Just in time for Labor Day, the National Labor Relations Board handed organized labor a great gift and potentially disrupted the business and labor relationships of thousands of American manufacturers.

On August 27, 2015, a divided Labor Board ruled 3-2 that Browning-Ferris Industries was the “joint employer” of workers supplied by a third-party.  Browning-Ferris Industries, 362 NLRB No. 186 (Aug. 27, 2015).  Rejecting over thirty (30) years of precedent holding that joint employer status would not be found unless the alleged joint employer actually exercised direct control over the employees’ terms and conditions of employment, the Board adopted a new test.  Going forward, the Board can find that two separate entities are joint employers of a group of employees if they “possess” the power to “share or codetermine” the “essential terms and conditions of employment.”  If you think there is a lot of writing behind those words, you would be correct.  The Board’s decision and dissent comprise over 50 pages of text, with 208 separate footnotes and a diagram.

The facts of the case are illustrative.  Leadpoint Business Services contracted with Browning-Ferris to supply labor to Browning-Ferris’s Newby Island recycling plant.  The contract appears to have been typical.  Leadpoint agreed to provide labor based on Browning-Ferris’s needs and schedule, and Browning-Ferris agreed to pay Leadpoint a per hour fee for each hour of work.  Leadpoint agreed to hire, train and be responsible for its workers, all of whom were required to meet minimum training standards and successfully complete pre-employment drug tests.  The agreement also provided, however, that Leadpoint could not assign employees to the Browning-Ferris facility for longer than six-months, could not assign former Browning-Ferris employees, and could not pay the employees more than the pay rate of current Browning-Ferris employees in the facility.  The evidence shows that on two occasions, Browning-Ferris managers notified Leadpoint of possible misconduct by its employees, misconduct which actually resulted in disciplinary action – once when two workers were observed passing a bottle of whiskey while working on the recycling equipment and once when a piece of equipment was found vandalized.

On these facts, the Labor Board held that Browning-Ferris was a joint employer of the Leadpoint employees.  While the Board could have held that Browning-Ferris was a joint employer under its long-established test, the Board went much further.  Announcing a new standard, the Board found that because Browning-Ferris possessed the power to determine or co-determine the “essential” employment terms, it was the employees’ co-employer.

The Board’s new standard was announced in the context of an initial representation election, but it carries profound implications for manufacturers.

First, many companies routinely enter into agreements with third-parties to provide labor or services – mailroom and delivery services, operating cafeterias and newsstands, cargo and short-haul freight delivery, and security to name just a few.  These typical service agreements contain many of the same terms the Board relied on in finding Browning-Ferris to be a joint employer.  Manufacturers usually determine when personnel can access their facility, require background checks and security clearances, mandate minimum qualifications, set standards for codes of conduct and work performance, and otherwise enact requirements to safeguard the premises and employees.  I personally cannot imagine a reputable employer failing to act after witnessing a contractor’s employees drinking on the job.  Thus, the Board’s decision opens the possibility that manufacturers will be found to be joint employers of the employees of routine third-party service providers.

Second, the Board expressly rejected any “bright-line” test and ignored a fundamental goal of labor relations – predictability.  Addressing this concern, the Board wrote:  “[W]e do not and cannot attempt today to articulate every fact and circumstance that could define the contours of a joint employer relationship.  . . . [T]hese issues are best examined and resolved in the context of specific factual circumstances.”  The absence of a predictable joint employer test could result in significant disruption down the road.  If a manufacturer can only determine whether it “jointly employed” the employees of a third-party service provider after protracted litigation, a manufacturer may have a difficult time deciding when to involve itself it the employment affairs of that third-party and when to stand back.

Finally, the lack of a predictable standard ignores the sometimes chaotic nature of labor relations.  The Browning-Ferris case arose in a representation election context .  But the joint employer standard often comes into play during contract negotiations, grievance-arbitration proceedings, and picketing and strike activity.  When an employee of a service provider files a demand for arbitration over an alleged wrongful discharge, will the manufacturer be obligated to participate in that arbitration even though it is not a party to the contract under a joint employer theory?  If a labor union strikes a service provider, is the manufacturer also a lawful primary target or does picketing at its gates become unlawful secondary activity?  If employees of a third-party service provider walk off the job to protest the actions of the manufacturer, are those employees even engaged in “protected” activity in the first place?

These are just some of the more disconcerting questions to come to mind.  Undoubtedly, as the “warp and woof” of the modern industrial workplace unfolds, we will have many chances to address these issues again.

In the meantime, manufacturers would be well served by reviewing there relationships with third-party service providers in light of the Browning-Ferris decision.