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NLRB Decision Presents New Challenges for California Employers

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NLRB Decision Presents New Challenges for California Employers

Sep 16 2015 | in Labor & Employment | by Risa Morris

Employers across the country have recently been presented with an unsettling question:  Who are our employees?   Not surprisingly, the answer is trickier for California employers.

A recent NLRB decision made headlines when it reversed a more than 30-year standard for assessing joint-employer status under the National Labor Relations Act.  The Browning-Ferris Industries of California, 362 NLRB No. 186 (“Browning-Ferris”) decision addressed the question of when an employee may be jointly employed by two (or more) entities.  For decades, the NLRB had taken the position that an entity must have direct control over an employee before it can be considered the worker’s employer.   Recently, the NLRB indicated that it intended to significantly expand the scope of joint employer relationships  (link).   Now, in the Browning-Ferris decision, the NLRB has ruled that an entity can be an employer if it has direct or indirect control over a worker.  The NLRB extended the definition of a joint employer to entities that have the potential to exert control, even if they do not actually act on that authority.

Browning-Ferris arose out of an attempt by the Teamsters to organize workers at a recycling plant.  The workers at issue were employed by one entity, Leadpoint Business Services (“Leadpoint”), but performed work for the recycler, BFI Newby Island Recyclery (“BFI”).   Leadpoint was the workers’ direct employer, and was responsible for hiring, disciplining, firing, training, and paying the employees.  BFI had no direct control over the employees, but did set the speed at which the production line had to move and the hours of operation.  BFI also indirectly controlled the wages of Leadpoint’s employees by requiring that the workers earn no more than its own staff.  It also mandated that Leadpoint workers adhere to BFI’s safety policies and pass a drug test, among other factors.

Under prior law, BFI would not have been considered the workers’ employer because it did not have direct control over their work.  In its new decision, the NLRB greatly expanded the scope of “joint employment,” such that BFI’s indirect control over the workers’ employment was sufficient to deem it a joint employer for the purposes of collective bargaining rights.  In fact, even if BFI had not actually exerted any indirect control over the employees, but instead only had the authority to impose indirect control, it would have been a joint employer under the new definition.

The Browning-Ferris decision will have a major impact on issues that fall within the domain of the NLRB, such as union representation elections and collective bargaining.  Employers of all sizes across the country that use temporary servicing providers, franchisees, sub-contractors, leasing companies, and similar relationships to staff their operations may soon find themselves faced with union organization efforts that would have been previously unthinkable.

But what about other contexts?  Does the NLRB decision universally change the definition of “joint employer?”

The short answer is no.  The Browning-Ferris decision is limited to the context of labor relations.

The longer answer, though, is that time will tell what impact the decision will have.  The NLRB’s new definition will likely migrate in some form to other areas of employment law.   For instance, the Equal Employment Opportunity Commission advocated for an expansion of the NLRB standard, and may well use the new NLRB standard to expand its own definition of joint employment.

For the moment, however, at least some California employers can take some comfort in a California Supreme Court decision issued last year, Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474 (2014).  In that case, the Court considered whether a franchisor was liable under the Fair Employment and Housing Act (FEHA) for sexual harassment allegedly suffered by an employee of a franchisee.   It concluded that a business is only liable as an employer under FEHA when it exerts “a comprehensive and immediate level of ‘day-to-day’ authority over matters such as hiring, firing, direction, supervision, and discipline” of employees.  This standard is considerably narrower than the new NLRB standard, which can find joint employment even when a business does not have comprehensive authority over a worker’s day-to-day schedule.   Also, the standard requires that a franchisor exert actual control, a much stricter requirement than the new NLRB standard, which only requires a joint employer to have the potential to exert control.

In other words, it is now entirely possible that a business might be subject to an unfair labor practice charge filed with the NLRB by a union for actions taken by a franchisee or subcontractor with regard to the franchisee’s or subcontractors employees  – but not face any liability if one of those workers sued for harassment under FEHA.  In this very unusual turn of events, an employee could have fewer rights under California law than provided in another context by federal law.

Given the unsettled nature of the law, it is more important than ever to evaluate relationships with staffing agencies, subcontractors, and any other entities that place workers.  The liability of joint employers will continue to be an area of heavy activity for employment litigation.

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Franchisors Protected in New Ruling by California Supreme Court After NLRB Asserts Determination That Franchisors Are Joint Employers

Oct 01 2014 | in Labor & Employment | by Genevieve Evarts

Two noteworthy developments in past months in the area of employment law issues related to franchise relationships may have franchisors understandably concerned, but there is also reason to be cautiously optimistic in light of a more recent California Supreme Court opinion on the issue.

First, on July 29, 2014, the National Labor Relations Board (NLRB) ruled that McDonald’s (as a franchisor) was a joint employer with its franchisees in connection with labor claims made by employees of its franchisees. In a striking reversal of the approach that is typically taken to determine whether a joint employer relationship exists, the NLRB asserted without explaining its rationale that McDonald’s “and/or” its franchisees will be named as respondents in several pending matters because the Board “determine[d]” that McDonald’s was a joint employer.

In the two-paragraph “ruling,” the NLRB General Counsel stated that the Board found “merit” in 43 of 181 claims filed against McDonald’s and its franchisees regarding alleged conduct in connection with pro-labor protest activities by workers. The fact that the NLRB is taking the position that McDonald’s is a joint employer in these cases suggests that the company could be held responsible for the actions of franchisees and the franchisee’s employees at McDonald’s restaurants nationwide. Not surprisingly, McDonald’s is publicly taking the position that it is not a joint employer and that the ruling represents a significant departure from several decades of legal precedent on the issue. While the next step in this matter will involve either a settlement(s) with McDonald’s or several hearings before administrative law judges regarding the employees’ claims, the issue is likely to be appealed – possibly up to the U.S. Supreme Court – if McDonald’s status as a joint employer in these matters is upheld.

Then, almost exactly one month later on August 28, 2014, the California Supreme Court struck a very different tone in Patterson v. Domino’s Pizza, — Cal. 4th — (Aug. 28, 2014, No. S204543), where it reaffirmed that the traditional “degree of control” analysis governs whether a franchisor could be held vicariously liable for the alleged harassment of one franchisee employee by another (supervisory) franchisee employee.

In Patterson, the Court affirmed the trial court’s original judgment granting the franchisor’s motion for summary judgment and held that “the [franchisor’s] imposition and enforcement of a uniform marketing and operations plan cannot automatically saddle the franchisor with responsibility for employees of the franchisee who injure each other on the job.” Furthermore, the Court stated that “[i]t follows that potential liability on the theories pled here requires that the franchisor exhibit the traditionally understood characteristics of an ‘employer’ or ‘principal,’ i.e.it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.”

The Supreme Court therefore affirmed that it is the “totality of the circumstances” involved in the franchise relationship itself and the degree of “control” that the franchisor exercises over the franchisee that governs whether a franchisor can be liable for the employment or personnel practices of the franchisee. Because the “essentially uncontradicted evidence” in the Patterson case showed that it was the franchisee that made day-to-day decisions regarding hiring, supervision, and disciplining of employees, no employment or agency relationship existed between Domino’s and the franchisee, and Domino’s was therefore not held vicariously liable for the alleged conduct at issue involving sexual harassment in the workplace.

The California Supreme Court’s opinion on this issue will hopefully influence other courts nationwide that may hear appeals regarding similar issues, but, at the same time, the NLRB will most certainly continue to pursue its recently adopted position on this matter. Companies and individuals in franchise relationships are advised to stay tuned regarding further developments in this area of law.

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Employment Law Tips For Small Employers with Household Employees in California

Sep 22 2014 | in Estate Planning, Labor & Employment | by admin

To assist estate planning and other attorneys who represent household employers, Genevieve Evarts made a presentation titled “Keeping Clients with Household Employees Out of Trouble with the Law” for the Bar Association of San Francisco on September 17, 2014.

The program provided an overview of the key compliance issues to be aware of when small employers are hiring and managing household employees in California.  While the ever-changing legal requirements in the employment area are difficult to comply and keep up with even for large employers, many individual and small employers are unfortunately putting themselves at risk by not understanding or ignoring the breadth of employment-related rules that also apply to them.  The topics covered during the presentation included:

  • The Employee vs. Independent Contractor Distinction
  • Hiring Checklist
  • Pay and Benefit Obligations
  • Wage and Hour Requirements
  • Best Practices for Discipline and Termination

You can access a copy of the outline accompanying the presentation here.

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