NLRB Announces Monumental Change to Joint Employer Test

Written by Scott M. Wich

For the past three decades, employers have enjoyed the benefit of a relatively predictable and common sense standard for determining joint employer status. Among other things, if an employer did not exercise authority over the workers of another employer, the NLRB routinely held that no joint employer relationship existed. In Browning-Ferris Industries of California, the NLRB has abandoned this standard and announced a new test that will vastly expand the bargaining obligations of many employers.

In a 3-2 split decision that included a lengthy dissent, the NLRB held that a workforce can be considered jointly employed when the two employers “share or co-determine those matters governing the essential terms and conditions of employment.” The NLRB went on to hold that actual sharing or co-determination of such matters is not necessary for a finding of joint employer status. Rather, if an employer has the authority or reserved right to share in the governance of the workforce, the NLRB will now find the workforce to be jointly employed. For example, as noted by the NLRB’s majority opinion, if a contract merely reserves a right to set a particular condition of employment, a joint employer relationship could be found even if that right was never exercised.

“Essential terms and conditions of employment” include traditional issues such as hiring, firing, discipline, supervision, direction, wages and hours, the NLRB noted. However, the NLRB highlighted that a right to control other terms, such as the number of workers to be supplied, scheduling, seniority, overtime, assignment of work or determining the manner and method of work performance, would also be sufficient to establish joint employer status.

As reported in the New York Times, the U.S. Chamber of Commerce has commented that the Browning-Ferris decision “could be one of the more significant by the NLRB in the last 35 years.” It is very likely to be challenged in the courts and, further, fuel efforts before Congress for relief. In the meantime, the decision has an immediate impact on all employers who contract with other entities, such as staffing, service or temporary agencies, concerning the provision of labor. The decision is also likely to impact the labor law as applied to franchisors, currently being litigated in the McDonald’s cases, as well as other workplace arrangements involving multiple employers.

Any employers who maintain a relationship with an outside business that involves the use of the workers of that business should promptly review that relationship, both on paper and in practice, to assess their new labor law risk profile. If you need any assistance with the NLRB’s new joint employer standard or have any questions concerning this article, please contact its author or your Clifton Budd & DeMaria attorney.

About the Author
Scott M. Wich
Partner
Mr. Wich is a regional attorney focusing on providing local, regional and national clients with services concerning management-related labor and...
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