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NLRB Expands “Joint Employer” Definition

By Jay M. Dade and Stan Hill

In a pivotal decision on August 27, the National Labor Relations Board “refined” its test for determining joint-employer status, broadening the scope of employers subject to joint collective bargaining and concerted activity obligations imposed by the National Labor Relations Act.  In a 3-2 split party-line decision in Browning Ferris Industries of California, Inc., the Board held that the power to exercise control over a workforce, rather than whether such power is actually exercised, is the appropriate lens for assessing joint employment.   This new joint employment test arms the NLRB and unions with a tool to potentially exert greater influence in so-called “fractured” workplaces, which include franchised businesses, sharing economy businesses, and any company leveraging independent contractors.

Specifically, the Board held that two or more entities are joint employers of a single workforce if (1) they are both employers under the common law definition of employer;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment. Central to both of these inquiries is the existence, extent, and object of the putative joint employer’s control.

The Board majority rejected several “limiting requirements” found in prior Board precedent.  The Board “will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority.”  The Board hinted that the power to control may arise from the terms of an operating agreement or other contract between joint employers.  In addition, joint employment now may arise through indirect control of a workforce using an intermediary, and such control need not be “exercised directly and immediately.”

Picking apart prior precedents, the Board majority observed the following factors may be probative of joint employment:

  • retaining the contractual power to reject or terminate workers;
  • setting wage rates;
  • setting working hours;
  • approving overtime;
  • dictating the number of workers to be supplied;
  • determining the manner and method of work performance;
  • inspecting and approving work;
  • terminating the contractual agreement itself at will.

Applying what appears to be a new standard cobbled together from several precedents, the Board majority found that Browning Ferris Industries of California, Inc. was a joint employer with Leadpoint, whose employees performed various work for BFI, including cleaning and sorting of recycled products. In ruling there was a joint employment relationship, the Board relied on the control, both direct and indirect, that BFI not only asserted, but also reserved, over essential terms and conditions of Leadpoint employees’ employment.

The watershed Browning-Ferris decision, though still subject to judicial review in what is expected to be an appeal by Browning Ferris Industries, sets a new, extremely broad standard for joint employment under the National Labor Relations Act.  Companies that regularly utilize contract labor as well as those in franchisor-franchisee relationships should closely monitor the progress of this case through the anticipated appeal process, and review their operations under the tenets of this decision with outside labor counsel.