NLRB Joint Employer Decision

On August 27, 2015, the federal National Labor Relations Board issued a 3-2 decision that the NLRBowner/operator of a California-based recycling facility is a “joint employer” for collective bargaining negotiations with employees of a temporary staffing company. The ruling supplants the NLRB’s previous test that required the “actual exercise of control” over workers for a company to be deemed a joint employer. Under the new test, it is enough if the company has the right of “actual control whether direct or indirect”.

We have already reported on a July 2014 memorandum from the NLRB general counsel that McDonald’s would be a “joint employer” of workers employed by individual franchisees. The latest Board decision, with the general counsel’s memorandum, points to a trend in the NLRB to extend liability under the National Labor Relations Act to companies not previously considered to be employers.

What does this mean for vehicle dealers?

  1. Vehicle manufacturers are franchisors just as McDonald’s is a franchisor for its individually-owned restaurants. McDonald’s provided standards that franchisee employees must meet in its franchise agreement. That was enough for the NLRB general counsel to claim joint employer status for the franchisor. While dealer sales and service agreements in the vehicle business may not contain that level of detail, incentive plans announced by manufacturers sometimes provide specific standards for dealership employee appearance, activities, or performance. Sometimes, manufacturers create performance plans for dealership employees and pay them directly. Given the NLRB trend, vehicle manufacturers may be at risk as joint employers. The more they try to impose controls that affect dealer employees, the more likely they can be held jointly liable for violations of the National Labor Relation Act. This may be a useful thing to remind the factory in any discussions about increasing efforts by the factory to control dealer practices.
  1. Sometimes, a manufacturer will provide temporary marketing personnel in a dealership. These may be manufacturer employees or temporary staffing company employees. To the extent the dealer and the manufacturer have the right of control over the activities of the workers, the manufacturer, the dealer, and any staffing company involved could all be joint employers under the National Labor Relations Act.
  1. From time to time, dealers may have to contract with F&I service companies to provide “specialists” to close deals and sell finance and insurance. To the extent the dealer may oversee and control the worker’s activities and performance, this increases the possibility that the dealer can be liable under the National Labor Relations Act with the F&I service company.

The trend of decisions by the NLRB indicates that it will broaden its interpretation of the law to become involved and protect concerted action by personnel regardless of whether they are considered “employees” under state law. This requires greater knowledge of the consequences and greater diligence by dealer management.