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NLRB Abandons Well-Established Joint-Employer Standard

August 31, 2015

NLRB Abandons Well-Established Joint-Employer Standard

August 31, 2015

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The reformation of the joint-employer standard dramatically expands who is going to be considered an employer for collective bargaining purposes.

On August 27, 2015, the National Labor Relations Board (NLRB or "the Board") issued a 3-2 decision in Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery (32–RC–109684) that changes the well-established joint-employer standard, eliminating the requirement that an employer exercise control over the essential terms and conditions of employment of the employees in order to find joint-employer status. 

The Case 

In this case, the Board considered whether BFI Newby Island Recyclery ("BFI") and Leadpoint Business Services ("Leadpoint") were joint employers of the sorters, screen cleaners, and housekeepers represented by Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters. The Board said it was grappling with whether it should "adhere to its current standard for assessing joint-employer status under the National Labor Relations Act or whether that standard should be revised to better effectuate the purposes of the Act, in the current economic landscape." Upon review, the Board decided to revise the joint-employer standard in order to establish a "clearer and stronger analytical foundation" that would best serve the federal policy of encouraging collective bargaining. Similar to its tact on other issues helpful of union organizing, this change will subject more entities to joint employer status for labor relations and bargaining purposes. 

BFI, the owner and operator of the Newby Island recycling facility, contracts with Leadpoint to provide workers to manually sort material, clean the screens on the sorting equipment and clean the facility at Newby Island. Upon request by the union, the Board reviewed the decision made by the Regional Director that BFI and Leadpoint were not joint employers under the Board’s then-current joint-employer standard. 

In its decision, the Board reaffirmed the joint-employer standard articulated by the Third Circuit in the 1982 Browning-Ferris decision, 691 F.2d 1117 (3d Cir. 1982), enfg. 259 NLRB 148 (1981). Under this standard, two or more individual employers may be considered joint employers of the same employees if they "share or codetermine those matters governing the essential terms and conditions of employment." 

In a two-step process, the Board will first determine whether there is a common-law employment relationship with the putative joint employer and the employees in question. If so, the inquiry will then turn to whether the putative joint employer possesses sufficient control over the essential terms and conditions of the employees' employment. While the Board adhered to the traditional definitional approach of "essential terms and conditions of employment" (i.e., hiring, firing, discipline, supervision and direction, etc.), it eliminated the requirement that a joint employer not only possess the authority to control the employees' terms and conditions of employment, but also exercise that authority. In evaluating the "exercise of control" in the workplace, the Board will now consider the ways in which joint employers may "share control" or "codetermine" the terms and conditions of employment. Ultimately, the Board held that "the right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect."

What This Means for Employers 

The reformation of the joint-employer standard dramatically expands who is going to be considered an employer for collective bargaining purposes. Corporations, small and large alike, potentially could be subject to bargaining obligations that they were not aware they had and may have greater exposure to liability for unfair labor practice violations by subcontractors and franchisees. 

Employers are likely going to see additional changes on the joint-employer front in the near future, as the NLRB recently invited the filing of briefs to address issues raised in Miller & Anderson, Inc. (05–RC–079249), including whether the Board should adhere to its 2004 decision in Oakwood Care Center (343 NLRB 659)—which held that consent of the employer is required before allowing the inclusion of solely employed employees and jointly employed employees in the same bargaining unit—or return to its earlier holding in M.B. Sturgis, Inc. (331 NLRB 1298) that determined consent was not required. 

In light of this new standard and the upcoming Board decision in Miller & Anderson, Inc., employers should consider evaluating their existing service agreements and, if necessary, revising any terms of these agreements pertaining to the right and ability to control the terms and conditions of the contingent employees. Employers should also consider the broader implications of a joint-employer conclusion under the NLRA for purposes of union-organizing efforts or other federal and state employment laws due to the potential exposure to liability for employment-related claims since such analysis may prompt modifications to an employer's policies and procedures to minimize such risks. 

For Further Information 

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.