NLRB Issues Controversial Decision Redefining Joint Employer Status

In a 3-2 decision involving Browning-Ferris Industries of California, the National Labor Relations Board revised its standard for determining joint-employer status last Thursday, August 27, 2015.

Specifically, the Board defined an employment relationship as one where the employer either exercises control or has the right to exercise control over the work of the employee. The latter is an added factor meant to bring NLRB standards in line with existing law. Thus, in determining joint employer status, where a “user employer reserves a contractual right to set a specific term or condition of employment for a supplier employer’s workers, it retains the ultimate authority” over the employee and “legal consequences may follow from this choice.”

This definition is a deliberate policy shift toward a broad application of the National Labor Relations Act, so as to “encompass the full range of employment relationships wherein meaningful collective bargaining is, in fact, possible.”

Once an employment relationship is established, the NLRB requires that a factual analysis must be done to evaluate whether a joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining. “Essential terms” include wages and hours; control over the number of workers to be supplied, scheduling, seniority, and overtime; and assigning work and determining the manner and method of work performance. The Board’s analysis in this particular case also included a review of the controls over hiring, firing, discipline, training, and safety. No one factor is meant to have more control than another, as each factual scenario is to be reviewed in totality.

The Board limited its decision so that “a joint employer will be required to bargain only with respect to such terms and conditions which it possesses the authority to control.” Further, the Board specifically stated that its analysis was limited to the facts of this particular case, and it expressly declined to find joint employer status in every legal relationship (e.g., lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debitor, and contractor-consumer).

Ultimately, the decision is unclear as to the potential industries and business relationships affected, as pointed out in the dissenting opinion. Nonetheless, it potentially exposes companies that use such workers to the kinds of employer responsibilities and liabilities that they have historically avoided by outsourcing their workforce. This issue is expected to be flushed out in the courts; this particular decision can be further appealed up to the Supreme Court.

Action Items:

1. Review the NLRB ruling HERE.
2. Review your contracts and subcontractor working arrangements with an attorney to evaluate any potential liability exposure. Although the decision specifically addresses workforces affected by collective bargaining, there may be broader implications for other work or services relationships.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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