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NLRB Refines Standard for Determining Joint Employer Status

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NLRB Refines Standard for Determining Joint Employer Status

In Browning-Ferris Industries of California, a 3-2 decision issued on August 27, 2015, the National Labor Relations Board departed from its long-standing principles for determining joint-employer status. In the decision, the Board held that two entities are joint employers if: (1) they are both employers within the meaning of the common law; and (2) they share or codetermine those matters governing the essential terms and conditions of employment (i.e., hiring, firing, discipline, supervision, job responsibilities, work hours, breaks, rules, etc.).

The Board determined that Browning-Ferris Industries of California, Inc., the owner and operator of a recycling facility, was a joint-employer with Leadpoint Business Services, a temporary staffing agency, which employed and provided workers to staff the Browning-Ferris facility. The local union had sought to represent the employees provided by Leadpoint to Browning-Ferris based on a joint employer theory. In finding that Browning-Ferris was a joint employer, the Board relied on indirect and direct control that Browning-Ferris possessed and exercised over the essential terms and conditions of employment of the employees supplied by Leadpoint as well as Browning-Ferris’s reserved authority to control such terms and conditions.

In evaluating whether a company possesses sufficient control over employees to qualify as a joint employer with the employees’ actual employer, the Board now considers whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. In other words, the critical factor under this new standard is whether the company has the right to control the workers. Thus, under the new standard, if a company has the right to exercise control over wages and working conditions, it is a joint employer, regardless of whether that control is actually used. Moreover, under the new standard, control does not have to be direct and immediate, and can be exercised indirectly, through an intermediary. Although the Board characterized the decision as an affirmation of its prior rulings, this decision represents a departure from its prior rulings, which only found joint employer status when employees were actually under a company’s direct control.

This decision is expected to impact collective bargaining with employers that use staffing companies and franchisors, who may indirectly control employees of franchisees. Following this decision, employers would be wise to reevaluate their contracts and the structuring of their business relationships with temporary staffing agencies to determine whether changes should be made. In addition, the Browning-Ferris decision will provide the Wage and Hour Division further support for its recent guidance regarding misclassification of employees as independent contractors under the FLSA, which emphasizes the degree to which an individual’s work is an integral part of the business and whether the worker is economically dependent on the employer, and downplays the amount of control the business exercises over the individual’s work. Under these circumstances, employers should carefully review their independent contractor agreements to determine whether there is a risk of misclassification or joint-employer status.