United States: NLRB Vastly Expands Its Joint-Employer Standard

Last Updated: September 4 2015
Article by Ross H. Friedman and Joseph C. Ragaglia

The Browning-Ferris decision overturns 30 years of precedent and opens up a wide variety of business relationships to allegations of joint-employer status, including staffing agencies, on-site contractors, outside suppliers, and franchise relationships. 

In a decision issued on August 27, the National Labor Relations Board (NLRB or the Board) overruled 30 years of joint-employer jurisprudence, announcing that it will no longer require direct and immediate control over terms and conditions of employment to establish a joint-employer relationship. Instead, a joint-employer relationship may be found based on the right to control terms and conditions of employment, even if that control is indirect and/or unexercised. This new standard can be applied to a wide variety of business relationships in which one employer contracts for the work of another business entities' employees, including outside suppliers, on-site contractors, and franchisees.

Background

The Board, with court approval, has historically applied the joint-employer analysis set forth in TLI and Laerco Transportation to determine whether a particular group of employees is solely or jointly employed by one or more employers.1 In TLI and Laerco, the Board rejected the notion that indirect, minimal, or hypothetical control should establish a joint-employer relationship and concluded instead that joint-employer status would require proof of a significant degree of direct and immediate control over the employees in question.

The Browning-Ferris Decision

In Browning-Ferris Industries of California, Inc.2, the Board held that a joint-employer relationship exists if two or more entities "share or codetermine those matters governing the essential terms and conditions of employment." In applying that standard, the Board announced that it will no longer require direct and immediate control by an alleged joint employer over the terms and conditions of employment to establish a joint-employer relationship. Instead, the right to control, even if indirect and/or unexercised, may be sufficient to establish a joint-employer relationship.

In analyzing whether a joint-employer relationship exists, the Board stated that a case-by-case, fact-intensive evaluation of the allocation and exercise of control in the workplace must be undertaken. This case-by-case analysis will be informed by several key principles:

  • The concept of "essential terms and conditions of employment" will not be limited to the core subjects of wages, hours, hiring, firing, and discipline. It will include subjects such as the number of workers to be supplied, scheduling, overtime, work assignments, and "the manner and method of work performance."
  • Although the range of subjects that may give rise to a joint-employer relationship is broad, the Board will consider whether the alleged joint employer's control is confined to subjects that are "too limited in scope or significance to permit meaningful collective bargaining."
  • Even if a joint-employer relationship is found, the Board stated that a joint employer will be required to bargain "only with respect to such terms and conditions which it possesses the authority to control." This could create an unusual dynamic at the bargaining table and require a joint employer to be involved in bargaining on some subjects but not others.

This case-by-case approach does not yield any bright-line rules that would provide clear guidance about when a joint-employer relationship is present. However, the Board included a potentially significant qualification of the scope of its decision when it disclaimed that "a putative employer's bare rights to dictate the results of a contracted service or to control or protect its own property constitute probative indicia of employer status." Thus, it seems that the Board analysis in future cases will focus on whether the alleged joint employer, in protecting those basic business interests, "affects the means or manner of employees' work and terms of employment."

Although these general principles are subject to definition in future cases, the application of the standard to the facts of this case are illustrative of the type of control that will give rise to joint-employer status under the Browning-Ferris standard. In finding that Browning-Ferris Industries (BFI) was a joint employer with its subcontractor, Leadpoint, the Board relied on the following factors:

  • Hiring. BFI had a contractual right to require that applicants take and pass drug tests and that its personnel "have the appropriate qualifications (including certification and training)." BFI also retained the right to reject an applicant referred by Leadpoint "for any or no reason."
  • Wages. Leadpoint was prohibited from paying its employees more than BFI paid its employees for performing comparable work. The Board also found it significant that BFI reimbursed Leadpoint for its labor costs on a cost-plus basis, although the Board stated that a cost-plus arrangement "on its own, is not necessarily sufficient to create a joint-employer relationship."
  • Discipline. BFI had the right to "discontinue the use of any personnel for any or no reason." Two separate instances were cited in which BFI managers reported employees' misconduct to Leadpoint and "request[ed] their immediate dismissal." In those two instances, Leadpoint officials immediately removed the employees from their duties and terminated them shortly thereafter. Although Leadpoint conducted its own investigation and no BFI manager was involved in the decision, the Board concluded that "the outcome was preordained by BFI's ultimate right under the terms of the Agreement to dictate who works at its facility."
  • Supervision. BFI controlled the hours and production lines in its facility, required that Leadpoint employees obtain the signature of an authorized BFI representative attesting to their "hours of services rendered" each week, held a sole preshift meeting to advise Leadpoint supervisors of which lines would run and which tasks they should do on those lines, and monitored the productivity of Leadpoint employees.

Practical Implications

The Browning-Ferris decision opens up a wide variety of business relationships to allegations of joint-employer status, including staffing agencies, on-site contractors, outside suppliers, and franchise relationships. Employers should review their contracts and business practices with respect to suppliers, contractors, and other business partners to evaluate the risk of a joint-employer finding. The Board made clear that a finding of joint-employer status under the National Labor Relations Act (NLRA) "does not govern joint-employer determinations under the many other statutes, federal and state, that govern the workplace." But, as noted by the dissent in Browning-Ferris, a finding of joint-employer status under the NLRA can have many significant implications:

  1. Union organizing. When a union seeks to organize a group of jointly employed employees, as in the Browning-Ferris case, the joint employer will be a party to the NLRB election process. The Board has not yet decided whether a "user employer's" employees may be combined with the jointly employed employees in the same bargaining unit without both employers' consent. That issue remains pending before the Board in Miller & Anderson (Case No. 05-RC-079249), a case in which the Board invited briefs on the issue of whether existing law should be overturned so that a bargaining unit can be created without both employers' consent.
  2. Collective bargaining. A joint employer will be obligated to participate in collective bargaining, at least on the subjects over which the joint employer is found to exercise control. The obligation to engage in collective bargaining on these subjects could also include an obligation to respond to union information requests
  3. Picketing and secondary boycotts. A joint employer could be subject to picketing or other forms of union activity that would otherwise be regarded as an unlawful secondary boycott. Such activity might not be limited to the site where a labor dispute arises.

In short, the impacts of the Browning-Ferris decision are wide ranging and affect many types of business relationships in many industries. Morgan Lewis will host a webinar in the near future to discuss these issues in more detail.

Footnotes

1. TLI, Inc., 271 NLRB 798 (1984), enfʼd mem. 772 F.2d 894 (3d Cir. 1985); Laerco Transportation, 269 NLRB 324 (1984). 

2. 362 NLRB No. 186 (Aug. 27, 2015).

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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