On January 25, 2019, the National Labor Relations Board issued a decision clarifying the test for determining whether workers are independent contractors or employees. In SuperShuttle DFW, Inc., the Board reversed its 2014 decision in FedEx Home Delivery where it revised the traditional common-law test for determining whether workers are employees or independent contractors. Prior to 2014, the test analyzed whether common-law factors set forth by the Supreme Court showed that the workers had significant entrepreneurial opportunity for gain or loss.
On January 11, 2019, in Alstate Maintenance, LLC, the National Labor Relations Board issued a decision that draws a clear distinction between employee conduct that constitutes protected "concerted activities" under the National Labor Relations Act and employee conduct that constitutes unprotected individual action.
Under Section 7 of the NLRA, employees have a right to engage in "concerted activities for the purpose of collective bargaining or other mutual aid or protection." Over the years, as the Board majority in Alstate Maintenance pointed out, the Board has issued decisions that "blurred the distinction" between protected group action and unprotected individual action. The Board majority characterized its Alstate Maintenance decision as the beginning of the process of restoring that distinction "by overruling conflicting precedent that erroneously shields individual action and thereby undermines congressional intent to limit the protection afforded under the Act to concerted activity for the purpose of mutual aid or protection."
On February 26, 2018, the National Labor Relations Board issued an order vacating its decision in Hy-Brand Industrial Contractors. As we recently reported on this blog, the Board's Hy-Brand decision reversed its 2015 Browning-Ferris decision, which had significantly changed the legal standard for determining joint employer status under the National Labor Relations Act.
Yesterday afternoon, SEIU Local 500 made a request to Region Five of the National Labor Relations Board ("NLRB") to withdraw its petition to represent a bargaining unit of Resident Advisors ("RAs") at George Washington University. The Regional Director of NLRB Region Five granted the request. So, the election to determine whether the RAs wished to join a union (which was scheduled to occur today), has been canceled. At least for now, this means that the issue of whether RAs at institutions of higher education are employees who are entitled to unionize will not be presented to the full NLRB or a federal appellate court for a decision.
On April 21, 2017, the Acting Regional Director of Region Five of the National Labor Relations Board ("NLRB") issued a Decision and Direction of Election holding that Resident Advisors ("RAs") at George Washington University are employees under the National Labor Relations Act ("NLRA") who are entitled to vote in a union representation election. This decision comes on the heels of the NLRB's recent decision in Columbia University, holding that graduate and undergraduate student assistants are employees who are also entitled to unionize. This ruling by NLRB Region Five could potentially open the door for unions to organize RAs at other private institutions of higher education.
The representation petition at George Washington was filed by Local 500 of the Service Employees International Union ("SEIU"). SEIU sought to represent a bargaining unit of all full-time and regular part-time RAs at George Washington, which consisted of approximately 110 individuals. As a condition of becoming an RA, an individual must be a full-time undergraduate student enrolled in a degree-granting program, and must have completed his or her first year of studies. RAs at George Washington are expected to be in good academic and judicial standing. George Washington argued that RAs should not be considered "employees" under the NLRA for two principal reasons: (1) its requirement for RAs to be undergraduate students is necessary for the RAs to develop a "peer-to-peer mentoring relationship" with their assigned residents; and (2) RAs are an important part of George Washington's residence life program, which is an extension of its academic program.
The Acting Regional Director of NLRB Region Five rejected George Washington's arguments after a hearing on these issues, finding that the RAs have an employment relationship with the University. The Acting Regional Director determined that RAs perform services for the University, are subject to the University's control, and perform their services in exchange for payment. The RAs at George Washington receive a stipend of $2,500 for the academic year, less applicable tax withholdings, as well as free on-campus housing valued at $12,665 per year. The RA position description at George Washington sets forth four main categories of job duties, along with a list of particular expectations for each category of job duties. The Acting Regional Director also found that RAs are subject to discipline, up to termination, if they fail to comply with George Washington's policies or if they fail to remain in good academic or judicial standing. One particular piece of evidence that the Acting Regional Director found to be significant was that RAs at George Washington are required to sign a four-page document entitled "Resident Advisor Employment Agreement," which describes the University's "expectations and employment terms" for RAs.
According to the Acting Regional Director, the mere fact that being an RA might be part of the educational experience of an undergraduate student at George Washington does not preclude a determination that the relationship is principally an economic relationship. The Acting Regional Director wrote: "Employment experiences can simultaneously be educational or part of one's personal development, yet they nonetheless retain an indispensable economic core."
A representation election will be scheduled in the coming weeks for the RAs at George Washington to determine if they wish to be represented by SEIU for purposes of collective bargaining. George Washington has the right to seek review by the NLRB and potentially by a federal appellate court if SEIU wins the election. At this point, two of the three occupied seats on the NLRB are filled by Democratic appointees who are pro-union. There are also two vacancies on the NLRB. When those vacancies are filled by President Trump, it is expected that the NLRB will have its first Republican majority in approximately nine years. Therefore, this ruling by NLRB Region Five may not be the last word on this important issue for institutions of higher education.
On August 26, 2016, the National Labor Relations Board issued a decision in Total Security Management Illinois 1, LLC, in which it held that an employer who is engaged in negotiations for an initial collective bargaining agreement with a recently certified union must provide the union with notice and an opportunity to bargain prior to imposing discipline on an employee within the bargaining unit. By doing so, the NLRB effectively reinstated its prior decision in Alan Ritchey, Inc., which had previously been invalidated by the Supreme Court in NLRB v. Noel Canning.
Prior to Alan Ritchey, employers had been able to continue to impose discipline consistently with past practices while initial negotiations with a recently certified union were ongoing, and they were able to do so without providing notice and an opportunity to bargain. Employers can no longer comfortably do so without risking a violation of the National Labor Relations Act. Instead, employers who are engaged in negotiations with a recently certified union will need to provide the union with notice and an opportunity to bargain over any discipline that will materially alter an employee’s terms of employment (i.e., termination, suspension, demotion, etc.).
However, the duty to bargain will not apply to discipline that does not materially alter the terms of employment (i.e., a verbal or written warning). The obligation also does not apply if the employer and the recently certified union have separately agreed on a disciplinary process.
Employers who are in the process of negotiating an initial collective bargaining agreement with a recently certified union should be mindful of this obligation going forward.
The National Labor Relations Board, in Columbia University, issued a 3-1 decision yesterday holding that graduate, and undergraduate, student assistants are common law employees within the meaning of the National Labor Relations Act and therefore are eligible to organize and bargain collectively under federal labor law. In so doing, the Board overruled its prior determination in Brown University. Board Member Miscimarra wrote a lengthy dissent, arguing that the educational nature of the relationship between student and educational institution should dictate that student assistants are not employees and therefore they should not be eligible to organize and bargain collectively.
After much speculation, and following an invitation for briefing in December 2015, the NLRB rejected the Brown holding that graduate assistants cannot be statutory employees because they are “primarily students and have a primarily educational, not economic, relationship with their university.” The Board first noted that it has the statutory authority to treat student assistants as statutory employees. The Board applied a common law test and indicated that when student assistants perform “work” at the direction of a college or university, for which they are compensated, a common law employment relationship will be deemed to exist and the students will be eligible to organize and bargain collectively.
The Board indicated that the new test will apply to all student assistants, including graduate assistants engaged in research funded by external grants (and subject to the conditions of those grants). The Board also determined that the petitioned-for bargaining unit at Columbia -- which included graduate students, terminal Master’s degree students, and undergraduate students -- constituted an appropriate unit and that none of the petitioned-for classifications consisted of temporary employees who should be excluded from the unit. Finally, the Board remanded the case to the Regional Director for consideration of whether student assistants not currently performing their assistant duties should be eligible to vote based upon a continuing expectation of future common law employment.
The Board’s decision was long the subject of speculation and has been anticipated by many commentators. In the wake of the decision, colleges and universities should anticipate increased organizing activity on their campuses and will have the obligation to bargain with units comprised of student assistants if they are recognized after an NLRB election. Given the breadth of the Board’s decision, and the potential units that could be petitioned for by unions, this decision has the potential to represent a significant challenge if broad units of student assistants are voted in and certified under NLRB procedures.
Temporary, contracted-for, or leased employees who are employed by a “supplier,” but are assigned to work at another employer’s premises, currently comprise as much as 5% of American workers, and are among the fastest growing sectors. Noting this trend, the National Labor Relations Board, in its Miller & Anderson, Inc. decision this week, announced a new standard that makes it much easier for unions to organize these temporary employees working at another employer’s facility; and further, allows them to be organized in a single bargaining unit together with the host employer’s employees who perform similar functions, if both groups share a “community of interest.” The case addressed a petition by the Sheet Metal Workers for a union election among a group of (a) Miller & Anderson’s workers at its Pennsylvania construction site, together with (b) a second group of sheet metal workers employed by a separate company, Tradesmen International, who had supplied additional workers at the site on a contract basis. Under the Board’s newly-liberalized “joint employer” standards promulgated in its recent Browning-Ferris decision, Miller & Anderson was deemed to be the joint employer of its own sheet metal workers on the site and also those provided by contract with Tradesmen International. By contrast, however, Tradesmen International had no employment relationship at all with the Miller & Anderson employees. Both groups -- and both employers -- were included by the Board in a single unit, on the ground that they shared a “community of interest” since they worked side-by-side under common working conditions. Thus, the Board’s decision allowed a single bargaining unit of employees even where there would be two different employers at the bargaining table -- with potentially differing interests -- without the consent of both employers. Further, it authorized for the first time a bargaining unit with two employers, where one (the “supplier” of temporary help) employed only a portion of the unit, but had no employment relationship with the remainder. The Board’s majority, however, brushed aside concerns raised by dissenting Board Member Miscimarra that this result would be “unworkable” and lead to “confusion and instability,” holding instead that each employer will be expected to bargain over “jointly employed workers’ terms and conditions which it possesses the authority to control.” This decision should be viewed together with the Board’s newly-expanded joint-employer standards articulated in Browning-Ferris (holding that “indirect” or “potential” control over terms and conditions suffices to show joint employer status; “actual” or “immediate” exercise of control are no longer required). Together, these cases allow proliferation of combined units including not only employees directly employed by an employer, but also temps performing similar functions, in circumstances that may involve only indirect control by the host company, or incidental collaboration with the temp agency. The decision appears to be yet another element of the Board’s program to broaden opportunities for unionization. At a minimum, employers who are supplied by agencies with temporary, contract or leased personnel -- and agencies who supply these personnel -- must be wary that these arrangements are now targets for union organizing, and that the user of these personnel is more likely to be viewed as jointly employing both groups. Employers using these personnel, and agencies who supply them, should closely review their contractual arrangements, and the level of control assigned to each employer in practice, with these issues in mind.
Last month, the United States Court of Appeals for the Fifth Circuit affirmed the lower court’s decision upholding the National Labor Relations Board’s “quickie” election rule. As we previously reported, the final rule, among other things, significantly reduces the time period between the filing of an election petition to the date of the election, narrows the issues that may be raised at a pre-election hearing, and requires disclosure of employees’ personal information, including personal telephone numbers and e-mail addresses. The rule was effective as of April 14, 2015. The Associated Builders and Contractors of Texas, Inc. (“ABC”) mounted the challenge to the rule’s lawfulness, asserting that the Board both exceeded its authority under the National Labor Relations Act (the “Act”) and violated the Administrative Procedure Act. ABC first argued that the rule unlawfully postpones the resolution of certain voter eligibility issues until after the election is complete, in contravention of the Act. The Fifth Circuit rejected this argument, reasoning that under the plain language of the Act the purpose of the pre-election hearing is to determine whether a question of representation exists -- not to resolve all voter eligibility issues. Next, ABC contended that the rule arbitrarily and capriciously requires the disclosure of employees’ personal information to the petitioning union in violation of the Administrative Procedure Act. The Fifth Circuit found that the Board had sufficiently considered employees’ privacy concerns as well as the burden on employers when it expanded the disclosure requirement, and thus, the requirement was not arbitrary and capricious in violation of the Administrative Procedure Act. ABC also challenged the rule on the grounds that faster elections interfere with an employer’s right to free speech during organizing campaigns. In rejecting this argument, the Fifth Circuit found that there is no language in the Act which requires a specified waiting period between the filing of the petition and the date of the election. Additionally, the Fifth Circuit noted that the Board’s Regional Directors, who are responsible for setting the date of the election, are to consider the interests of both parties when setting an election date, which may include an employer’s opportunity to communicate its views concerning unionization to its employees. Now that the Fifth Circuit has joined an earlier decision from the United States District Court for the District of Columbia upholding the Board’s “quickie” election rule, employers must be prepared to respond before an election petition is even filed. The time employers have from date of petition to date of election has been effectively cut in half (from about 6 weeks to about 3 weeks), making a successful counter campaign extremely difficult to mount without advance planning and preparation. We recommend regular supervisory training and the creation of a tentative campaign blueprint that is ready for immediate activation in the event of a union petition. As before, an employer’s best opportunity to remain union-free comes from early awareness of organizing activity and an effective pre-petition campaign that discourages employees from signing the number of union authorization cards needed for the union to trigger an NLRB election.
In Whole Foods Market, Inc., the National Labor Relations Board, in a 2-1 decision, held that Whole Foods' rules prohibiting the recording of conversations in the workplace violated Section 8(a)(1) of the National Labor Relations Act. The two rules that were found to be unlawful were nearly identical. Both appeared in the company's General Information Guide, a guide that applied to all employees. The first rule prohibited the recording of company meetings without prior approval from store management, and the second rule prohibited all recording in the workplace without similar prior approval. The stated purpose of both rules (as set forth in the Guide) was to encourage open conversation and dialogue, and to eliminate the chilling effect that may exist when someone is concerned a conversation is being secretly recorded. Contrary to the stated purpose of the rules (to encourage open and honest communication), the Board majority instead found that such rules would reasonably be interpreted by employees to prohibit them from engaging in protected Section 7 activity. The Board majority reasoned that such rules would unlawfully prohibit employees from engaging in Section 7 activity such as (1) recording images of protected picketing, (2) documenting hazardous working conditions, or (3) documenting and publicizing various issues relating to terms and conditions of employment. The Board majority rejected the employer’s (and the dissent’s) contention that the stated intent of the rules (to encourage open and honest communications in the workplace without fear of surreptitious recordings) constituted a valid overriding employer interest to justify the rules. So, it is clear that the current Board will likely find no-recording rules in the workplace to be a violation of the NLRA unless the employer can establish a valid overriding interest to justify such rules. Considering the current pro-union makeup of the Board, establishing such an overriding interest will likely be difficult, and such rules will be aggressively scrutinized. Nonetheless, certain narrowly tailored restrictions supported by valid business justifications may be upheld by the Board. For example, a rule prohibiting the recording of meetings in which confidential information or trade secrets are discussed, or a rule prohibiting the recording of conversations involving private client or patient information, may be found to be lawful. However, at this point, employers should be wary of imposing broad no-recording rules in the workplace. Employers may require employees to follow applicable state or federal laws regarding secret recordings. The impact of an employer's ability to impose this restriction is limited in New York, where an individual may lawfully record a conversation as long as the individual doing the recording is a party to the conversation. However, an employer's ability to impose this restriction would have a significant impact in states such as Massachusetts and California, where the law requires that all parties to a conversation must consent to the recording of the conversation. The Board's decision in the Whole Foods case may not necessarily be the last word on this issue, because the company has appealed the decision to the Second Circuit Court of Appeals, which may be more sympathetic to the valid business justification for the company's no-recording rules. However, it may be worthwhile for employers to consider whether they currently have policies in their employee handbooks that prohibit recordings in the workplace, and if so, whether those policies should be revised. Employers should consult with legal counsel to assess the potential valid business justifications for the policies and to review any recording laws that may be applicable to employees in particular locations. Both the valid business justifications and any legal restrictions on recordings in the workplace should be expressly stated in the policies.
Perhaps it is the end of racing season in Saratoga, but the federal employment agencies are certainly looking to hit the trifecta against independent contractors, franchisors, parent companies, and similar entities under the guise of expanding the definitions of employer and employment.
First, a little background: on April 28, 2014, the U.S. Senate confirmed David Weil as the new head of the U.S. Department of Labor’s Wage and Hour Division. Before he was confirmed, Weil had published a book entitled The Fissured Workplace, a dense lament on the perceived evils of independent contracting and franchising, and companies that Weil claims attempt to "have it both ways" by not bearing responsibility for the workers from whom they ultimately benefit by virtue of the work performed. It was thus not unexpected that Weil would seek to remedy those perceived evils during his tenure; however, the extent to which this philosophy has reached other agencies is surprising.
Fast-forward to July 2015, during which Administrator Weil issued an Interpretation turning the classic test for independent contractor status on its head. The central tenet used to be control -- does the company set the worker's hours, have the power to discipline the worker, supervise and direct the worker, etc., or instead does the company simply give the worker the contours of the job, and pay contingent on the acceptability of the work? The new Administrator’s Interpretation, however, focuses on the "economic realities" of the work arrangement, and whether the worker is "economically dependent" on the company. Most workers have some dependence on the source of the income, and therefore unless a worker has multiple sources of income to demonstrate that he or she is truly in business for himself or herself, many people who currently consider themselves to be independent contractors are now employees in the eyes of the Wage and Hour Division. As Weil puts it in his interpretation: "Thus, applying the economic realities test in view of the expansive definition of 'employ' under the Act, most workers are employees under the FLSA."
But the Wage and Hour Division is not the only agency to get into the act. On August 27, the National Labor Relations Board issued a controversial decision in the Browning-Ferris case, basically holding that a staffing agency, franchisor, or contractor that reserves the right to make decisions affecting a worker’s employment, even if the entity does not actually exercise that right, will likely be considered a joint employer. In short, the NLRB is also seeking to follow Weil’s lead and fuse “the fissured workplace” to hold contractors and other types of entities responsible for possible employment violations under the guise of joint employment.
Not to be outdone, OSHA is going for the trifecta. Late last month, the International Franchise Association disclosed that it is receiving reports from its members that OSHA investigators are seeking information and documents during inspections to tie franchisors into those inspections in order to cite them as employers along with franchisees. The IFA is concerned that OSHA is (at the behest of unions such as SEIU) looking to simply treat franchisors as employers regardless of the details of a franchisor-franchisee relationship. Indeed, the IFA obtained a copy of an internal OSHA memo that shows that OSHA is looking to follow the WHD and NLRB’s lead. The memo states, in part:
"Issue Presented for OSHA:Whether for purposes of the OSH Act, a joint employment relationship can be found between the franchisor (corporate entity) and the franchisee so that both entities are liable as employers under the OSH Act.Ultimate determination will be reached based on factual information about the relationship between the franchisor and franchisee over the terms and conditions of employment. While the franchisor and the franchisee may appear to be separate and independent employers, a joint employer standard may apply where the corporate entity exercises direct or indirect control over working conditions, has the unexercised potential to control working conditions or based on the economic realities. As a general matter, two entities will be determined to be joint employers when they share or codetermine those matters governing the essential terms and conditions of employment and the putative joint employer meaningfully affects the matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction."
The IFA is seeking more information from OSHA via the Freedom of Information Act, and its full statement can be found here.
In short, any entity with franchisees, independent contractors, or other vendors should be well aware that any investigation or inspection by the federal agencies tasked with enforcement of labor and employment laws -- the National Labor Relations Board, the U.S. Department of Labor’s Wage and Hour Division, and now, OSHA -- may seek to expand the investigation or inspection well beyond just the franchisee or contractor inspected, to any franchisor, parent company, or beneficiary of a contract for services.
In Browning-Ferris Industries of California, Inc., the National Labor Relations Board (“NLRB” or “Board”), in a 3-2 decision, expanded who may be considered a joint employer under the National Labor Relations Act (“NLRA” or the “Act”). The Board’s decision significantly lowers the threshold for joint employer status, making it more likely that entities such as staffing agencies, franchisors, and contractors will be considered joint employers under the Act. A joint employer finding is significant because this means that an entity may be subjected to joint bargaining obligations and potential joint liability for unfair labor practices or breaches of collective bargaining agreements. Joint Employer Analysis Before Browning-Ferris Prior to the Board’s decision in Browning-Ferris, the standard for establishing joint employment was that both entities in question had to share the ability to control or co-determine essential terms and conditions of employment. Hiring, firing, supervising, and directing employees were generally considered to be the essential terms and conditions of employment. Board decisions further clarified that the type of control over the essential terms must be direct and immediate, and the alleged employer must have actually exercised that control -- it was not enough that it may have reserved some level of control through a contract. Rather, the control had to be exercised in practice. Joint Employer Analysis After Browning-Ferris The Board significantly modified this approach in Browning-Ferris. The Board’s stated new test, which sounds similar to the old test in words, but not in application, is that:
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 and conditions of employment.
The application of this test is where the Board makes sweeping changes. The Board will now evaluate the evidence to determine whether an alleged employer affects the means or manner of employees’ work and terms of employment, either directly or indirectly. In other words, the control no longer needs to be direct or immediate. Additionally, the Board found that it is not critical that the entity actually exercise such authority so long as it possesses or reserves the right to do so. The Board also expanded on those items found to be “essential terms and conditions” beyond just hiring, terminating, supervising, and directing employees. The Board included such things as dictating the number of workers to be supplied, setting work hours, controlling seniority and approving overtime, and assigning work and determining the manner and method of work performance. In short, the new test makes widespread changes by finding indirect control significant in establishing an employment relationship, not requiring that such control actually be exercised, and including more terms and conditions of employment as relevant in this analysis that were previously not considered to be “essential.” Applying the New Test in Browning-Ferris The issue before the Board in Browning-Ferris was whether Browning-Ferris, which operated a recycling facility, was a joint employer with LeadPoint, a staffing company that supplied employees to perform various work functions at the facility. Under the Board’s old test, it is almost certain there would have been no joint employer finding. LeadPoint set its employees’ schedules, engaged its own human resources manager to work at the Browning-Ferris facility, and had the sole responsibility to discipline, review, evaluate, and terminate its own employees. In addition, LeadPoint employed an Acting On-Site Manager, three shift supervisors, and seven line leads to manage and supervise LeadPoint employees working at the facility. Nonetheless, applying the new test, the Board found sufficient evidence of direct and indirect control (relying on control both exercised and reserved by contract) to support its joint employer finding. The Board relied on the following facts in making its determination: Browning-Ferris gave LeadPoint supervisors fairly detailed directives concerning employee performance that the LeadPoint supervisors then communicated to their employees; Browning-Ferris set some conditions on hiring that LeadPoint was contractually bound to follow (must have appropriate qualifications and meet or exceed Browning’s own standard selection procedures and tests); Browning-Ferris had the authority to discontinue the use of LeadPoint employees; Browning-Ferris determined when overtime was necessary; and Browning-Ferris' contract with Leadpoint prohibited LeadPoint from paying its employees more than Browning-Ferris paid its own employees who performed comparable work. Takeaways and Potential Implications The primary change resulting from Browning-Ferris is that indirect control over terms and conditions of employment may now be enough to create a joint employment relationship. Unfortunately, the Board’s decision fails to provide any real clarity on just how much indirect control may be sufficient to create such a relationship. The two dissenting members take issue with how broad the majority’s decision appears to be, stating that “the number of contractual relationships now potentially encompassed within the majority’s new standard appears to be virtually unlimited.” The dissent then lists the following examples:
Insurance companies that require employers to take certain actions with employees in order to comply with policy requirements for safety, security, health, etc.;
Franchisors;
Banks or other lenders whose financing terms may require certain performance measurements;
Any company that negotiates specific quality or product requirements;
Any company that grants access to its facilities for a contractor to perform services there, and then continuously regulates the contractor’s access to the property for the duration of the contract;
Any company that is concerned about the quality of the contracted services; and
Consumers or small businesses who dictate times, manner, and some methods of performance of contractors.
The dissent’s list showcases the potential reach of the Board’s new test and the potential to significantly alter the landscape of how employment is understood under the NLRA. While employers wait for the Board to issue more decisions further delineating the scope of this test, there are some practical steps employers can take. Employers can revise their contracts to clarify that control over terms and conditions of employment rests with the contractor, use as little detail as possible in directing the work of the contractor, and stay out of all hiring, firing, and wage-related decisions. Alternatively, some employers may choose to wait to make any changes until this decision is eventually challenged in federal court. Employers should discuss with counsel how to best respond to this change. Ultimately, because of the wide array of factual arrangements involving contingent workers, franchisees, and independent contractors, and the reality of business relationships, there will certainly be some situations where letting go of some level of operational control is not a practical option. This must be weighed against the risk of being found to be a joint employer, and carefully evaluated when entering into and reassessing all business relationships.
