Last week, the National Labor Relations Board ruled that companies that use temporary agencies are considered “joint employers,” of temp workers and share responsibility with the agencies for liabilities regarding those workers. In addition, temporary workers that unionize have the right to bargain with the parent company as well as the temporary agency.
It’s a game-changing ruling, say labor attorneys who work with manufacturers, and employers who rely heavily on temps best not be sitting on their hands hoping it will all go away. Instead, they should be auditing their temporary agency contracts to see what changes they need to make—and consider bringing their contingent workforce in-house.
“They’re going to need very strong indemnification provisions [in their temporary agency contracts], because if they’re joint employers, they can be held jointly liable for unfair labor practices,” says Michelle Johnson, a partner at Nelson Mullins in Atlanta who specializes in defending management in labor disputes.
Employers will also need to gird themselves for the possibility of their temporary workforce unionizing-- and having to bargain with the union alongside the temp agency, said Johnson.
The NLRB case involved a Browning-Ferris Industries recyclry in California with about 60 unionized permanent employees, mostly working off site, and 240 temporary employees working on-site in sorting and cleaning. The Teamsters union argued that Republic Services, which owns Browning-Ferris, should be considered an employer of the temporary workers and subject to bargaining along with the temporary agency, Leadpoint.
The NLRB ruled that previous Board decisions about joint employer status dating back to 1984 were misguided, having “no clear basis” in the common law or in the National Labor Relations Act. Those decisions have left the board “increasingly out of step” with “changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships,” the NLRB stated.
The decision last week takes the joint-employer relationship back to the pre-1984 definition, that companies need not exercise their control to be considered joint employers—they just have to have the authority to make decisions over those employees.
“The interesting thing about the case is how broad the language is—how many companies could find themselves as joint employers where they didn’t intend to be and didn’t want to be,” said Johnson.
The NLRB ruled that BFI had authority over employees because while it doesn’t hire and fire employees or schedule them, it sets the conditions for hiring and firing and determines how many employees it needs and when employees will work at its site.
“That indirect control can qualify a company as a joint employer over workers that are on site, even where the on-site contractor might have supervisors of their own directing and controlling the work,” said Bryance Metheny, a labor attorney and partner in the Birgmingham, Ala. law office of Burr & Forman who represents automotive manufacturing clients.
“I think it’s going to be impactful on a lot of the manufacturers we represent,” he said.
BFI required temporary workers to pass a drug screening, meet BFI-set productivity standards and follow its safety standards , and had the authority to dismiss or reject employees without cause. According to testimony in the case, BFI managers also at times stopped the line and directly intervened with temporary employees when they felt they weren’t working fast enough.
Steven Suflas, managing partner of Ballard Sphar Denver office, said that the NLRB opinion “loses sight of the realities of the manufacturing world” by saying that a company is considered a joint employer if it specifies the number of temps it needs or requires a drug test or controls the work schedule.
He said that employers have two choices: “Number one, they can try to go back and reformat their relationships with the supplier company in order to meet this NLRB test, or they can sit back and say, ‘NLRB, go back at the moon—wait until the federal courts of appeal deal with this case. The NLRB is not faring very well in courts of appeal.”
Johnson said that most of her clients have contracts that state that if a temporary worker is on site and performs unsatisfactorily for any reason, the temp agency must replace that worker. Under the new ruling, her clients could be “subject to an unfair labor practice charge” for removing the employee. She is advising her clients to review their indemnification provisions “and have language that specifically says that the temp agency agrees to defend them from any unfair labor practice charge, and indemnify them for any damages.”
With his major auto supplier clients, Metheny sees the ruling affecting not so much production line temporary workers as ancillary workers outsourced for jobs like janitorial and food service, which manufacturers may want to consider bringing in house. Metheny says his clients already tend to consider themselves joint employers of production-line workers (and thus liable for their welfare and subject to union bargaining) and plan accordingly.
“The production line temp workers are often already subject to direct control by the manufacturer's supervisors,” he said. “There will always be a place for temporary production workers in large environments because of the need for flexibility in staffing size and ability to limit the size of the permanent workforce that is eligible for full employee benefits.”
Still, he said, said, some companies may want to consider hiring those perma-temp production workers and avoid the temp-agency expense because the ruling diminishes their value as contract workers.
Johnson said that employers should also be reviewing the temp agency’s hiring practices and how they treat their employees. Check court records, she advises, to see whether the company has a record of ill-treatment.
Metheny he’s advising his clients to audit all of the contract workers on their premises, both temporary and independent contractors. “You need to know the extent to which that worker could end up subjecting you to exposure to labor violations or become a member of a bargaining unit that could vote in an election. And evaluate them on things like how long are they here, what’s their purpose for being here” and decide whether to make them full employees or keep them temp employees and ease requirements like drug tests and adherence to safety guidelines.
“For us the recommendation is most likely going to be we simply need to assume that they’re going to be deemed our employees and be part of a bargaining unit,” he said.
It is “certainly possible,” added Metheny, “that this is going to lead large manufacturers” to bring all of their ancillary services “in-house.”