United States: NLRB Expands Joint-Employer Standard: Exercising Direct Control No Longer Required

Last Updated: September 1 2015
Article by Joel S. Barras and Sarah T. Hansel

The National Labor Relations Board ("NLRB") overturned decades-old precedent by vastly expanding its definition of "joint employer," upending established federal labor law and creating tremendous uncertainty for companies. Under the standard announced in Browning-Ferris Industries ("BFI"), the NLRB will no longer require direct and immediate control over terms and conditions of employment to find a joint-employer status. Rather, the right to indirectly control terms and conditions of employment, even if never exercised, is sufficient to create a joint-employer relationship.

New Standard Enunciated For the 30 years that preceded BFI, host companies avoided legal obligations to collectively bargain with represented subcontracted employees by forgoing their authority to exercise direct and immediate control over those employees. The proposition was simple and logical: an employer that does not directly set terms and conditions for employees is not required to collectively bargain those terms and conditions of employment.

Under the standard announced in BFI, the NLRB will define two or more entities as joint employers of a single work force if "they share or codetermine matters governing the essential terms or conditions of employment." In determining whether a company satisfies this burden, the NLRB will evaluate whether: (1) a common-law employment relationship exists; and (2) the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining.

Relevant factors the NLRB will consider include the ability to:

  • Hire, fire, discipline, supervise and direct employees
  • Set wages, hours, schedules, seniority and overtime
  • Assign work and determine the manner and method of work performance

Critically, a company must only possess and does not have to exercise these abilities to be a
joint employer.

While the NLRB emphasized that this standard requires a case-by-case, fact-intensive inquiry, the analysis performed in BFI provides some insight into how the NLRB will scrutinize this criteria. There, BFI contracted with Leadpoint Business Services ("Leadpoint") to supply approximately 60 employees to a recycling plant.

During the representation proceedings before the NLRB, BFI argued that Leadpoint constituted the sole and proper employer of its employees. The NLRB rejected BFI's argument, finding a joint-employer relationship based on the following:

  • Hiring
    While BFI never directly participated in Leadpoint's hiring process, it developed hiring criteria that Leadpoint used when evaluating potential employees. For example, BFI mandated that Leadpoint employees (like BFI employees) undergo drug testing and certain job-related training.
  • Discipline/Firing
    BFI retained the right to "discontinue the use of any [Leadpoint] personnel" assigned to BFI. BFI never directly disciplined Leadpoint employees and lacked control to terminate their employment. Rather, BFI controlled a level of authority over which employees worked at its facility.
  • Supervision/Direction of Work
    BFI set specific productivity standards for both Leadpoint and BFI employees. The company also assigned specific tasks for Leadpoint to complete. Leadpoint managers oversaw its employees, determined the staffing and methods for completing those standards, and maintained day-to-day oversight of its employees.
  • Wages and Hours
    BFI determined the number of workers necessary for particular jobs, set shift times for Leadpoint to staff, and determined if overtime was necessary. Leadpoint established its employees' pay rates and administered payroll, but BFI prevented Leadpoint from paying its employees more than BFI employees who performed comparable work.

Practical Concerns for Employers As articulated by the dissenting Board Members in BFI, the new standard presents a host of issues for employers that could destabilize existing bargaining relationships and complicate new ones.

First, the standard expands the definition of joint employer to such a degree that an incalculable number of companies now fall under its ambit, including, for example:

  • Insurance companies that require employers to take certain actions with employees in order to comply with policy requirements for safety, security, health, etc.
  • Franchisors
  • Banks or other lenders whose financing terms may require certain performance measurements
  • Any company that negotiates specific quality or product requirements
  • Any company that grants access to its facilities for a contractor to perform services there, and then continuously regulates the contractor's access to the property for the duration of the contract
  • Any company that is concerned about the quality of the contracted services
  • Consumers or small businesses who dictate times, manner, and some method of performance of contractors

By widening this net, the Board has increased the number of companies susceptible to union organizing efforts, and the bargaining obligations that apply if their employees ultimately unionize.

However, it is entirely unclear how the NLRB will define the scope of the bargaining unit. For example, will a cleaning company's employee fall under one of dozens of collective bargaining agreements depending on where he or she reports to work for the day, or the shift, or the part of the shift?

Second, contract negotiations will become exponentially more complicated as the secondary joint employer and the union will have widely divergent interests.

Third, because the "host" company and the contractor are considered joint employers, both will be required to engage in collective bargaining. Uncertainty and conflict between the companies is inevitable when deciding which is responsible for bargaining a given issue or which company prevails in the event of differing opinions over contract terms.

Additionally, questions will arise as to what confidential information companies must share with unions and their "joint employer" partners. This will no doubt impact negotiations over services agreements between the two companies themselves.

Fourth, formerly neutral "host" companies enjoyed protections from secondary picketing and boycotts that will no longer apply as they become primary employers under this expanded definition.

Fifth, the new standard will complicate asset and stock purchases and deter potential purchasers from taking over failing businesses. As the dissent in BFI explained, successor employers will lack the ability to terminate or rebid client and services contracts, eliminating a common practice by purchasers for reducing historic expenditures.

These concerns are just a few of the practical, detrimental consequences of the BFI decision raised by the dissenting NLRB Members. Perhaps of more concern, these are the consequences that are easily identifiable. Time will tell what unforeseen and unintended consequences result from this landmark decision.

Of course, numerous legal challenges are expected. But even if those challenges are successful in overturning BFI, the NLRB's new joint-employer standard will still likely apply for years.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Joel S. Barras
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions