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A little control goes a long way under NLRB’s broad new definition of “joint employer”

August 28, 2015

In a major decision issued on August 27, 2015 entitled Browning Ferris Industries of California, Inc. (BFI), the National Labor Relations Board (the Board) abandoned its long-held “joint employer” definition in favor of a more expansive standard that considers both a company’s indirect control and its reserved control over workers to determine whether two or more companies are a joint employer. In that decision, the company used temporary employees to perform various work functions like cleaning. Applying its new definition, the Board held that the company was a joint employer with the staffing agency that provided the workers. The new definition likely will result in the Board finding joint-employer relationships in many cases where it would not have before under its previous standard, which required direct and immediate control that was not “limited and routine.” In addition to businesses that use staffing companies to supply temporary workers, this decision could seriously impact franchisors and make them vulnerable to union organizing efforts and potential liability for unfair labor practices under the National Labor Relations Act (NLRA).

Under the Board’s new standard, “two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law [i.e., they both exert sufficient control over, or right to control, the workforce, all factors considered]; and (2) they share or codetermine those matters governing the essential terms and conditions of employment.” The Board will examine various factors, including whether a business entity “has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so,” to determine whether there is sufficient control to be deemed a joint employer.

In its decision, the Board relied on the fact that BFI had both direct and indirect control over the essential terms and conditions of temporary workers’ employment, even though the workers performing cleaning and sorting of recycled products were supplied by a staffing agency, Leadpoint Business Services (Leadpoint). The Board also considered significant the fact that BFI reserved authority to control the workers’ terms and conditions of employment. Applying its new standard, the Board held BFI was a joint employer with Leadpoint.

This decision is another example of how activist the current Board is, and it may have wide-ranging impacts. Businesses using staffing companies should be mindful of the degree of control (whether direct, indirect or reserved) they may have over temporary workers. The Board through this decision has expanded sources of liability under the NLRA—for unfair labor practices, union organizing and possibly at the bargaining table with unions. Additionally, franchisors should examine their franchise agreements and relationships to assess the risk of any indirect control or reserved authority over franchise workers’ terms and conditions of employment. Other types of business models may be subject to the NLRB’s joint-employer determination as well. Thus, businesses utilizing contractors, vendors, or suppliers should pay careful attention to the level of direct and indirect control they may have over another company’s employees. For more information or guidance on this issue, please contact one of Honigman’s Labor and Employment attorneys.

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