Companies sometimes hire workers through staffing agencies. Sometimes they participate in joint ventures or have subcontracting relationships. Companies and individuals today enter into a variety of contractual arrangements to reduce costs and maximize available capital, flexibility, talent and efficiency. A typical feature of these arrangements is for one company to use and incorporate the work performed by employees of another company into the products and services it ultimately delivers. This is common in the world of cross-border transactions and relationships, where it makes sense to arrange for another company to perform the work needed due to its expertise, location or cost overhead.
Enter the National Labor Relations Board (“NLRB” or “Board”), whose decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 2015) may change how many of these relationships function. It even raises questions about whether some of these arrangements are now too risky. Under Browning-Ferris, the NLRB has shifted the standard for determining whether two companies constitute joint employers under the National Labor Relations Act (“NLRA”). The new joint-employer standard increases the risk that employers could be liable for claims and actions against the entities with whom they contract.
In its decision, the Board first restated that it may find that two or more entities are joint employers of a single work force if they essentially share or codetermine matters that govern the essential terms and conditions of employment of those employees. After restating this general principle, however, the NLRB proceeded to expand the standard for assessing joint-employer status and to overrule legal precedent it had been following for the past 30 years.
The case involved Browning-Ferris Industries, which operates a recycling facility and staffs its operation with about 60 of its own employees and an additional 240 workers contracted through a staffing agency, Leadpoint Business Services. When a local union filed a petition to represent Leadpoint’s employees, it argued that Browning-Ferris was a joint employer with Leadpoint, and should, therefore, be required to engage in collective bargaining with the union with respect to the Leadpoint workers.
The Board supported the union’s argument, holding that it would no longer require that an employer actually exercise authority over workers’ terms and conditions of employment and that the mere possession of such authority was sufficient to make an employer a joint employer. Conditions of employment include such issues as hiring, firing, wages, scheduling, discipline, supervision and direction of work. The Board also overturned its prior requirement that a joint employer’s control must be exercised directly and immediately. Control exercised indirectly, through an intermediary, may now suffice to establish joint-employer status.
Why Does Browning-Ferris Matter?
Browning-Ferris does not mean that every employer who uses contract labor will now be found to be a joint employer. In fact, other agencies besides the NLRB apply varying joint-employer standards under particular statutes and regulations, including Title VII of the Civil Rights Act, which addresses issues of discrimination, and the Fair Labor Standards Act, which addresses wage and hour issues. Those agencies and the courts presumably will continue to apply their own standards, and may or may not be influenced by the NLRB decision.
But a company should care about Browning-Ferris and its implications for joint-employer status if it contracts with other entities, such as staffing agencies, subcontractors and franchisees, to deliver, develop or manufacture certain of its goods and services or perform functions like those typically performed by the company’s employees. Under the new test, if the contract reserves the right of Company A to control or to specify any of the terms or conditions of employment of Company B’s employees, then Company A, even if it does not exercise those rights, could be deemed a joint employer of Company B’s employees for labor matters.
There are four clearly identifiable consequences of a determination of joint-employer status under the NLRA: (1) the obligation of the joint employer to engage in collective bargaining alongside the primary employer; (2) exposure of the joint employer to joint liability for unfair labor practices and breaches of collective bargaining agreements; (3) removal of the joint employer’s insulation from a union’s dispute with the primary employer, including what would otherwise constitute secondary strikes, boycotts and picketing; and (4) it will be more difficult for a company to terminate or rebid contracts with clients who have a unionized work force.
The potential applicability of Browning-Ferris could arise in a variety of contexts in cross-border transactions, including:
- A company in one jurisdiction (“user”) may seek to employ the services of a company in another jurisdiction (“supplier”) whose workers are represented by a union. In that case, the non-unionized user company will want to take affirmative steps to avoid joint-employer status with the supplier.
- A company in one jurisdiction may have a franchisor-franchisee relationship with a company in another jurisdiction. In that case, the franchisor will want to structure the relationship to avoid joint-employer status.
- A company in one jurisdiction may have a parent-subsidiary relationship with a company in another jurisdiction. The Board’s adoption of the “potential control” standard likely presents additional challenges for the parent to insulate itself from joint-employer status with its subsidiary.
To reduce the possibility of a company’s joint-employer status with another company and the consequences that flow from a joint-employer relationship, the company should consider the following practices:
- Avoid contract language that reserves for the company any potential control over the terms and conditions of employment of the other company’s employees. Incorporate a disclaimer of such control if the circumstances allow.
- Refrain from exercising actual control over the other company’s workers. The NLRB may determine that a company’s exercise of actual control is sufficient to confer joint-employer status even if the company has disclaimed a right to do so in the contract.
- Avoid contracting for work that is similar to the duties already performed by the company’s employees.
- Require the other company to provide a written agreement stating that it will comply with all federal, state and local labor laws and regulations, specifying in particular those pertaining to labor and employment. If the circumstances allow, require an indemnity clause in which the other company agrees to indemnify for any claims or liabilities arising out of an alleged violation of these laws.
- On paper and in everyday practice, focus on the results to be delivered by the other company, not on the methods or means it utilizes to achieve those results.
- Minimize contact with the other company’s non-supervisory employees. Avoid providing direction, materials, training or benefits to these employees. If the other company’s workers are represented by a union, do not participate or retain the right to participate in collective bargaining or in administration of the collective bargaining agreement.
A good business plan involves consideration of both short-term and long-term goals. Your plans should do the same for your management and business employees; getting them into the U.S. as you start or grow your business, and keeping the organization properly staffed as it succeeds. This occasional blog provides guidance regarding some of the most common and important employment-based U.S. immigration options.
Today’s blog focuses on an employment-based immigration option available to citizens of particular countries; in this case, Japan. I will follow up with additional information about these options for other countries in the future.
In my last blog, I wrote about one of the fastest and easiest ways to transfer a valued employee to the U.S. to work for a related business entity: the L transfer option. But what options do you have if the person you have identified for a U.S. position has never worked for you, or has worked for you, but not for the one year required for the L transfer option? Or what if the person qualifies for the L transfer option, but U.S. employment is sought for more than the up to seven years authorized for L status, and the person does not want to become a U.S. permanent resident?
An additional employment-based immigration option is available if the business operating in the U.S. happens to have significant (50% or more) Japanese ownership or investment. The U.S. and Japan have a “Treaty of Commerce and Navigation” that makes it possible to hire Japanese citizens, whether they are still in Japan or already in the U.S., to provide executive, managerial, or “essential” services. No previous employment with any of your companies is required.
The E process may involve a filing at a U.S. consulate overseas and/or a mail-in petition in the U.S. Government-charged filing fees at U.S. consulates in Japan start at $270. Mail-in filings in the U.S. have a $325 filing fee. Mail-in filings can take one month or more for review, and visa issuance in Japan can take just as long or longer, depending on the availability of appointments.
One particular advantage of this option is that the status has the potential of being renewed indefinitely, which is the reason why many Japanese businesses choose the E process for many employees, even if other employment based immigration options are available.
Two versions of E status are available.
The E-1 (“Treaty Trader”) is available based on the U.S. business having “substantial trade” with Japan. Items of trade include but are not limited to:
- International banking
- Technology and its transfer
- Some news-gathering activities.
To qualify for E-1 classification, the Japanese employee of a treaty trader must be an employee engaging in duties of an executive or supervisory character, or if employed in a lesser capacity, have special qualifications.
The other version of E status is the E-2 (“Treaty Investor”), which is available based on a “substantial investment” by Japanese in a U.S. business, such that the U.S. business is at least 50% owned or controlled by Japanese.
The treaty investor must be Japanese and must have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise in the United States. The government does not define how much the investment must be. It can vary from a relatively low percentage compared to the total cost of purchasing or establishing a large U.S. business, up to 100% for a relatively small U.S. business. And the investment must generate more than enough income to provide a minimal living for the treaty investor and his or her family. Treaty Investor E-2 status is available for the qualified investor who seeks admission to develop and direct the enterprise, as well as for non-investing executives, supervisory and essential workers.
The Immigration Group is available to work with you as you consider employment-based immigration options for you or your employees.
Foster Garvey’s International practice group comprises a cross-disciplinary group of attorneys practicing in areas ranging from business transactions, immigration, maritime, government regulatory work, transportation and logistics and estate planning. The group members include bilingual and multicultural attorneys who are well-versed in handling these subject matters in a cross-border context. A number of attorneys have been actively practicing in the international arena since the early 1970s.