On August 27, 2015 the National Labor Relations Board (NLRB), in a high-impact, 3-2 decision along party lines, handed labor unions a significant advantage in their enforcement of collective bargaining laws by significantly modifying its longstanding “joint employer” standard. The ruling will surely leave countless businesses potentially liable for violations of labor laws committed by their subcontractors and franchisees.

The NLRB’s decision in Browning-Ferris Industries of California, Inc. explored the question of whether Browning-Ferris Industries (BFI) was a “joint employer” with Leadpoint, a staffing services company, in a union representation election covering Leadpoint’s employees who were placed with BFI on a temporary basis. The NLRB concluded that BFI and Leadpoint are joint employers with respect to dozens of temporary workers under the representation petition filed by Teamsters Local 350. In a lengthy opinion addressing the historical evolution of the “joint employer” standard under the National Labor Relations Act (NLRA), the Board focused on BFI’s indirect control and reserved contractual authority over essential terms and conditions of employment of the Leadpoint-supplied employees.

The Browning-Ferris decision has been anticipated ever since April of 2014, when the NLRB’s General Counsel, Richard Griffin, invited amicus briefs in the case and suggested perhaps that the “joint employer” standard should be expanded to include a company that “exercised direct or indirect control over working conditions, had the unexercised potential to control working conditions, or where ‘industrial realities’ otherwise made it essential to meaningful bargaining.” For the past 30 years, two companies were considered “joint employers” only when they shared or co-determined matters governing the essential terms and conditions of employment, such as possessing and exercising the right to hire, terminate, discipline, supervise and direct the employees. The type and degree of control sufficient to render a company a “joint employer” with another entity could not be indirect or potential but must be actual, direct, substantial and immediate.

Under Browning-Ferris, a company may now be considered a “joint employer” for purposes of compliance with the NLRA even if it has no direct control over the employee’s working conditions, and even if it has never exercised control or influence it may contractually have over the employee’s working conditions. Indeed, the Browning-Ferris dissent, authored by Board members Miscimarra and Johnson, states “the number of contractual relationships now potentially encompassed within the majority’s new standard appears to be virtually unlimited.” By way of example, Members Miscimarra and Johnson cited:

  • “Insurance companies that require employers to take certain actions with employees in order to comply with policy requirements for safety, security, health, etc.;
  • Franchisors’
  • Banks or other lenders whose financing terms may require certain performance measurements;
  • Any company that negotiates specific quality or product requirements;
  • Any company that grants access to its facilities for a contractor to perform services there, and then continuously regulates the contractor’s access to the property for the duration of the contract
  • Any company that is concerned about the quality of the contracted services;
  • Consumers or small business who dictate times, manner, and some methods of performance of contractors.”

The dissent claims the sky is falling on the U.S. business world. Whether this is so remains to be seen, as we wait to see how and to what extent the NLRB, as they review future representation actions, will apply the new and expansive “joint employer” standard to business relationships far beyond its historical scope. Without question, small business owners and franchisors could be significantly impacted by this decision, as many have traditionally relied on independent entities to promote and operate tentacles of their businesses with limited oversight corporate overisght.

A prudent employer will want to consider the new Browning-Ferris standard in evaluating its current business practices and its relationships with all third party vendors and service providers with an eye toward eliminating, or at least minimizing, the likelihood that it may be deemed a “joint employer” under the NLRA. This will be a tough task, however, as the NLRB has provided precious little guidance as to how an employer can avoid that designation in the future. The uncertainty itself may lead many employers to either end longstanding relationships with third party organizations – subcontractors, franchises and employment agencies, to name just a few – or distance themselves so far from those organizations in an effort not to be considered a “joint employer” as to dilute their brand and corporate goodwill.

While the Browning-Ferris decision may certainly be appealed, a reversal could only affect the outcome in that particular case, with the NLRB standing fast to this new, expanded “joint employer” standard for the rest of the corporate world to navigate.

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