When Is Someone an Employee?
Whether someone should be classified as an employee, as opposed to an independent contractor or subcontractor, has been a longstanding legal question in the workplace. Last week, the National Labor Relations Board weighed in, issuing a decision many observers say has the potential to greatly impact how franchisors and other corporations do business.
The case, Browning-Ferris Industries, involved two companies
– Browning-Ferris Industries (BFI), who owned and operated a recycling facility, and Leadpoint, a staffing agency who provided workers for the recycling facility. The question before the NLRB was whether BFI was a joint employer of these Leadpoint employees, and thus subject to the National Labor Relations Act collective bargaining provisions.
The NLRB said “yes,” BFI was a joint employer because along with Leadpoint, it “share[d] or codetermine[d] those matters governing the essential terms of employment.” In support of its decision the NLRB relied on some of the following:
- BFI imposed specific conditions on hiring and firing;
- BFI had complete say over the streams of materials workers handled;
- BFI defined productivity measures and evaluated Leadpoint employee’s productivity;
- BFI determined where Leadpoint employees were assigned;
- BFI communicated instructions directly to Leadpoint employees; and
- BFI met with Leadpoint employees to discuss complaints and business objectives.
BFI also determined the timing of shifts, when overtime was necessary, and had a significant say in determining Leadpoint employee’s wages.
The NLRB made clear that the changing employment landscape played a role in its decision, noting that the NLRB’s definition of joint employment had narrowed in recent decades while “the diversity of workplace arrangements in today’s economy has significantly expanded,” The Board pointed to the proliferation of temp and subcontracting work, and “contingent employment.”
The decision comes at a time when a number of high-profile lawsuits are challenging whether businesses are misclassifying employees as independent contractors and thus shirking legal obligations to employees such as healthcare, pensions, worker’s compensation, and unemployment insurance. In June, FedEx disclosed that it reached a
$228 million dollar settlement with FedEx Ground drivers in California who sued the company, alleging that it misclassified them as independent contractors. The increasingly prominent “gig economy” (where people work as independent contractors, many times through technology platforms such as smart phones apps) will only cause the question of who is an employee to become more pressing. Earlier this summer, California’s Labor Commissioner’s Office
ruled that a driver for Uber, a popular ride-hailing service, was an employee and not an independent contractor as Uber has classified its drivers. More recently,
a federal court ruled that a lawsuit brought by a group of Uber drivers in California may proceed as a class action. The drivers also allege that the company has misclassified them as independent contractors.
Ultimately, the “employee” question boils down to whether a company exercises enough control over workers that they should receive the benefits and protections the law provides for employees. The sole issue before the NLRB in Browning-Ferris was whether employees of contractors and franchises can collectively bargain with corporations who ultimately have a great deal of say in their working conditions. It is a significant decision on collective bargaining rights. However, beyond that,
Browning-Ferris shows that the NLRB is ready to contemplate today’s changing economy and come down on the side of finding an employee-employer relationship.