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August 31, 2015

NLRB Adopts New Joint-Employer Standard

On August 27, 2015, the National Labor Relations Board (“the Board”) announced a new standard for determining whether two employers are joint-employers for purposes of collective bargaining. Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015). The Browning-Ferris decision, which was issued by a 3-2 vote along party lines, no longer requires a putative employer to exercise direct and immediate control over the putative employees in order to be found to be a joint-employer. Rather, the relevant inquiry focuses on whether the putative employer retains the authority to “share or codetermine those matters governing the essential terms and conditions of employment.”

Under the Board’s redefined standard, the proper inquiry involves a two-step approach: First, whether there is a common-law employment relationship between the “user” employer and the employees of the “supplier” employer; and second, whether the putative joint-employer possesses sufficient control over those employees’ essential terms and conditions of employment to permit meaningful collective bargaining. Essential terms and conditions have been defined to include the authority to terminate workers, set wage rates, set working hours, approve overtime, dictate the number of workers to be supplied, determine the manner and method of work performance, inspect and approve work, and terminate the contractual agreement itself at will. The Board stressed that although one firm may make specific personnel decisions and administer the employees’ performance on a day-to-day basis, if it does so pursuant to the guidance of another firm, the employees are in essence subject to two layers of control. In such a scenario, a joint-employment relationship may be found. The Board held that it was enough for the user employer to have the right to control (such as under the terms of the written agreement between the employers), and it did not matter that the user employer did not actually exercise that control.

In issuing its decision, the Board majority stated that Board decisions over a course of many years had improperly narrowed the circumstances where a joint-employment relationship would be found. The Board majority considered the growing number of subcontracting and agency-staffing arrangements, and found that the economic realities that exist today dictate an expansion of the joint-employer standard. The dissenting Board Members argued that, among other concerns, this new test will fundamentally alter the law for user-supplier, lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor and contractor-consumer business relationships. Indeed, the dissent maintains that without citing to any other cases, this decision effectively overrules many other decisions.

Take Away for Employers

The Browning-Ferris decision represents a significant change for businesses that rely on the employees of other employers to provide services. Virtually any right of control over the terms and conditions of employment of the supplier employer’s employees puts the user employer at risk of being held to be a joint-employer. Employers should carefully review all agreements to determine whether the right of control exists and, if so, whether that is what was intended.

The Board did not define the scope of the bargaining obligation of the user and supplier employers. That scope is likely to be defined in future decisions in the coming months and years.

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Please contact us if you have any questions regarding the Board’s new joint-employer standard or for guidance on what steps may be taken to minimize the potential for being found to be a joint-employer.