The NLRB’s New Joint Employer Standard

September 16, 2015

By Alex E. Jones

In Browning-Ferris Industries of California (“Browning-Ferris”), the National Labor Relations Board (“NLRB”) created a new standard for determining whether two companies are “joint employers” for purposes of the National Labor Relations Act (“NLRA”).  The decision greatly expands who is considered a company’s employee, and has serious implications for franchisors and companies that utilize staffing agencies and other third party contractors and vendors.

The NLRB had long held that two companies “are joint employers of a single workforce if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.” The pre-Browning-Ferris standard for “governing the essential terms and conditions of employment” required the employer to exercise direct control over employees with regard to the right to hire, fire, supervise and discipline. In Browning-Ferris, the NLRB abandoned the direct control test in favor of a much more lenient one.  Now, if an employer indirectly controls or has the authority to control the hiring, firing, supervising and disciplining of employees, then it will be deemed a joint employer even if no such control is exercised.

In Browning-Ferris, the company relied on a staffing agency, Leadpoint, to hire employees for its recycling facility. Leadpoint staffed approximately 240 workers for Browning-Ferris, and a Teamsters Local sought to organize those workers and argued that the two companies were “joint employers.” The NLRB ruled that although Browning-Ferris did not participate in the everyday activities of the Leadpoint hired workers, it still exercised sufficient control to be deemed a joint employer with Leadpoint. Specifically, Browning-Ferris: (1) required Leadpoint to only hire workers who at least met the hiring requirements Browning-Ferris imposed on its employees; (2) controlled the speed of the sorting lines in the facility; (3) oversaw the number of employees working at a time and the number of hours they worked; and (4) prohibited Leadpoint from paying the workers more than similarly situated Browning-Ferris employees.

The NLRB’s decision is highly controversial and may be challenged in court or met with congressional action to reverse or modify it. If the Browning-Ferris decision stands, it will undoubtedly have far reaching implications for any company that utilizes third parties in its business operations. Employers should evaluate their relationship with any third party (and that party’s workers) that could possibly be considered a “joint employer.”  This includes contractors like the staffing agency hired by Browning-Ferris, and could also include vendors or service providers (such as janitorial services).

The NLRB’s decision may signifcantly impact franchisor and franchisee relationships.  For example, McDonald’s has been engaged in a very public fight with the NLRB on this issue. McDonald’s takes the position, based on prior NLRB precedent and business realities, that its franchisees – not McDonald’s itself – are the “employers” of the franchisees’ workers for purposes of the NLRA.  The NLRB’s Browning-Ferris decision may significantly ease the way for these workers to, for example, unionize by bargaining directly with the parent company (rather than the individual franchisee). McDonald’s will proceed to trial against the NLRB on this issue in early 2016, and the NLRB will certainly point to the Browning-Ferris decision to help establish its case.

Please contact your KJK attorneys to discuss how to reconcile the needs of your business and workforce with these issues.