Joint Employer Standards

National Labor Relations Board Expands the Joint Employer Standard in Browning-Ferris Decision

A majority decision by three National Labor Relations Board (“Board”) appointees overturned a Regional Director’s finding that Leadpoint Business Services, a Phoenix-based staffing firm, was the sole-employer of workers it supplied to one of Browning Ferris’s (BFI) recycling plants.  The decision overturns 30 years of case law that served to define the employment relationship as one requiring “immediate and direct” control over employees.  In a sweeping decision, the Board found that BFI’s direct and indirect control over the essential employment terms and conditions of Leadpoint workers was sufficient to establish BFI as a joint-employer with Leadpoint, rendering BFI answerable to Leadpoint employees for unfair employment practices or violations under the National Labor Relations Act.  The Board points to the “changing economic circumstances,” and in particular, “the recent dramatic growth in contingent employment relationships” as necessitating a departure from the current “unjustifiably narrow” standard.

The dispute arose from an effort by Leadpoint employees and Teamsters Local 350, a signatory to Leadpoint, to bring BFI to the bargaining table. The Regional Director held that BFI was not a joint employer, stating that BFI lacked direct control over, among other essential terms of the employment relationship, their wages, termination, recruitment, daily work, and instruction.  In response to the union’s request for review, the Board called on the parties and interested amici to consider whether the present joint-employer standard is consistent with the Act’s policy of “encouraging the practice and procedure of collective bargaining.”

The Board maintains that it is not introducing a new standard, but rather that it is returning to its traditional pre-1984 joint-employer standard.  Whether two statutory employers are “joint employers of the same statutory employees,” the Board explains, depends on a two-prong test.  The first looks at the extent to which employers “share or co-determine those matters governing the essential terms and conditions of employment” as to “hiring, firing, discipline, supervision, and direction.”  The second weighs the degree to which “a putative joint employer possesses sufficient control over the employee’s essential terms and conditions of employment to permit meaningful collective bargaining.”

Key to distinguishing the old standard from the new is the Board’s interpretation of “control.” While the Board emphasizes that control is central to both inquiries, it distinguishes the new standard from the old, specifying that the new standard “will no longer require” that a joint employer, in addition to possessing control, exercise it.  Further, the Board says that it is “sufficient” for the control to be exercised indirectly through an intermediary.  Notably, the ruling “expressly overrules, TLI, LaercoAirborne Express and AM Property.”

The two dissenting appointees argue that the new standard “threatens to cause substantial instability in bargaining relationships” that could end up imposing undue burden, risk, and litigation expenses on employers, employees, and unions alike.  For one, they contend that the decision threatens to upend protections that have afforded “neutral employers” secondary boycott protection.  They also reject the majority’s notion that the decision represents a “return to the traditional test,” asserting, rather, that “under common law,” an indication of “indirect control is probative only to the extent that it supplements and reinforces evidence of direct control.”  The dissent lists business relationships that are expected to be most affected by this decision, including the “user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer” relationships.

Indeed, this decision comes on the heels of another ruling by the Board’s General Counsel to issue unfair labor practice complaints against one of the country’s largest fast food chains.  The Board found that McDonald’s Corp. engaged in sufficient control over its franchisee’s operations” through its use of “tools, resources, and technology,” to qualify as “joint-employer.” Moving forward, it is not yet certain how Browning-Ferris will impact the present case against McDonald’s Corp. and franchisees or how the courts will decide cases under the new and broader joint employer theory moving forward.  This decision is but one in a string of more activist undertakings by the Board.  Employers should anticipate continued Board rulings that may change the business landscape in the coming years