NLRB’s Browning-Ferris Decision Expands Joint Employer Liability

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Recently, the National Labor Relations Board (“NLRB”) drastically expanded joint employer liability under the National Labor Relations Act (“NLRA”). In a 3-2 decision involving a Local 350 union, which had filed a representative petition that sought to represent sorters, housekeepers, and screen cleaners employed by a subcontractor Leadpoint, the NLRB modified its standard for determining joint-employer status. Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015) (slip op. available here). Initially, Local 350’s petition alleged that that Browning-Ferris, a waste and recycling services company, jointly employed the workers with Leadpoint because Leadpoint had contracted with Browning-Ferris to provide temporary labor to manually sort materials, clean the screens on the sorting equipment and clear jams, and clean the recyclery. After a hearing, a decision was issued, holding that Leadpoint was the sole employer because it had sole control over recruiting, hiring, counseling, disciplining, and terminating its employees. Then, Local 350 filed a request for review of the decision that Browning-Ferris and Leadpoint were not joint employers. The Board granted the petition for review in April of 2014, and issued the present decision.

Under the new standard, two separate entities will be found to be joint employers under the NLRA if “they ‘share or codetermine those matters governing the essential terms and conditions of employment.’ . . . [T]he initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.” Slip op. at 2, citing NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117, 1123 (3d Cir. 1982). In short, the NLRB may find the entities to be joint employers where (1) they are both employers within the meaning of the common law; and (2) they share or co-determine matters governing the essential terms and conditions of employment indirectly or whether they both have the authority to do so. For example, if Company A, that obtained workers from Company B, has a mere right to control elements of employment such as salary and working conditions, then both companies may qualify as employers.

This decision is likely to have profound implications for companies that rely on third-party labor providers because previously, those companies had to exercise “direct and immediate” control over workers. Slip op. at 7. The majority stated that it chose to “restate the Board’s legal standard for joint-employer determinations and make clear how that standard is to be applied going forward,” returning to the “traditional test” used by the Board. Id. at 15. Under the new regime, the courts and regulators will take a case-by-case approach in determining whether companies have the potential to affect pay and working conditions of the contracted employees. “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.” Id. at 16. Notably, the Board stated it would “no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but must also exercise that authority, and do so directly, immediately, and not in a ‘limited and routine’ manner,” thus overruling prior Board decisions to the extent they are inconsistent with this decision. Id. at 15-16. 

Indeed, under the new approach, many companies, including franchisors or users of staffing agencies, may become wary of relying on labor services provided by third parties, because such an arrangement may substantially expand these companies’ potential liability. On the other hand, the NLRB’s approach is likely, in its own words, to avoid requirements that are “increasingly out of step with changing economic circumstances,” and “significantly and unjustifiably narrow the circumstances where a joint-employment relationship can be found.” Slip op. at 31. Labor providers frequently have little control over their employees, whose daily working conditions are determined by policies and practices of the companies that hire those employees. The new rule, therefore, ensures that companies that rely on contract or temporary employees may not shield themselves from liability merely by citing their third-party status.

Authored By:
Stan Karas, Senior Counsel