRB found evidence of control for each of the four parameters above in its review of the labor supply agreement. Simply having the ability to exercise control as provided in the labor supply agreement was sufficient to make Browning-Ferris a “joint employer.” The NLRB determination was made without regard to whether that control had actually been exercised. This was unique as previous NLRB decisions made actual exercise a factor critical to the determination of joint employment. The Teamsters Union, which had already unionized the Browning-Ferris employees, was thereby entitled to hold an election among Leadpoint workers.

What Additional NLRB Action Is Noteworthy?
Contractors should also be aware that in a separate case, the NLRB indicated that it intends to lower the hurdles for unions to compel joint employers to conduct an election. Under a 2014 decision, the Board decided that both employers in a joint employer situation must consent to an election. In taking a new case dealing with that question, the NLRB now seems to indicate that it will reverse itself and permit an election to be held even if one of the employers objects.

Another ominous aspect of this potential ruling will be the exposure to liability for wrongful employment practices. For example, a professional employer organization (PEO) contracted by a construction company could be wrongfully withholding parts of paychecks or erring on how hours are counted. The construction company could be held liable even if it had no actual input on how the PEO operates.

Together with Browning-Ferris previously discussed, these decisions incentivize unions to target temporary employment companies and PEOs.

What Should Construction Employers Do Now?
Due to these developments, it is important to know what kind of control is provided in trade subcontracts. Trade subcontracts often give the general contractor at least some aspects of “control” over a subcontractors’ employees, at least on paper. That includes the ability to eject personnel and set work hours. If that control is broad enough under the parameters above, the new NLRB decision could provide an opening for labor unions to organize either of the parties to the subcontract.

Contractors with an existing labor union arrangement in some of the states where they operate need to examine their agreements with temporary labor companies and PEOs. The reach for organizing efforts could conceivably extend into right-to-work states. Minimize exposure to unionizing activity by extending control over as few of the factors as possible. Bear in mind that it is all about what is written in the agreement as a potential control ability.

Ironically, the Browning-Ferris decision may become a favorite among PEO firms. With the PEO and its client bound together under a collective bargaining agreement, it may be very difficult for the client organization to extricate itself from the PEO. This would cut down on competition among PEO firms and result in client organizations becoming “captive” to their PEO. For the client employers, this would be a very bad result, of course, since a main benefit in engaging a PEO is supposed to be increased flexibility, including the ease of engaging a new PEO firm.

What finally happened with Leadpoint? The decision released a previously impounded shop ballot that showed the employees voted in favor of joining the labor union.

Endnote:
[1].      Find the complete text at www.nlrb.gov.


Stephen L. Wright, Esq., is an attorney, arbitrator, and mediator who practices with Taylor English Duma LLP in Atlanta, GA. He focuses on complex commercial and construction litigation and arbitration domestically and internationally, and serves as outside general counsel. He has represented companies in the construction industry for more than 20 years.

He may be reached at (678) 336.7262 or by e-mail at
swright@taylorenglish.com.