Landmark NLRB Decision Likely To Change the Rules on Joint-Employer Status

On August 27, 2015, the National Labor Relations Board issued a much anticipated decision in a case known as Browning-Ferris Industries of California. The decision significantly broadens the legal definition of joint-employer. This means that an organization that would normally be considered as an unrelated entity, which is not involved in the hiring, firing or supervision of another (direct) employer’s employees, can now be connected as a joint-employer and bear the same responsibilities as the direct employer under the National Labor Relations Act (NLRA).

The National Labor Relations Board (NLRB) under Browning-Ferris established a new test for the definition of joint-employer. In summary, two otherwise unrelated employers may be found to be a joint-employer for the same employees “if they share or codetermine those matters governing the essential terms and conditions of an employment”. In determining whether a business relationship (think franchisor- franchisee) meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. The relationship will turn on whether the potential joint-employers both possess sufficient control over the essential terms and conditions of employment “to permit meaningful collective bargaining”.

This new NLRB decision will effect both unionized and non-unionized employers (even if some of the entities have no employees of their own). Moreover, this ruling will have broad implications for other employment laws and government agencies including the Department of Labor, the EEOC and OSHA. State laws could also be effected by this case. It is anticipated that the Department of Labor’s Wage and Hour division, which issued its own guidance on independent contractors last month, will also weigh in on the joint-employer issue for franchisers, contractors, and parent companies.

Background

The Browning-Ferris case involved a representation petition filed by Teamsters Local 350 to represent sorters, housekeepers and other workers employed by Leadpoint, a subcontractor performing housekeeping work at a Browning-Ferris facility. The petition for representation claimed that Browning-Ferris, a waste and recycling services company, was a joint-employer with Leadpoint because it contracted with Leadpoint to engage the services of temporary labor to sort materials, clean screens and work on sorting equipment related to the cleaning of the recycling facility. Initially, the NLRB Region 32 (Oakland/East Bay Area) issued a decision holding that Leadpoint was the sole employer based on the fact that it alone hired, disciplined, compensated, and terminated employees. An election was held but the ballots were impounded based on a request by the Union to reconsider whether Browning-Ferris and Leadpoint were joint-employers. The National Labor Relations Board granted review and issued the decision on April 27, 2015.

Significance

This decision will certainly be challenged by many employers in the future, however the implications are vast. For example, in the fast food industry, McDonald’s corporate could be held to be involved as a joint-employer with a McDonald’s independently owned franchisee. That would mean McDonald’s corporate would have collective bargaining obligations with multiple franchised organizations where union organizing elections were won. This decision could impact virtually every industry sector that has relied on its business structure based on Supreme Court precedent and over thirty years of settled National Labor Relations case law. The prior definition has been that so long as an overarching entity did not possess or exercise direct control of the employer/employee relationship, such entity would not be considered as a joint-employer under the National Labor Relations Act.

Any organization that seeks to begin to proactively protect itself from this potentially highly disruptive decision, should consider the following steps:

  1. Review and modify service agreements with third parties to establish further arm’s-length relationships.
  2. Ensure that third parties establish clearly their independent and separate terms and conditions of employment as evidenced by employee handbooks and policies.
  3. Clearly distinguish work performed by the other entity’s employees as opposed to the primary duties of the overarching employer.
  4. Consider project payment structure other than hourly wages plus markup for services rendered by non-employees.

This decision may radically change unions’ ability to organize groups on a national basis, and turn the clock back to much more significant union influence as it existed decades ago. In 1981, 27% of the non-government US workforce was union. Today by most statistics, that number is less than 7%. This decision could radically change the employer and business structure landscape. Employers are encouraged to take this decision seriously and to begin reviewing business relationships in this new light.

Bay Area Human Resources Services

Cyber Security Applies to Everyone – Including Your Employees

It is difficult to pick up a newspaper or read a blog without hearing of another cyber security incident. A recent article in the Chronicle stated that “an earthquake” of cyber security is inevitable.

For example, over the past several months, several of our clients in the wine industry were notified by a common vendor that security information on customers had been breached. This incident resulted in a huge management time sink as well as a review/restructure of each link in the chain of the customer relationship. A data security expert told one of our clients: “There are only two kinds of organizations: those that have been hacked and know it, and those that have been hacked and do not know it.” While the state of affairs may not be quite this dire – it is clearly a serious and growing concern.

Do you have A Cyber Security Breach Plan in Place?

Not only is there a civic duty to advise customers when sensitive information you possess may have been breached, there are also important legal requirements. Many organizations still do not know that there has been an amendment to the California Online Privacy Protection Act (CALOPA) (Cal. Civ. Code § 1798.82). This law imposes clear and strict requirements in the event of a data breach.

Often employers and businesses do not consider the fact that they possess sensitive information requiring protection. The fact is that most organizations have lots of data in paper and electronic format and must safeguard information on their own employees, as well as their customers. Many organizations believe information is securely locked on their network behind a firewall. Even if this is the case, are appropriate protections in place for current and former employees? How secure is your network, particularly if it lives in the cloud? Do you adequately control all access points to data by employees? What controls are in place if employees have access through their personal devices?

The short answer is that there must be a plan in place to review security steps, train employees on protocols, and add items to separation checklists. There should be clear documentation related to cyber security that demonstrates that you are taking every reasonable step to protect sensitive information.

What to Do

Here are a few suggestions to improve the security on your systems:

  1. Consider a cyber-insurance rider to your liability insurance policy.
  2. Make sure reasonable “industry standard” security systems are in place.
  3. Meet at least once per year with your IT team and HR to review cyber security matters.
  4. Have employee protocols on passwords and data security in place and train people on cyber security. Pay particular attention to personal devices of employees.
  5. Add password and data protection/recapture procedures and protocols to your separation checklist.

If you need assistance with data security protocols, policies on personal devices and passwords, or electronic media policies, please contact our offices.

Bay Area Human Resources Services

Retooling Performance Reviews – Part 1

Lately, it has become somewhat of a popular trend to bash “the annual perforce review”. The Washington Post recently reported that Accenture CEO Pierre Nanterme and his team were preparing for a “massive revolution” in the way that it conducts its annual review process, citing that, “all of the time, money and effort spent didn’t ultimately accomplish the main goal – to drive better performance among employees.” Accenture is not alone in announcing major changes in this annual process. Deloitte, Adobe, Gap, and Medtronic have all announced major shifts in how they conduct this very important process.

According to a Corporate Executive Board (CEB) survey, 95 percent of managers are dissatisfied with their Performance Management systems, and 90 percent of HR heads believe they do not yield accurate information. Yet, according to a study by Mercer, 95% of companies they surveyed (over 1,000 organizations around the world) set individual goals and 94% conduct formal year-end discussions. So, if we are SO unhappy with the annual review, why are most companies still conducting this process?

The answer lies in the critical nature of the annual review. It is a time-tested tool to manage the performance of our people and to ensure that the work they are doing is being performed at acceptable levels and is aligned with the goals of the company. Most of the negative press about the annual reviews are linked to one or more isolated aspects of the process such as: it’s too paper-based, the requirement to force rank employees, the rating system, the fact that they happen once a year, or that managers don’t take them seriously. The biggest problem is that most companies don’t see performance management as a “system” that includes informal feedback as well as formal feedback in a manner that sets clear expectations of what work needs to get done, regular feedback on how the work is being performed, and documentation.

Employee performance is probably the most important factor in the success of any organization, so the advantages of performance management are substantial. Some of the benefits of successful performance management are high employee satisfaction leading to increased customer satisfaction, meeting targets and employee retention. There are also numerous benefits to the manager as an individual. Good performance management leads to higher levels of trust and communication within a team, provides a better understanding of the team both as a whole and as individuals and, if necessary, provides the tools and evidence needed if it comes to disciplinary action.

Although objectives and standards of performance are ultimately there to ensure business needs are met, a manager must balance this with the ongoing development of their team. Individual needs and ambitions must be taken into account in order to get the best performance from a team. To do this successfully you should give guidance, clarity, motivation and opportunities for advancement. These all lead to increased confidence within a team and feelings of empowerment and engagement in your employees.

In order manage your employees’ performance well, they must be fully aware of your expectations of them, such as volume of work to be produced, as well as standards of behaviour and quality. Without this clarity and guidance they may underperform without even realising it, as they may not be aware of the standards and targets you expect from them. Once you’ve clearly stated your expectations you can use this as a starting block to managing their success and reviewing their performance. There are both formal and informal methods of performance management, and we will look at those in more detail in next month’s SharedHR Bulletin.

Bay Area Human Resources Services