NLRB Adopts Broader Standard for Determining Joint-Employer Status

NLRBOn August 27, 2015, the National Labor Relations Board (“the Board”) “refined” its standard for determining joint-employer status pursuant to its decision in the Browning-Ferris Industries case.  In a 3-2 party-line decision, the NLRB reversed an August 2014 ruling that found Leadpoint Business Services Inc. to be the sole employer of the workers at the BFI recycling facility where the local Teamsters union attempted to organize.  As part of its reversal, the Board announced a new joint-employer standard that is significantly broader and more inclusive than the standard the Board has upheld for the past 30 years.

In its “restatement” of the legal standard, the Board explained that it may find two or more entities are joint employers if (1) they are both employers within the meaning of the common law and (2) they share or codetermine those matters governing the essential terms and conditions of employment.  In evaluating the control an entity has over essential terms and conditions of employment, the Board will assess the actual exercise of direct and/or indirect control, as well as determine whether such control has been reserved by the entity in question.  To make this determination, the Board will consider, for example, whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary or whether it has reserved the authority to exercise such indirect influence.  The Board also took an inclusive approach in defining the terms and conditions of employment to mean dictating the number of workers to be supplied; controlling scheduling, seniority, and overtime; assigning work; and determining the method and manner of work among other considerations related to hiring, firing, supervision, and wages/hours.

This new standard adopts more of a “totality of the circumstances” approach, requiring “a full assessment of the facts” in each case.  The dissenting Board members criticized such an approach, pointing out that it provides little to no predictability or certainty in who would be considered a joint-employer, and could potentially allow the most tangential evidence to suffice to support joint-employer status.  The majority, however, responded that a definitive formula is not appropriate for this type of evaluation and that a full assessment of the facts and incidents should prevent a finding of joint-employer status where there is only tenuous indications of control in a relationship.  In its explanation of how the standard will be employed, the majority made clear that a finding of joint-employer status will be a very fact-specific assessment and require a case-by-case analysis of the level of control asserted by the putative joint-employer.

Under its new standard, the Board determined that BFI was a joint employer with Leadpoint because BFI possessed direct and indirect control over essential terms and conditions of employment of the workers supplied by Leadpoint.  It also determined that BFI reserved authority to control such terms and conditions, which added additional support to its finding in favor of joint employer status.

Although the majority claims that this new standard is simply a “return to the traditional test used by the Board,” in actuality this standard is completely different from prior iterations and will significantly expand coverage of the joint-employer relationship through consideration of indirect and reserved control.  As the dissenting Board members point out, this new test muddies the waters in determining who would likely be considered a joint employer and will likely create instability in bargaining relationships because of its uncertainty.

This decision is particularly significant for every employer currently using or considering using temporary workers through a staffing agency, as well as entities involved in franchisor-franchisee relationships.  As the dissenting members observed, “there is no limiting principle in [the majority’s] open-ended multifactor standard.”  Therefore, the authority exercised and/or reserved by contracting employers or franchisors must be carefully evaluated to ensure it does not impact the essential terms or conditions of employment, particularly those terms or conditions likely to be included in a collective bargaining agreement.  There is no doubt this decision will be used by labor unions to try and organize contract workers, providing another avenue for unionization in an organization that previously had relied on the staffing company to be the “employer” for labor and employment matters.

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