Joint-employer decision could have implications in construction

The following article from Judd H. Lees and Williams Kastner originally appeared on our website. It has been edited slightly for timeliness.

While employers were troubled by the National Labor Relations Board’s decision to issue a complaint against McDonald’s last year based on the alleged unfair labor relations acts of its franchisors, the Board’s pending Browning-Ferris decision represented more potential downside for the construction industry based on the Board’s potential expansion of the definition of “joint employers.”

Recently, the Browning-Ferris shoe fell and, as predicted, the Board overturned decades of case law in this area in determining that Houston-based waste management firm Browning-Ferris shared sufficient control with Phoenix-based Leadpoint Business Services, to constitute joint employers.

This article will examine the implications of the decision on the construction industry.

The facts were these. Browning-Ferris Industries (“BFI”) operated a recycling facility which required the sorting of materials for resale to other businesses. It directly employed 60 loader operators, equipment operators, forklift drivers and spotters largely working outside the facility. These employees were represented by the Teamsters. BFI subcontracted with non-union Leadpoint to provide workers to perform the manual sorting of the recycled materials on four conveyor belts within the facility. The Teamsters filed for a representation election covering Leadpoint’s employees and argued that BFI was a joint employer with Leadpoint.

Pursuant to the BFI temporary labor services agreement which was in effect indefinitely, Leadpoint was to hire, supervise, discipline and manage their own employees. However, in point of fact, the BFI services agreement set the standards for hiring qualifications, wages, and required the Leadpoint employees to follow BFI safety standards.

In addition, BFI supervisors often required the discipline or termination of Leadpoint employees based on observation of the work. Most importantly, BFI hours of operation as well as the speed of the conveyor belts which BFI controlled, dictated the hours, number of employees, breaks and shifts of Leadpoint workers.

A Regional Director of the Board ruled that pursuant to controlling law, the two entities were not joint employers since the subcontractor’s employees were not under Browning-Ferris’ direct control as to hours, wages, job responsibilities, hiring, firing, discipline and supervision of employees. According to Regional Director, the presence of potential control in these areas was insufficient—actual control would have to be exercised. The matter then went to the entire Board which, last week, disagreed and held that the two were joint employers.

The primary change in the Board’s analysis is the deletion of the requirement of evidence of actual control over the subcontractor’s employees—the right to control is now sufficient, whether or not it is exercised. In other words, if there is the potential for shared control over the terms and conditions of employees, joint employer status may be found.

The Board found the following items dispositive of the joint employer status of BFI and Leadpoint: (1) BFI required Leadpoint applicants to meet or exceed BFI’s selection process and retained the right to reject any worker; (2) BFI had unilateral control over the speed of the conveyors or “streams” as well as productivity standards and task assignments and thus effectively directed Leadpoint employees’ work; and (3) BFI precluded Leadpoint from paying their employees more than the BFI employees, thus controlling their wages. Based on these factors, the Board determined that BFI “shared and codetermined the terms and conditions of employment” with Leadpoint and was therefore a joint employer.

Based on the similar co-dependence and interrelationship of construction subcontractors on project sites to achieve a common end, the Browning-Ferris decision should provide some worry. For example, the Stute decision mandates the need for control and oversight by the general over the safety practices of subcontractors.

What should contractors do in order to avoid joint employer status after this decision?

• First, ensure that your subcontracts dictate the ends and not the means of the assigned task and specifically do not dictate the wages, work quality, number of employees or work processes of subcontractor employees. Typically, contract specs do specify the quality of equipment and/or material standards but do not implicate employee terms and conditions; nor should prevailing wage requirements trigger concern since those are required by state and/or federal law.
• Second, any employment action related to evaluation, discipline or termination should be in the hands of the subcontractor. An upper tier contractor may clearly point out performance or safety issues they observe and ask the subcontractor to have the offending employee leave the site, but should not require termination or other disciplinary action by the subcontractor.
• Finally, the scheduling of subcontractors to ensure timely and cost-effective project execution will typically be insufficient to constitute the requisite “co-management” of employees. However, contractors should take care not to drill down too deeply in the affairs of other contractor employees, such as dictating employee numbers or tasks or engaging in constant supervision of their work.

The real concern with the Browning-Ferris decision in construction is with contractor use of staffing agencies or contingent workers since these workers are typically supervised and directed by the construction employer. Employers utilizing these agencies as well as franchisors may find themselves drawn into organizing campaigns or unfair labor practice charges involving other entities if they are not careful.

In sum, most construction contractors should not be greatly affected by the Browning-Ferris decision. However, caution is needed to ensure that control of—or more accurately the right to control—the terms and conditions of employment for the employees of other contractors, is absent.

Judd Lees is a member in the Seattle office of Williams Kastner. He is a member of AGC’s Legal Affairs Committee and a former AGC Board of Trustees member.