When does being employed by a contractor also mean being employed by the corporation with whom it contracts? The National Labor Relations Board currently is reviewing this issue in a potential landmark case. If the board rules in favor of a Teamsters local in California, unions everywhere could have a powerful organizing weapon. The union had filed a petition back in July 2013 to represent workers at a San Francisco Bay Area recycling plant. A labor contractor, Leadpoint Business Services, handles hiring, wages and other personnel issues at the plant on behalf of the plant owner, Browning-Ferris Industries (BFI) of California Inc. The union wants the board to classify Leadpoint and BFI as a dual employer for collective bargaining purposes. The local failed to convince the NLRB at the regional level last August – and not without reason.
A large portion of the U.S. labor force now works for contractors. And that portion is likely to get larger. A recent report by software maker Intuit concluded that by 2020, more than 40 percent of the nation’s workforce, or 60 million people, will be freelancers, contractors and temp workers. The primary advantage for employees is flexibility of scheduling and workplace experience. The primary advantage for employers is reduced labor costs, especially benefits. In many industries with high concentrations of unskilled workers, contracting has become the norm. And this new rule often extends to employers as well as individual workers. The fast food industry, for example, is oriented toward franchisees. Virtually all of McDonald’s restaurants are franchisee- rather than corporate-owned. Union officials long have looked unfavorably toward the practice of contract hiring, whether in the private or public sector. They see contracting as short-changing workers. If a contractor is considered the employer at a given worksite, then so should the company that farms out that responsibility.
Sanitary Truck Drivers and Helpers Local 350, a Teamsters affiliate based in Daly City, Calif., has been leading the way as of late in campaigning to broaden the definition of a dual employer. For the past year it has been trying to convince the National Labor Relations Board to declare Browning-Ferris Industries of California a joint employer alongside its labor contractor, Leadpoint Business Services, at the Newby Island recycling plant in Milpitas, not far from San Jose. The union seeks a redefinition of circumstances under which two separate employers would be brought to the negotiating table, thus breaking with longstanding precedent. If NLRB rules in favor of the union (Case 32-RC-109684), not only the Teamsters, but also unions as a whole, could gain dramatically in organizing and representation capacity.
For three decades, the NLRB has held that legally separate entities qualify as a joint employer only when they share basic employment functions, such as hiring, training and supervision. The board established this position in a pair of 1984 rulings, TLI Inc. (271 NLRB 798) and Laerco Transportation (269 NLRB 324). Without direct and immediate control, argued the board, a company that contracts labor to another firm doesn’t qualify as an employer of the workers onsite. Hence, such a company shouldn’t be subject to collective bargaining requirements. Applying this doctrine to the current case, Leadpoint Business Services would be considered the sole employer. Employer groups don’t see anything unique here to warrant any change in the doctrine. The NLRB several times over the last 30 years has upheld its joint employer standard — see Goodyear Tire & Rubber Co., 312 NLRB 674, 676 (1993), and AM Property Holding Corp., 350 NLRB 998, 1002 (2007).
NLRB Oakland Office Regional Director George Velastegui affirmed this precedent last August 16, when he ordered a secret ballot representation election to be held for the benefit of full-time and regular part-time workers employed by Leadpoint Business Services at the Milpitas plant. BFI California directly employs about 60 individuals at that facility, most of whom are equipment operators. In addition, the company contracts with Leadpoint to provide 240 temporary workers for entry-level positions such as sorter, screen cleaner and housekeeper. The agreement states that Leadpoint is solely responsible for all employment decisions relating to the latter workers. That includes recruitment, hiring, training, discipline, termination, wages, benefits and supervision. The only company overlap has been a “cost-plus” compensation arrangement whereby BFI reimburses Leadpoint for wages up to fixed ceiling per employee. Such an arrangement is common in U.S. industry. And in and of itself, it is not a justification for mandating dual employer status.
Teamsters Local 350 several years ago had established itself as a presence at the Newby Island plant. The union won a representation election there in December 2008 by a 17-11 margin. Yet the union has been unsatisfied because Leadpoint remains the sole employer in collective bargaining. In his ruling of a year ago, Regional Director Velastegui concluded that Browning-Ferris Industries of California and Leadpoint are not dual employers. Local 350 proceeded to file a Request for Review with the NLRB, arguing that true representation was impossible unless BFI were declared a joint employer. This past April 30, the board, by 2-1, voted to grant the union its request. And on May 12, it invited interested parties to file amicus briefs.
Union officials and their lawyers see the existing dual employer doctrine as in need of an overhaul. In its brief on behalf of Local 350, the Oakland, Calif.-based firm of Beeson, Tayer & Bodine summarized:
(T)he NLRB’s current standard for defining joint employer status makes it overly difficult to establish joint-employer status. The current test does not address the realities of the modern workplace, where facility operators frequently rely on labor contractors to supply workers, while retaining control over both their and their labor contractor’s workforce. The current standard allows contractors and facility operators to avoid, as a practical matter, the basic legal obligation to recognize and bargain with workers’ chosen representatives, because such employees cannot engage in meaningful bargaining when the party that exercises control and influence over their working conditions is not required to participate or bargain.
BFI of California, argued the brief, has de facto control over terms and conditions of employment at the Milpitas recycling plant, even though Leadpoint nominally is in charge. Therefore BFI should be declared a joint employer.
Employers take a much different view. In an amicus brief prepared on behalf of the American Hospital Association, the National Council of Chain Restaurants, Associated Builders & Contractors, and over a dozen other employer groups, Zachary Fasman and Vanessa Gilbreth, attorneys for Proskauer Rose LLP, argue:
The rationale that led the Board, three decades ago, to adopt a direct control standard remain fully applicable today. No new facts or industrial developments require that the Board abandon thirty years of established law and depart from an approach it has developed and implemented for the past three decades. The current approach provides ample flexibility to allow the Board to police any improper attempts to evade the requirements of the [National Labor Relations] Act. A return to the “indirect control” standard advocated by Petitioner, by contrast, sweeps too broadly and would enmesh separate businesses in bargaining relationships over which they have no significant control without any materially greater protection of employee rights under the Act.
Despite scant evidence that the current case represents an unusual employment relationship, the National Labor Relations Board, with its built-in 3-to-2 pro-union majority, is likely to rule on behalf of the union. Steven Bernstein, a partner with the Atlanta-based litigation shop of Fisher & Phillips, believes that the NLRB is “not likely to change it [the joint employer standard] for purposes of narrowing it.” To the contrary, he said, the board is pondering how to cast “a wider net over a bigger group of employers.” He elaborated: “I think the NLRB is interested in pursuing a doctrine that maximizes the number of employees who get to vote and maximizes the number of employers who can be held responsible for violations.” Jonathan Fritts, an attorney with Morgan, Lewis & Bockius, sees a weak rationale for review. He notes: “It is sort of a surprise that the board is doing this, and it raises the question of what the standard should be and why there would be cause to change it.” The explanation for the board’s decision to review can be explained largely by the fact that the three Democrats on the five-member board – Mark Gaston Pearce (chairman), Nancy Schiffer and Kent Hirozawa – are strong union partisans. By widening the net for employer collective bargaining, these members can win institutional gains for unions.
A ruling on behalf of Teamsters Local 350, at the very least, would force BFI of California and Leadpoint to bargain with the union over terms and conditions of employment of Leadpoint-contracted employees. Moreover, BFI could be sued for any unfair labor practices allegedly committed by Leadpoint. Yet a union victory would have ramifications well beyond this dispute. Unions of all types would have much more leeway to organize and bargain. And more employers would be forced to play by union rules, even if they have nothing to do with day-to-day decisions that affect the workplace. Moreover, in the event of accidents, including fatal ones, more than one employer means more opportunities to shift liability. A recent study by ProPublica, a New York-based nonprofit journalism group, revealed that on-the-job injuries are substantially higher among temporary employees than among standard employees. The authors concluded that temp labor contractors rarely provide new hires with sufficient training on handling dangerous equipment and materials. Why should BFI be held legally responsible for the shortcomings of firms with whom it contracts? An NLRB ruling in favor of dual employer collective bargaining in this case would seem a potential bonanza for union attorneys more than anything else.
One issue about this whole controversy that usually gets downplayed is that a sensible immigration policy – the kind this country hasn’t had for several decades – could have headed off this conflict. Temp agencies often seek out new hires who are disproportionately first-generation Hispanic and Asian immigrants. These employees, more so than the native-born, are willing to accept low wages, zero benefits and unsafe working conditions. They are exploitable. The corporations who own the facilities where they work are have an interest in reducing labor costs. Browning-Ferris Industries of California has an especially strong motive because its parent company, Browning-Ferris Industries Inc., hasn’t formally existed since 1999. The Houston-based corporation was bought out that year by Allied Waste and a pair of equity firms, The Blackstone Group and Apollo Management (BFI was allowed to keep its name to serve state and local markets). Reducing labor costs has been a major motive behind such buyouts. But with fewer immigrants in this country to exploit, BFI of California might well have found it more expedient to hire directly for its Milpitas recycling plant. Had it done so, the ‘dual employer’ issue never would have come up in the first place.