Laborsphere

The NLRB Expands the Definition of “Joint Employer”

Yesterday, the National Labor Relations Board (the “NLRB” or “Board”) issued a decision greatly expanding the standard for determining whether a company may be deemed a “joint employer.” The Board’s decision, in Browning-Ferris Industries of California, Inc., overturned the narrower standard that the Board had been applying for 30 years. The impact on companies that rely on staffing agencies and contractors is likely to be significant and the effects may ripple into the world of franchised business.

The Previous Joint Employer Standard

The National Labor Relations Act (“NLRA”) imposes numerous obligations on employers, including the duty to bargain with a union that workers select as their designated representative. These obligations can extend to a company that does not directly employ the workers in a traditional sense, if the company is deemed to be a joint employer.

For decades, to determine whether a company constituted a joint employer, the Board relied on a test set forth in NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117 (3d Cir. 1982), and refined in two subsequent Board decisions – TLI, Inc., 271 NLRB 798 (1994), and Laerco Transportation, 269 NLRB 324 (1984). Under the Third Circuit’s test in Browning-Ferris Industries of Pennsylvania, two or more companies could be considered joint employers of the same group of employees if they “share[d] or codetermine[d] those matters governing the essential terms and conditions of employment.” In TLI and Laerco, the Board imposed additional limitations on the test, requiring that, to be considered a joint employer, a company must actually exercise control – not merely possess the authority to exercise control. Moreover, the control had to be direct and immediate, not limited and routine.

The Facts

Browning-Ferris Industries of California, Inc. (“BFI”) owned and operated the Newby Island Recyclery (“Newby Island”), where workers sorted mixed waste and recyclable materials into separate commodities that were sold to other business. BFI employed 60 employees at Newby Island, who were represented by the International Brotherhood of Teamsters (the “Union”). BFI entered into a temporary labor services agreement (the “Agreement”) with Leadpoint Business Services (“Leadpoint”) under which Leadpoint provided employees to sort the recyclables on Newby Island’s conveyor belts, clean the screens on the sorting equipment and provide housekeeping services.

BFI and Leadpoint maintained separate management teams and human resources functions. Although BFI managers were not directly involved in hiring Leadpoint’s employees, under the Agreement, BFI required Leadpoint to ensure that any personnel assigned to Newby Island met certain BFI-set qualifications, including drug testing and certification and training requirements. The Agreement provided that Leadpoint retained sole authority to counsel, discipline, and terminate its employees. However, the Agreement also granted BFI the authority to reject any personnel provided by Leadpoint and to “discontinue the use of any personnel for any or no reason.” As to wages, Leadpoint was responsible for paying the employees who worked at Newby Island. Yet, under the Agreement, Leadpoint could not, without BFI’s approval, pay a higher rate than BFI to Leadpoint employees who performed similar tasks to BFI’s own employees. As to hours and scheduling, while Leadpoint decided what employees to schedule for which shifts, BFI retained sole control over the shifts and operating hours of the facility. Moreover, BFI – not Leadpoint – decided how many employees to assign to specific conveyor lines. BFI also set productivity standards and retained the sole authority to set the pace of the material streams. As to training and safety, although Leadpoint conducted its own training, BFI occasionally supplemented the training, and Leadpoint employees were required to comply with BFI’s safety policies and procedures. The Agreement expressly provided that Leadpoint was the sole employer of its personnel and that nothing in the Agreement should be construed as creating a joint employer relationship.

The Union petitioned to represent Leadpoint’s sorters, screen cleaners, and housekeepers. The Union wanted to bargain with BFI on behalf of these workers, arguing that BFI was the joint employer. Applying TLI/Laerco, the Board’s Regional Director disagreed, finding that BFI was not a joint employer and, therefore, BFI had no duty to bargain. In arriving at this decision, the Regional Director focused on the fact that, under the Agreement and in practice, Leadpoint retained primary and direct control over its employees supplied to Newby Island.

The Union requested that the Board review the decision. Among its arguments, the Union contended that the Board should revisit its joint employer standard.

The Board’s Decision

After reviewing the history of its joint employer jurisprudence, the Board concluded that the test originally set forth by the Third Circuit in Browning-Ferris Industries of Pennsylvania had been severely distorted in subsequent NLRB decisions, including TLI and Laerco. The Board noted the increasing prevalence of employers procuring workers through staffing and subcontracting arrangements. In its view, the existing, narrow, joint employer test was out-of-date in light of the changing realities of industrial life.

A “New” Joint Employer Test

After criticizing the long line of Board decisions that had narrowed the joint employer designation, the Board declared that it was returning to the original test announced by the Third Circuit. The Board articulated this “new” test as follows:

The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms or conditions of employment.

Relevant facts to consider under this test include the roles that companies play with regard to: hiring, firing, discipline, supervision and direction; wages and hours; scheduling, seniority and overtime; assigning work; and determining the manner and method of work performance. The Board explicitly overruled TCI, Laerco, and their progeny, stressing that a company may be a joint employer by virtue of its authority to exercise control, irrespective of whether the company actually exercises that control. The Board rejected the requirement that a joint employer’s control is necessarily exercised directly and immediately. Now, control exercised indirectly may establish joint employer status.

The Board stressed that a putative joint employer’s “bare rights to dictate the results of contracted services or to control or protect its own property” would not be determinative. However, it made clear that:

[w]here … [a] user firm owns and controls the premises, dictates the essential nature of the job, and imposes the broad, operational contours of the work, and the supplier firm, pursuant to the user’s guidance, makes specific personnel decisions and administers job performance on a day-to-day basis, employees’ working conditions are a byproduct of two layers of control.

In such situations, the Board suggested that both the supplier and user of the contingent or temporary workforce would constitute joint employers.

The Board Reverses The Regional Director’s Determination

Applying its revived joint employer standard, the Board found that BFI constituted a joint employer. Even though BFI was not directly responsible, it exercised “significant control” over hiring, firing and discipline by virtue of the parties’ Agreement. Moreover, the Board noted that, by virtue of its unilateral control over the operation of its facilities, it also had control over the supervision, direction and hours of work of Leadpoint’s employees. Likewise, by virtue of the agreed-upon wage ceiling, the Board found that BFI exercised control over Leadpoint’s employees’ wages.

Take Aways From And Potential Impact Of Browning-Ferris

It is unknown whether the Browning-Ferris decision will be appealed. However, unless and until it is potentially narrowed or overturned by the Supreme Court, the case may have significant consequences for companies that rely on staffing agencies or contractors. When a company reserves significant authority with regard to the workers of a staffing agency or contractor, the company risks being deemed a joint employer of those workers. The company would then have a duty to bargain with a union representing those workers and could be subject to unfair labor practice charges for alleged NLRA violations. The Browning-Ferris decision could also have implications for franchisors if they retain significant control over their franchisees (and franchisee employees).

For now, the Browning-Ferris decision only has implications for an employer’s obligations and exposures under the NLRA. It does not have the force of law in other contexts, such as wage and hour disputes and claims of discrimination under other state and federal laws. However, it is conceivable that some courts may find the decision persuasive and appropriate for application in other legal contexts. In that event, every company that has labor supplied through subcontractors could now face vastly expanded liability under those other laws.

In light of the Browning-Ferris decision, companies that rely on supplemental workforces and franchise agreements should examine their current arrangements carefully.

CA Paid Sick Leave: DLSE Opinion Letter Not a Cure-all

Last week, on August 7, 2015, the DLSE issued its first opinion letter interpreting the Healthy Workplaces, Healthy Families Act of 2014 (“Paid Sick Leave Law”), which is codified at California Labor Code section 245 et. seq. and which was recently amended by AB 304, effective July 13, 2015.

As most California employers should now be aware, the Paid Sick Leave Law generally requires employers to provide three days or 24 hours of paid sick leave to an employee who works at least 30 days within a year in California, including part-time, per diem, and temporary employees. Employers may either grant the paid leave up front or, alternatively, allow employees to accrue the paid time off. The question presented to DLSE was how to address the sick leave requirement for an employee who regularly works a ten-hour shift where the employer has opted to follow the front-loading method. Does the employer have to front load thirty hours (the equivalent of that employee’s three days)? Or, rather, does the employer have to front load 24 hours (as referenced in the statute, and because a “day” is typically eight hours)?

The DLSE responded in a three page letter, in which it opined that the Paid Sick Leave Law requires an employer to front load thirty hours in this ten-hour a day scenario. The DLSE reasoned that the Paid Sick Leave Law establishes minimum standards for paid sick leave, and defines “paid sick days” as “time that is compensated at the same wage as the employee normally earns during regular work hours.” (emphasis in original). In order to give effect to this minimum labor standard for all employees, including those that may work more or less than eight hours per day, the language necessarily must be interpreted to require 24 hours or three days, “whichever is more for an employee.” (emphasis in original).

So, with respect to an employee who regularly works a ten hour day, a paid sick day would be the normal full day and the employer with a ten hour per day employee must therefore front load thirty hours in the beginning of the 12 month period. However, an employee who regularly works a six hour day would also be entitled to the minimum amount of leave required under the Paid Sick Leave Law, which for him or her would be 24 hours (e.g., the greater of 24 hours or three days).

The DLSE also clarified that the same analysis would apply when the employer elects to proceed under an accrual system. Under the Paid Sick Leave Law, an employer must allow the employee to accrue up to six days or 48 hours, though the employer may limit the time off to three days or 24 hours. However, in the case of an employee who regularly works a ten hour day, if an employee has accrued 30 hours in his or her sick leave bank, then the employee must be able to use and be paid for the full three days at 10 hours per day. Similarly, the employee who works six hours per day must be permitted to take a minimum of 24 hours of paid sick leave, not only three part-time days.

So far so good, but what happens when the employee normally earns daily or weekly overtime? For example, employers who have not adopted an alternative work week schedule may normally pay overtime to employees who work over eight hours in a day. Some employers may regularly schedule employees for six-day work weeks and pay overtime on the sixth day. If the employee is to be paid “at the same wage as the employee normally earns during regular work hours,” does that include overtime wages? What happens when some employers adjust the shift schedules of employees during their busy season (assume 3 months out of the year) from a regular 8 hour day to a 9 or 10 hour day? How much paid sick leave should the employer provide to such employees if, for instance, the employer has implemented the front load method? We expect more DLSE answers in the weeks and months to come as DLSE is revising their FAQ section of their website. Please check with us for further updates.

Right to Marry But Not to Work? Pennsylvania Catholic School Terminates Gay Married Teacher

Last month, Waldron Mercy Academy, a K-8 Catholic school located in Merion, Pennsylvania, fired Margie Winters from her position as Director of Religious Education, a job she had held for 8 years. According to Ms. Winters, her employment contract was not renewed because she is gay and married to her partner. A few days later, the United States Supreme Court issued its landmark opinion in Obergefell v. Hodges, in which it held that same-sex couples may exercise the fundamental right to marry. The majority opinion in Obergefell stated that religious believers may continue to “advocate” and “teach” their views of marriage, but did not however, address or reverse the precedent established by the Supreme Court in Hosanna-Tabor Evangelical Lutheran Church and School v. Equal Employment Opportunity Commission, in which the Supreme Court held, in an unrelated context, that churches have the right to make employment decisions free from government interference, including compliance with anti-discrimination laws.

Indeed, in an e-mail to parents, the principal of Waldron Mercy Academy advised that Ms. Winters was no longer working at the school, and reiterated the school’s dedication to Catholicism, stating: “Many of us accept life choices that contradict current church teachings . . . but to continue as a Catholic school, Waldron Mercy must comply with those teachings.”

Based on the 2012 precedent established in Hosanna, it is not clear that Ms. Winter has any valid legal challenge to Waldron Mercy’s termination decision, which would violate the laws of many states, if a non-religious organization were involved. Currently, twenty-one states and the District of Columbia have laws prohibiting employment discrimination based on sexual orientation, and 18 states and D.C. also prohibit discrimination based on gender identity. And, Lower Merion Township, the home of Waldron Mercy Academy, also has a local antidiscrimination ordinance which provides that it is the public policy of Lower Merion Township to foster the employment of all individuals in accordance with their fullest capacities regardless of a person’s sexual orientation, gender identity or gender expression. The ordinance further provides, however, that it is not unlawful for religious institutions that are “not supported in whole or in part by governmental appropriations” to refuse to hire or employ an individual on the basis of actual or perceived sexual orientation, gender identity or gender expression.

In Hosanna, still the leading case on the application of anti-discrimination laws to religious organizations, the Court barred the Plaintiff from bringing an employment discrimination suit against the school. The plaintiff had been promoted to a “called” teacher at the “Christ-centered education” school, but had taken leave after being diagnosed with narcolepsy. After her leave, school officials refused to hire her back. Plaintiff argued that she was fired from the school in violation of the ADA and Michigan state law. The Supreme Court found that the First Amendment’s “ministerial exception,” (which exempts religious organization from anti-discrimination laws) applied because the school held the Plaintiff out as a minister, and because her job duties reflected a role in conveying the church’s message and carrying out its religious mission.

Thus, even with the passing of numerous state and local ordinances and the Supreme Court’s landmark decision in Obergefell v. Hodges, it appears for the moment that religious institutions will continue to be exempt from statutes prohibiting employment discrimination on the basis of sexual orientation and/or gender identity and that certain employees of such religious institutions may be barred from bringing suit against the organizations. In Hosanna, the Supreme Court stated that the “ministerial exception” should apply to any employee “who leads a religious organization, conducts worship services or important religious ceremonies or rituals, or serves as a messenger or teacher of its faith.” The recent termination at Waldron Mercy and the Obergefell decision are a reminder to employers operating religious institutions that significant questions may remain about the scope and proper application of the ministerial exception.

Amendments to California’s New Paid Sick Leave Law

As California employers, and those non-California employers with employees in California, know by now, as of July 1, 2015, such employers were required to provide paid sick leave to any employee who works 30 days or more within a year under the Healthy Workplaces, Healthy Families Act of 2014 (the “HWHFA”).

The HWHFA provides, among other things, that eligible employees are entitled to paid sick days for prescribed purposes to be accrued at a rate of no less than one hour for every 30 hours worked, or alternatively, be provided at least 3 days or 24 hours on a lump sum method. The accrual rate method imposed by the HWHFA created several challenges for employers who were already providing paid sick leave, albeit under a different accrual method, such as per pay period, per month, per week etc. To provide some flexibility to employers in complying with the HWHFA and provide further clarifications to the HWHFA, on July 13, 2015, Governor Brown signed into law AB 304 to amend the HWHFA. The amendments are effective immediately and a summary of its key provisions are as follows:

1. An employer is now able to provide for employee sick leave accrual on a basis other than one hour for each 30 hours worked, provided that the accrual is on a regular basis and the employee will have 24 hours of accrued sick leave available by the 120th calendar day of employment, each calendar year, or each 12-month period. This means that employers no longer have the obligation to track actual hours worked (i.e., one hour for each 30 hours worked), on the condition that the employee accrues 24 hours of leave within the first 4 months of employment.

2. An employer is able to keep their pre-January 1, 2015 paid sick leave and/or paid time off (PTO) policies as long as:

a. these policies existed prior to January 1, 2015;

b. these policies provide for time off for the same purposes as specified in the HWHFA (including carry-over and use requirements);

c. these policies continue to provide an employee paid sick leave and/or PTO on an accrual and on a regular basis so that an employee, (including an employee hired into that class after January 1, 2015):

(i) has no less than one day (or 8 hours) of accrued paid sick leave or PTO within 3 months of each year of employment of each calendar year, or each 12-month period; and

(ii) was eligible to earn at least 3 days (or 24 hours) of paid sick leave or PTO within 9 months of each year of employment.

3. If an employer modifies the accrual method used in the policy it had in place prior to January 1, 2015, the employer must comply with the one hour for each 30 hours worked accrual method, or alternatively, provide for the lump sum method.

4. The amendments provide for a new method for calculating the rate of pay:

a. For non-exempt employees with different hourly rates, an employer now has an option on how to pay sick days. Paid sick time for nonexempt employees shall be calculated using either of the following two options:

(i) in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek; or

(ii) by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

b. For exempt employees, paid sick time must be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

5. An employee must work for the same employer for at least 30 days in California in order to qualify for paid sick leave.

6. Employers who provide unlimited sick leave to their employees can satisfy notice requirements by indicating “unlimited” on the employee’s itemized wage statement.

7. The provisions of the original text of the HWHFA required an employer to reinstate accrued paid sick days to returning employees within one year of termination, resignation, or separation from employment. This requirement is unchanged by the amendments. However, if an employer paid out accrued PTO to an employee upon termination, resignation, or separation from employment, an employer is not required to reinstate accrued PTO if the employee is rehired within one year.

8. An employer no longer has the obligation to inquire into or record the purposes for which an employee uses sick leave or paid time off. However, as provided under the original text of the HWHFA, an employer is still required to keep records for three years documenting the hours worked and paid sick days accrued and used by an employee and to make those records available to the Labor Commissioner upon request.

9. The original text of the HWHFA contained an exemption for employees in the construction industry covered by a valid collective bargaining agreement (which met certain requirements). The HWHFA previously defined “employee in the construction” to mean an employee performing onsite work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work …”. (Emphasis added). The amendments removed the term “onsite”, which now broadens the exemption for employees in the construction industry because the focus is no longer on where the work is performed but rather on the work that employee is assigned to perform.

10. For employers governed by Wage Orders 11 (Broadcasting Industry) and 12 (Motion Picture Industry), the amendments delay to January 21, 2016 the requirements that these covered employers provide to their employees written notice setting forth the amount of paid sick leave and/or PTO available on each wage statement or other document on each pay date.

While most of the provisions of the amendments are welcomed news to employers because the amendments provide some flexibility and much needed clarifications, the amendments may perhaps be a little too late especially for those employers who expended significant resources to modify their PTO policies to be compliant as of July 1, 2015.

Non-compliance with the HWHFA and its amendments carry significant liabilities, and as such, employers should consult with legal counsel to ensure their paid sick leave and/or PTO policies are compliant.

Is Social Media Eroding Nonsolicitation Agreements?

Are former employees in violation of non-solicitation agreements by using social media to contact their employer’s customers or co-workers? Florham Park Counsel, Lawrence Del Rossi, recently published an article in Law360 discussing the emerging trends regarding the role that social media plays in restrictive covenant case. He also provides practical guidance to employment law practitioners.

Read “Is Social Media Eroding Nonsolicitation Agreements?” here.

New Guidance Regarding Employee Handbooks Part Six: Ensuring Conflict of Interest Rules Don’t Inhibit Protected Concerted Activity

This post is the sixth in a series providing guidance on federal rules regarding permissible and impermissible employer handbook policies and rules. See Guidance Regarding Confidentiality Rules Here, Employee Conduct Rules, Rules Related to Company Logos, Copyright, and Trademark, Rules Restricting Photography and Recording and Rules Restricting Employees From Leaving Work. While the recent guidance was issued by the National Labor Relations Board (NLRB), (found here) this guidance is applicable to both unionized and non-unionized employers. The National Labor Relations Act (NLRA) restricts all employers from issuing policies or rules – even if well-intentioned – that inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.

Conflict of Interest Rules: A Balancing Act

Naturally, all employers would like to prevent their employees from engaging in activities that are in conflict with the employers’ interest. However, there is a great deal of potentially conflicting employee activity that is protected by Section 7 of the NLRA, such as protesting in front of the company, organizing a boycott, or soliciting support for a union during non-work time. Accordingly, if an employer’s conflict-of-interest rules can reasonably be read to prohibit protected concerted activity, the NLRB will view them with great suspicion.

The NLRB provides a couple examples of conflict-of-interest rules that were found to be impermissibly overbroad. These include:

• Policy banning employees from engaging in “any action” that is “not in the best interest of” the employer.

• Policy providing that, “[b]ecause you are now working in one of [employer’s] restaurants, it is important to realize that you have an up close and personal look at our business every day. With this in mind, you should recognize your responsibility to avoid any conflict between your personal interests and those of the Company. A conflict of interest occurs when our personal interests interfere – or appear to interfere – with our ability to make sound business decisions on behalf of [the employer].”

Examples of Permissible Conflict of Interest Rules

The NLRB advises that employers ensure their conflict-of-interest rules do not impinge upon protected Section 7 activity by including specific examples of prohibited behavior. The NLRB explains that when a rule clarifies that it is limited to the employer’s legitimate business interests, employees will understand that it is not banning Section 7 activity.

Some examples of lawful conflict-of-interest rules include:

• A policy that provided two pages of examples of what was considered a conflict of interest, instructing employees to do such things as “avoid outside employment with a[n employer] customer, supplier, or competitor, or having a significant financial interest with one of these entities.”

• Rules prohibiting employees from giving, offering, or promising, “directly or indirectly, anything of value to any representative” of “any person, firm, corporation, or government agency that sells or provides a service to, purchases from, or competes with” the employer.

• Rules in a section of a handbook dealing entirely with business ethics banning employees from “activities, investments or associations that compete with the Company, interferes with one’s judgment concerning the Company’s best interests, or exploits one’s position with the Company for personal gains.”

In sum, employers should take great care to ensure their conflict-of-interest rules provide sufficient clarifying examples and context to indicate that such rules are intended only to protect the employer’s legitimate business interests, and not to inhibit activities protected by Section 7.