The Times They Are A-Changin: National Labor Relations Board Revises The Joint-Employer Test After More Than Thirty Years

After more than 30 years, the National Labor Relations Board (the “Board”) has concluded that it was time to change the standard for determining when companies are to be considered joint employers under the National Labor Relations Act.  On August 27, 2015, with its much-anticipated decision in Browning-Ferris Industries of California, Inc., the Board issued a new joint-employer standard that will examine whether an employer has the potential to exercise control over employees’ working conditions and reversed the previous requirement that a joint employer must exercise direct and immediate control over the employees in question.

The Board’s ruling stems from a 2013 NLRB Regional Director decision that found that Browning Ferris, where the employees worked, and Leadpoint, the subcontractor that employed the employees to sort recyclable materials and clean the Browning Ferris facilities, were not joint employers because they did not share direct and immediate control over conditions of employment.  The union appealed the decision, and the Board subsequently issued a notice and call for amicus briefs to address whether the Board should maintain its existing joint-employer standard or adopt a new one.

The Board concluded that a new standard was warranted citing the increasing “diversity of workplace arrangements in today’s economy.”  Under the new standard, the Board may find that two or more employers are joint employers if they (1) maintain a common-law employment relationship with the employees in question; and (2) possess sufficient control over those employees’ essential terms and conditions of employment to permit meaningful collective bargaining.  Importantly, the Board will no longer require that a joint employer exercise authority over the terms and conditions of employment; it is enough that reserved authority to control exists.  Further, the Board will not mandate that a joint employer exercise direct and immediate control.  Instead, “[i]f otherwise sufficient, control exercised indirectly—such as through an intermediary—may establish joint-employer status.”

Applying this new standard, the Board reversed the Regional Director’s decision and held that Browning Ferris and Leadpoint were joint employers.  The Board found that Browning Ferris’ “role in sharing and codetermining the terms and conditions of employment establishes that it is a joint employer with Leadpoint.”

The Board’s decision has significant implications for employers and employees.  Under the revised standard, employers could find themselves as joint employers with subcontractors, temporary agencies, or staffing companies.  In addition, while Browning-Ferris did not address the question of franchises directly, the new standard will certainly be tested in a case the NLRB is litigating against McDonald’s and several of its franchisees, where the NLRB is alleging that the corporate franchisor McDonald’s is a “joint employer” with its franchisees.