On August 27, 2015, the National Labor Relations Board (NLRB) issued its anticipated decision in Browning-Ferris Industries, Case 32-RC-109684, significantly expanding its standard for assessing joint-employer status for private-sector entities. The National Labor Relations Act (NLRA) governs labor relations between private sector employers sufficiently engaged in interstate commerce and their employees. Under the NLRA, a “joint employer” consists of two or more separate entities that “share or codetermine” matters governing a workforce’s essential terms and conditions of employment. Joint employers, in the NLRA context, essentially are treated as the same employer.
For much of the last 31 years, the Board has assessed joint-employer status using a standard developed in TLI, Inc., 271 NLRB 798 (1984), and Laerco Transportation, 269 NLRB 324 (1984). Under this standard, the Board required the party advocating for joint-employer status to provide evidence of the following: (1) that the alleged employer had direct and immediate control over the workforce, (2) that the alleged employer exercised that control in practice, and (3) that the employer’s exercise of that control was/is substantial and not “limited and routine.”
The Board’s Browning-Ferris decision explicitly overturns TLI-Laerco. Instead, in determining whether an entity exercises control over the terms and conditions of employment, the Board will now consider a “reserved” right to control, regardless of whether the entity actually exercises that right. Further, the Board will no longer require that an entity exercise direct and immediate control over a workforce – indirect control will now be sufficient. When assessing the issue, the Board will now take a broad look at the alleged joint employer’s control of the workforce. A business entity may, for example, indirectly influence a contractor’s workforce’s employment terms through contract, negotiation, or pressure to maintain the business relationship. The Board will consider such indirect influence a factor towards finding joint-employer status between the business entity and the contractor.
The NLRB’s Browning-Ferris decision enlarges the number of business entities considered to be a joint employer under the NLRA. Initially, business entities that contract with professional/temporary staffing agencies and franchisors will be most affected by the Board’s new standard. The NLRB will look at the service/franchise contract and determine whether a party has reserved the right to control the terms of employment. For example, does the entity require the workers supplied by the staffing agency to submit to a drug test, or does the entity reserve the right to refuse to allow a staffing-agency employee onto its premises? Does the Franchisor require the franchisee’s employees to maintain a certain professional standard or appearance? Does the alleged joint employer possess control over wages, hours, overtime, vacation time, et cetera? The Board will now look to several control-based factors, and it is no longer required that an entity actually or directly exercise the control it possesses in order to be found to be a joint employer.
Besides incurring the obligation to bargain with unionized workers over the terms and conditions of employment, the employer could also be subject to Union activities designed to apply economic pressure—e.g. boycotts, picketing—without such activities constituting an unfair labor practice; i.e., a joint employer is considered a “primary employer” for purposes of the secondary-activity prohibition. It is also worth noting that small businesses who otherwise would not have qualified as an “employer” under the NLRA might become a statutorily-covered employer if it is deemed to be a joint employer.
It will take some time before employers can fully understand the implications of the NLRB’s Browning-Ferris decision. The Board’s new joint-employer standard may likely be challenged in the courts as well. In the meantime, employers should review their service contracts, identify areas they potentially may exert control over a contractor’s workforce, and plan or renegotiate as appropriate.
If you have any questions or concerns, please contact Fishel Hass Kim Albrecht attorneys.