United States: NLRB Delivers New Joint-Employer Standard

Howard Sokol is a Partner and Katherine Marques is an Associate in the New York office

Decision Leaves Franchisors, Contractors, Parent Companies, and Other Employers Vulnerable to Costly Labor Obligations and Violations


  • The NLRB, in a long-anticipated 3-2 decision along party lines, established a new and broader standard for determining whether two separate companies will be deemed joint employers under the National Labor Relations Act.
  • Unions representing the employees of franchisees, subcontractors or subsidiary companies will have few if any legal obstacles to hold the respective franchisors, contractors and parent companies jointly liable for unfair labor practices and other violations under the Act, for which those entities had no direct involvement.
  • The wide range of businesses, especially franchises, whose business practices are likely to be affected by this decision speaks to the significance of its holding.

The National Labor Relations Board (NLRB or Board), in a long-anticipated 3-2 decision along party lines, established a new and broader standard for determining whether two separate companies will be deemed joint employers under the National Labor Relations Act (Act), the federal framework governing labor management relations in the private sector. In the Aug. 27, 2015 decision, Browning-Ferris Indus. of Cal. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186, the majority (all Democratic appointees), held that BFI Newby Island Recyclery was a joint employer with a wholly distinct company, Leadpoint Business Services, where BFI had contracted with Leadpoint to provide BFI with temporary employees for work at BFI's recycling facility. BFI did not supervise Leadpoint's employees. The union at issue sought to represent Leadpoint's employees in a secret ballot election.

Notwithstanding that the labor services agreement between BFI and Leadpoint expressly stated that Leadpoint was the sole employer of personnel it supplied, the NLRB analyzed the arrangement between the parties and concluded, while updating its decades-old standard, that they were joint employers. Accordingly, if the union wins the election, BFI, along with Leadpoint, will be required to negotiate a collective bargaining agreement with the union covering wages, hours, and other terms and conditions of employment of Leadpoint's employees. The holding of this decision, undoubtedly, will be stretched by unions to cover relationships beyond contractor-subcontractor and to obligate purported joint employers to duties beyond sitting at the bargaining table.

New Joint-Employer Standard: Less Defined and More Onerous

Under the revised standard, a company may be found to be a joint employer even if it does not supervise the employees of another company with which it contracts or otherwise has a legal relationship. The new standard, therefore, makes it significantly easier and will likely be used to establish joint-employer status of a franchisor (when the franchisee is the actual, hands-on employer) or, as in the case at issue, BFI, a contractor, who outsources certain functions to a subcontractor staffing company, subjecting the joint employer to a host of obligations and potential liabilities under the Act, beyond collective bargaining. Now, unions representing the employees of franchisees, subcontractors or subsidiary companies will have few if any legal obstacles to hold the respective franchisors, contractors and parent companies jointly liable for unfair labor practices and other violations under the Act, for which those entities had no direct involvement.

Old v. New Joint-Employer Standard

"Meaningful" Changes to Key Requirements

More than 30 years ago, in NLRB v. Browning-Ferris Industries of Pennsylvania, the Third Circuit established the joint-employer standard requiring that two entities must "share or co-determine those matters governing essential terms and conditions of employment." The Board formally adopted this standard a few years later and explained that essential terms include such key activities as hiring, firing, discipline, supervision, and direction of the other entity's employees as such terms and conditions "meaningfully" affect an employment relationship. Over many years, the Board has refined this standard and made clear that "limited and routine" supervision over the other entity's employees – even when it is direct – is insufficient to meet the requirements to create joint-employer liability.

NLRB Changes Picture by Remote Control

Now, in effectively stripping away the requirements for active and meaningful involvement by both (or more) entities, the Board has established a new standard in determining whether two (or more) entities are joint employers of a single workforce, with the following inquiries:

  1. Are both employers within the meaning of the common law (where an employer is one who "controls or has the right to control")?
  2. Do both employers share or codetermine those matters governing the "essential terms and conditions of employment"?

In evaluating whether a putative employer possesses sufficient control over employees to qualify as a joint employer, the Board will not merely consider what control has been actually exercised, but also whether the entity in question has exercised control over terms and conditions of employmentindirectly through an intermediary, or whether it has reserved the authority to do so. As an example of indirect control, the Board's decision discussed an episode where a BFI manager contacted Leadpoint after observing two Leadpoint employees drinking on the job, which led to discipline. The burden of proving joint-employer status remains unchanged and belongs to the party asserting that relationship. Those "essential terms" that may trigger joint-employer status when a putative employer is involved in determining them include wages and hours, dictating the number of workers to be supplied, controlling scheduling, seniority, overtime, assignment work, and determining the manner and method of work performance.

The Board attempted to elucidate the boundary for a finding of joint-employer status by stating that "a putative employer's bare rights to dictate the results of a contracted service or to control or protect its own property [do not] constitute probative indicia of employer status." The determination will depend on whether a putative employer "affects the means or manner of employees' work and terms of employment, either directly or through an intermediary." A joint employer will be required to bargain only on the terms and conditions that it controls (or has retained the latent ability to control). The Board has justified this significant expansion of the joint-employer standard by observing that the erstwhile standard, which required "direct and immediate control" for a joint-employer finding was "out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships."

The Dissent: Confused and Concerned

The lengthy, forceful dissent criticized the new rule's breadth, which it argues will lead to instability, concluding that "no bargaining table is big enough to seat all of the entities that will be potential joint employers under the majority's new standards." It argued that expanding the parties subject to bargaining will disrupt the bargaining process and result in uncertainty because numerous "cooks ... in a single kitchen ... is a recipe for dyspeptic collective bargaining." The dissent also expressed concern about maintaining individual employer's information, using the hypothetical example of a cleaning company who is deemed a joint employer with its client, a business who contracts with the company for cleaning services. The cleaning company could be required to turn over data on pricing for all its clients – information it otherwise would keep confidential from any particular client.

In addition, remote "parent" employers that are not engaged in direct control over employees may be subject to economic protest activity from their subsidiary or subcontractor's employees that would have otherwise constituted unlawful secondary activity. Along the same lines, the dissent observed that joint employers would not be free to end contractual relationships with unionized contractors, as they otherwise would be. Tying contracting entities to contracts that may no longer make business sense could render those entities noncompetitive in their markets.

What Is Likely to Come: Legal and Compliance Challenges

BFI may appeal the Board decision, but only after the union representation election is concluded and the union representative is certified. Any appeal could take years, while the finality of this decision remains inconclusive for potentially affected employers and contractors. Certain employer-centered lobbying groups have begun seeking congressional action to prevent the enforcement of this new standard.

Why the New Joint-Employer Standard Matters

The wide range of businesses, especially franchises, whose business practices are likely to be affected by this decision speaks to the significance of its holding. The Board will apply this new standard retroactively. Companies that have been operating subject to franchise agreements or other outsourcing of staff management should particularly consider the potential impact of this new standard on their obligations in the face of union organizing or collective bargaining demands, and consult counsel for guidance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.