NLRB Changes Joint Employment Standard, with Far-Reaching Implications for Employers

David Phippen, Constangy, Brooks, Smith & Prophete LLP

This article originally appeared in Constangy, Brooks, Smith & Prophete LLP’s client bulletin.

The National Labor Relations Board issued yesterday its long-awaited ruling in Browning-Ferris Industries and, as expected, changed the standard for determining joint-employer status. If the decision stands, it will dramatically change the dynamics of organizing campaigns and elections before the Board, expand the range of “target” employers vulnerable to potential unfair labor practice charges, and remove important flexibility in establishing and ending business relationships between contractors, subcontractors and suppliers.

(We have previously covered the Browning-Ferris/joint employer issue herehere (scroll down to Browning-Ferris: Joint Employer Standard), and here.)

In yesterday’s decision, the NLRB’s three-member Democrat majority concluded that BFI was a joint employer of workers provided by Leadpoint Business Services, Inc., a contract staffing agency, at a recycling facility in California that was controlled by BFI. The Board majority contended that the Boardís prior joint-employer standard, which generally required direct, immediate, and actual exercise of control over the workers, was outdated in light of the increased use of contingent workers in American workplaces.

Under the new standard, two or more entities can be considered “joint employers” if the entities are “employers” under common law, and if they share responsibility for or co-determine the essential terms and conditions of the workers’ employment. The Board ruled that an entity can be a “joint employer” if it has the authority to control terms and conditions of employment, even if it does not actually exercise that authority. Reserved control (authority that is not exercised) and indirect control may be enough to establish joint-employer status.

In August 2013, in connection with a representation election at the BFI facility, a Board Regional Director issued a recommended decision that Leadpoint was the sole employer of the contract workers. The Teamsters local involved in the election asked for the full Board to review the Regional Directorís recommendation, and the ballots from the election were impounded. Presumably, the ballots will now be counted in light of the NLRB’s refusal to adopt the Regional Director’s recommendation. If the vote is in favor of the union, BFI or Leadpoint (or both) will probably seek review of the NLRB’s decision by a U.S. Court of Appeals in a “technical refusal to bargain” unfair labor practice case.

Republican Board Members Philip A. Miscimarra and Harry I. Johnson, III (whose term ended yesterday), dissented vigorously, saying that the decision was “the most sweeping of recent major decisions,” rewriting the longstanding test for determining joint employer status. According to the dissenting members, “This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts and picketing.”

The import of the Board’s decision, assuming it ultimately stands, probably cannot be overstated. For example, a “user” employer of contract employees would no longer be able to readily extricate itself from labor problems of a supplier/contractor employer by simply terminating the contract with the supplier/contractor. We expect the Board to use the BFI standard as a basis for finding franchisors and franchisees to be joint employers, which will obviously have far-reaching implications for the restaurant and hospitality industries, among others. The Board can also be expected to approve multiemployer bargaining units consisting of a combination of workers who are employed by two or more “joint” employers and workers who are employed by a single employer. In addition to the expected court battles, Republicans in Congress are taking a look at legislation to overrule the Board’s decision.

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