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By: Tim Holdsworth
On August 27, 2015, the National Labor Relations Board discarded thirty years of precedent and handed down a new and expanded definition of joint employer. See Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015). This decision comes on the back of the National Labor Relations Office of the General Counsel’s determination last year that McDonald’s USA, LLC, could be named as a joint employer in forty-three unfair labor practice complaints against its franchises, as previously discussed here.
In the August decision, the Board found that an entity is a joint employer if (1) there is a common-law employment relationship between the employee and employer, and (2) the entity possesses sufficient control over an employee’s essential terms and conditions of employment. In determining the entity’s control the Board announced two major departures from precedent in their inquiry, although the majority characterized these changes as merely “reaffirm[ing]” the standard articulated by the Third Circuit in N.L.R.B. v. Browning-Ferris Indus. of Pennsylvania, Inc., 691 F.2d 1117, 1119 (3d Cir. 1982). First, they will no longer require a joint employer to possess and exercise authority to control employees’ terms and conditions of employment, but instead will find sufficient control if the entity merely reserves this authority. Second, they will no longer require the entity’s control to be exercised directly and immediately. Instead, the Board declared that control exercised indirectly, such as through an intermediary, can establish the requisite control.
Applying this new standard, the Board found that Browning-Ferris Industries, the owner of a recycling facility, was a joint employer with Leadpoint, its subcontractor, for workers supplied by Leadpoint that would manually sort materials, clean screens and clear jams on the sorting equipment, and clean the facility.
Although this decision only sets an NLRB standard and has not yet been endorsed by a federal court, given the uncertain scope of what constitutes “indirect control” sufficient to determine an entity is a joint employer, it clearly reaffirms the agency’s effort to dramatically expand employer liability despite decades of contrary decisions. We might also see the NLRB’s standard gain traction in federal courts, where plaintiffs are already pushing for an expansion of employer liability to franchisors under different theories.
In sum, the Agency’s decision to expand the joint employer standard may have a profound effect not just on franchisors, but on labor relations and business relationships in general.