1. fisherphillips.com The Changing Landscape of Joint Employer Status In Light of Recent Regulatory Presented by: Melanie L. Webber, Esq. Phone: (440) 838-8800 Email: mwebber@fisherphillips.com

2. fisherphillips.com 440-838-8800 Potential Joint Employer Implications Joint employers may be liable for another’s ULPs and compelled to bargain with union representatives over both sets of employees Joint employers may be liable for another’s violations of other federal and state laws such as Title VII, OSHA, and the FLSA Joint employers may be liable for another’s contractual commitments, including those involving provision of benefits, along with the possibility of IRS tax exposure

3. fisherphillips.com 440-838-8800 Actions by the NLRB Have Changed the Joint Employer Landscape A pair of recent NLRB decisions have broad implications for employers using third party providers, those in the recruiting and staffing industry, and those with franchise relationships BFI Miller & Anderson

4. fisherphillips.com 440-838-8800 Who is Most Impacted? Franchise owners and franchisees Employers that subcontract labor through outside vendors Other businesses that secure workers from third-party staffing agencies Entities that have utilized vendor-provided workers, believing the relationship insulated them against liability and exposure

5. fisherphillips.com 440-838-8800 Historical Factors that Always Raised the Specter of Joint Employer Status Documents governing the relationship between supplier and “user” businesses addressing the right to control, hiring, firing, promoting, and supervising Tracking supplier employees’ working hours, determining their rates of pay, paying them, and maintaining their employment records Giving the supplier’s workers direction concerning the manner in which they perform assigned tasks, handle scheduling, and providing training, tools, or equipment to perform the work

6. fisherphillips.com 440-838-8800 Historical Factors that Always Raised the Specter of Joint Employer Status Requesting vendor to discipline or discharge one of its own workers Lack of on-site supervision to direct vendor workers’ manner of performance In the case of franchise brand owners, instructions and guidance regarding representation of the brand, and how employees should work as directed by the brand owner

7. fisherphillips.com 440-838-8800 NLRB’s 2015 BFI Decision In August of 2015, the NLRB ruled that BFI should be considered a joint employer of employees supplied by third party staffing agency Leadpoint Occurred in context of Teamster petition for representation of Leadpoint employees On heels of subsequent Teamster victory, BFI may now be compelled to bargain side-by-side with Leadpoint over terms and conditions of Leadpoint employees

8. fisherphillips.com 440-838-8800 Facts of BFI and Recent Developments BFI (largely unionized) contracted with Leadpoint (non-union) to supply workers for its cleaning and sorting refuse Service contract identified Leadpoint as sole employer and confined assignment duration to six months at a time Employees were separately supervised BFI has pursued appeal Counter-legislation has been proposed

9. fisherphillips.com 440-838-8800 Union Arguments in BFI Union appealed initial separate employer determination Argued that BFI controlled Leadpoint wages by precluding them from exceeding its own Presented evidence that BFI influenced discipline Argued that BFI controlled hours, work rules and work pace Pointed to service agreement reserving extensive rights

10. fisherphillips.com 440-838-8800 The Majority’s Decision NLRB rejected 30 years of precedent and held it will no longer require joint employer to exercise authority to control terms and conditions, only that it has potential power to indirectly control them (even if unexercised) NLRB noted the diversity of workplace arrangements in today’s economy, their expansion, and frequency with which staffing and subcontracting arrangements exist NLRB estimated such workers compose over 4% of employment, involving at least six million workers, and stated this alone is reason to revisit the standard

11. fisherphillips.com 440-838-8800 “Terms and Conditions” of Employment Beyond hiring, terminating, supervising, and directing employees, the following are essential employment terms and conditions: Wages and hours Number of workers supplied Scheduling, seniority and overtime Assigning work and determining manner of performance

12. fisherphillips.com 440-838-8800 NLRB Rationale “[W]e will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but must also exercise that authority, and do so directly, immediately, and not in a limited and routine manner … the right to control is probative of joint employer status, as is the actual exercise of control, whether direct or indirect” The majority failed to specify which facts were controlling. This leaves a significant amount of lingering uncertainty, to be exercised in the NLRB’s broad discretion going forward

13. fisherphillips.com 440-838-8800 View of the Dissent “No bargaining table is big enough to seat all of the entities that will be potential joint employers under the majority’s new standards.” “The number of contractual relationships now potentially encompassed within the majority’s new standard appears to be virtually unlimited.” Cited examples include Insurance companies, franchisors, banks or other lenders, any company that negotiates quality requirements or grants access to facilities and then regulates contractor access to property for the duration of the contract, and consumers or small businesses who dictate times, manner, and methods of performance of contractors.

14. fisherphillips.com 440-838-8800 Specific Areas That May Be Problematic Retaining right to reject contractor employees Establishing qualifications over contractor’s workforce Imposing minimum testing or related requirements Setting maximum wage scales for contractor employees Precluding contractor from establishing work shifts Imposing proprietary safety/training requirements Directly supervising contractor employees

15. fisherphillips.com 440-838-8800 Other Potential Ramifications Forfeiture of statutory protection from secondary picketing Impediments to replacing contractors for labor disruption Restrictions on setting initial terms of employment Franchising relationships could be threatened Increased risk of being embroiled in misclassification and tax issues governed by a host of additional laws and regulations Joint responsibility for unfair labor practice charges

16. fisherphillips.com 440-838-8800 NLRB’s 2016 Miller & Anderson Decision NLRB recently had opportunity to apply BFI against backdrop of user and supplier employers that were both non-union Union petitioned for combined unit of both groups of employees Overturning twelve years of precedent, NLRB combined both groups into a single bargaining unit even absent consent of their employers Upon finding joint employer status under BFI, the agency turned to an analysis of “community of interests” between employee groups NLRB concluded by upholding petition and conducting single election that commingled ballots of both sets of employees

17. fisherphillips.com 440-838-8800 A See-sawing Standard For decades, the NLRB found units appropriate even where they contained employees jointly employed by another employer In 1990, the agency established a new standard requiring the consent of both employers as a prerequisite to combination In 2000, the NLRB overturned that standard in M.B. Sturgis The agency reversed itself four years later in Oakwood Care Center For the past twelve years, joint employer consent had been required That all changed once again with the Miller & Anderson decision

18. fisherphillips.com 440-838-8800 The NLRB’s Rationale Contingent workers comprise over 4% of national workforce Temporary employment is among fastest growing industry sectors NLRB found it logical to combine even absent employer consent So long as traditional “community of interest” factors are present Common wages, hours, supervision and working conditions Shared or integrated functions, skills and duties Working side-by- side with common interaction/ interchange

19. fisherphillips.com 440-838-8800 Upshot of NLRB Decisions Extent of control need no longer be direct or immediateEntity need not exercise authority if it reserves right to do soIndirect control over employment terms may now be sufficientClarity will have to come from future rulings and determinationsNLRB retains vast discretion to interpret the new standard In the meantime, both employers can be compelled to bargain over two separate sets of employees or one combined grouping Only thing standing in the way is a separate “community of interests”

20. fisherphillips.com 440-838-8800 The DOL Weighs In DOL Wage & Hour Division issued interpretation 2016-1 on 1/20/16 Provides new guidance on joint employer relationships under FLSA Expansively defines concept of joint employment Addresses two separate contexts – “horizontal” and “vertical” Horizontal focuses on relationship between the employers Vertical focuses on employee’s relationship with the employers

21. fisherphillips.com 440-838-8800 “Horizontal” Joint Employment Where employers are sufficiently connected with respect to employee Common ownership or directors Shared operational control Commingled operations Shared supervisory authority Shared clients or customers Documented agreements memorializing such relationships

22. fisherphillips.com 440-838-8800 “Vertical” Joint Employment “Economic realities” test examines relationships with both employers Directing, controlling or supervising work performed Controlling pay, hiring, discipline and other working conditions Duration and permanency of relationship Repetitive/rote nature of the work itself Integral nature of that work to employer’s business Work performed on employer’s premises Performing administrative functions commonly performed by employers

23. fisherphillips.com 440-838-8800 So What Do We Do For Now? Consider revising contracts to clarify extent of control that remains the contractor Consider relinquishing aspects of control that fail to otherwise support business objectives Avoid excess detail in directing contractor’s work Refrain from unnecessary insinuation into hiring, disciplinary, and wage-based decisions If reserved rights are not being exercised – consider eliminating any reference to them

24. fisherphillips.com 440-838-8800 So What Do We Do For Now? Consider potential to exercise control over any employment term Review handbooks and internal policies for potential impact Evaluate contractual obligations and consider how essential it is to retain or potentially exercise control over matters addressed – particularly where it has no plans to do so over life of that contract Decide at highest levels whether risk of joint employer status is necessary to core business goals If so, explore opportunities to reduce community of interest and economic reality factors

25. fisherphillips.com 440-838-8800 Final Questions Presented by: Melanie L. Webber, Esq. Phone: (440) 838-8800 Email: mwebber@fisherphillips.com