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“NLRB Finds No Joint Employment Relationship In First Test Since Browning-Ferris”

Franchise Law Insider By David A. Beyer, David B. Kern, and Christopher L. Nickels

The National Labor Relations Board (“NLRB” or the “Board”) Region Five Director (located in Baltimore) was recently asked to decide whether an environmental remediation contractor was a joint employer with its employee staffing firm, in the Green JobWorks LLC case.

This is the first time that a Regional Director has looked at the joint employer issue since the Board’s controversial decision in Browning-Ferris Industries of California Inc. (“Browning-Ferris”), and applying the new broader joint employer test. The Regional Director found no joint employment relationship, and although this was not a franchise decision, there are important takeaways for those in the franchise industry. Despite the publicity over it, Browning-Ferris also did not involve franchising, but understandably raised concerns by franchisors and franchisees alike.

The Players
Green JobWorks LLC (“GJW”) is a staffing company that provides temporary labor to construction companies located in Washington D.C. and the surrounding area. ACECO, LLC (“ACECO”) is a licensed demolition and environmental remediation contractor who employs its own work force, but also supplements its workforce with GJW employees. The Construction and Master Laborers’ Local Union 11 (“Union”) filed a petition seeking to represent a unit of employees alleged to be jointly employed by GJW and ACECO.

The Documents
GJW and ACECO entered into a master labor services agreement (“MSLA”) requiring GJW to provide lead workers who are responsible for tracking GJW employee hours, determining breaks, and removing GJW workers from the construction site, if necessary. The MSLA also stated that GJW was exclusively responsible for, among other things: (1) employee recruiting, hiring, counseling, discipline and discharge; (2) establishing and paying employee wages; (3) providing worker’s compensation insurance and fulfilling unemployment compensation obligations; and (4) maintaining personnel and payroll records for GJW employees. Notably, ACECO was itself a sub-contractor on the project at issue, and so project orientation and day-to-day schedules were determined by the general contractor, who was not a party in the case.

The Union’s Claims
The Union argued that ACECO should be a joint employer because: (1) the MLSA gave ACECO the right to direct GJW managers and supervisors and to dismiss staff employees for safety issues or for other reasonable objections; (2) ACECO had requested specific GJW employees with particular skills; and (3) ACECO effectively controlled the wages of GJW employees by negotiating wage rates via the MSLA.

The Decision
In finding the Union’s argument unpersuasive, the Regional Director distinguished the facts before him from those in Browning-Ferris. Notably, the Board had found that Browning-Ferris was a joint employer with its staffing agency because it had the power to control hiring decisions and to reject or discontinue personnel provided by the staffing company for any reason. By contrast, ACECO’s right to refuse a GJW employee for safety violations or other reasonable objections was limited and was not an unqualified right. Although ACECO could request specific employees, the staffing agency was under no obligation to fulfill this request.

As to wages, the Board found that Browning-Ferris was a joint employer because it mandated that the wages of contracted employees could not exceed those of its own for comparable work. By contrast, GJW employees were able to individually negotiate higher wages based on job performance, and GJW was not prohibited from paying its employees more than ACECO pays its employees for comparable work.

As to day-to-day supervision, Browning-Ferris exercised “near-constant oversight” over contracted employees including by assigning daily tasks and holding regular performance meetings with them. By contrast, ACECO, who was a subcontractor, did not determine the job tasks for GJW employees. Instead, they received project orientation and day-to-day schedules from the general contractor. Further, GJW field supervisors traveled to project sites to interact with lead employees, and lead employees were responsible for tracking GJW employee hours, determining breaks and rest period, and removing GJW workers from the site, if necessary.

Therefore, the Regional Director ruled that ACECO was not a joint employer of GJW’s employees.

The Takeaway
Either party will have the right to request review from the full Board, and it will not be surprising if the Union does so.

In the interim, this case reinforces that the details matter, both on paper and in practice. Each case will be very fact specific. The MSLA made clear the express rights reserved to the staffing agency. Likewise, a franchise agreement should reserve to the franchisor only that which is a business necessity when it comes to the terms and conditions of the franchisee’s employees. Where it is not necessary to exercise control related to hiring, scheduling, discipline or discharge of franchisee employees, those rights should clearly run only to the franchisee. Practice needs to follow the agreement. For example, franchisors who conduct on-site visits should not consult with the franchisee’s employees as it relates to the terms and conditions of their employment.

This case has far more similarities to the typical franchise relationship. For example, like the relationship between ACECO and GJW, and unlike Browning-Ferris, few franchisors determine their franchisee’s hiring decisions; mandate wage rates (by ceilings or otherwise); or assign daily tasks and review employee performance.

Therefore, while remaining vigilant, the franchise industry can take great solace from the outcome in this case