United States: Subcontractor Or Franchisee Relationships May Expose Companies To Joint-Employer Status After Recent NLRB Decision

In a recent decision, Browning-Ferris of California, Inc., the National Labor Relations Board (the “Board”) redefined and expanded its test for determining joint-employer status. The Board may now find a joint-employer relationship exists over a single workforce if both entities “share or codetermine the essential terms and conditions of employment.” 362 NLRB 186, slip op. at 2 (2015). Such essential terms and conditions may include wages, hours of work, the number of hours of work to be supplied, scheduling, seniority determinations, overtime approval, and assignments regarding the manner and method of work to be performed.

The central consideration for the new joint-employer test remains control. However, the Board is no longer limiting its analysis to actual control but expanding it to include the right to control. In fact, the Board stated that it will no longer consider simply whether an employer exercises actual control over the terms and conditions of employment, but the Board will now also consider whether a putative joint-employer possesses the authority to control such terms and conditions of employment through contract or otherwise.

The new test has significant implications for all employers who engage in contractor-subcontractor relationships, and will also likely impact those with franchisor-franchisee relationships.

Ultimately, the Board’s decision may force companies to bargain with labor unions with respect to individuals who are not directly employed by the companies, which could also increase exposure for potential unfair labor claims. Expect to see an uptick in union organizing campaigns in the coming months as a result.

To avoid such potential exposure, companies with contractor-subcontractor or franchisor-franchisee relationships should review and evaluate written agreements governing those relationships and carefully analyze any reservation of rights language that may grant the authority to control. Such analysis should be performed in conjunction with a review of the actual practices at the applicable worksite.

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