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Employment Matters Blog

NLRB Adopts New Joint Employer Test: Companies That Kind of, Sort of, Maybe Someday Could Exercise Control Over Employees Can Be Joint Employers

Posted in employer liability, NLRB

The NLRB dropped a major bomb on businesses in subcontracting, franchising, and temporary staffing relationships yesterday, adopting a new—very, very broad—definition of joint employment. In Browning-Ferris Industries of California, Inc., a 3-2 decision, the NLRB decided that workers at a Browning-Ferris recycling facility were not only employees of subcontractor Leadpoint, but also were employees of Browning-Ferris—this even though Browning-Ferris never actually exercised its authority to control the terms and conditions of the workers’ employment.

The NLRB’s Browning-Ferris decision reverses a regional director’s determination that no joint employment existed with respect to the recycling plant workers, and, more importantly, completely changes the definition of “employer” under U.S. labor law. Since 1984, the NLRB has considered a company a joint employer for National Labor Relations Act purposes only if it exercised direct control over working conditions. Now, a company may be deemed a joint employer if it simply exercises indirect control or even just reserves the right to do so. Note: The decision has no impact on laws over which the NLRB does not have jurisdiction. So, it does not change or affect the definition of who is an employer for tax or benefits purposes (e.g., the Affordable Care Act or the multitudinous rules governing retirement and welfare plans under the Internal Revenue Code, ERISA, and the Public Health Service Act) or under Title VII or other laws.

But, the NLRB’s “kind of, sort of, maybe someday” standard, if not reversed on appeal to the Ninth Circuit Court of Appeals or D.C. Circuit Court, will have a major impact on business as usual when it comes to issues over which the NLRB has jurisdiction.  Indeed, the NLRB issued a statement noting that 2.87 million U.S. workers are employed through temp agencies. This says nothing of the impact it could have on franchising and subcontracting relationships. All kinds of non-union contracting entities who exercise little or no authority over workers’ day-to-day activities could be on the hook for collective bargaining, responding to unfair labor practice charges, and dealing with the impacts of secondary employee strikes.

If this decision stands, the staffing firm industry may take a hit if companies bring employees in-house to avoid any “surprises.”  Whether such a response is justified is another question.  The general counsel for the American Staffing Association, Stephen Dwyer told ASA Staffing Today that prior NLRB decisions that made unionization of temp workers easier “did not demonstrably result in increased unionization of such workers.” As a consequence, staffing industry sources have told us they believe it is unlikely that the ruling will significantly affect the use of staffing services or staffing firm/client relations.

On the flip side, it may not be all sunshine and roses for the unions, which likely will be forced to spend inordinate amounts of time trying to get every entity (the employer’s employer, the employer’s employer’s employer, and on and on) that might possibly have some say in an employee’s work conditions to bargain with them. Note to unions:  Secure a very large bargaining table and many chairs and block off months, possibly years, to reach agreement among all those parties.

Although Browning-Ferris is not this Board’s first push to expand its jurisdiction, it is certainly the most stunningly broad in its potential impact. The dissent from Philip Miscimarra and Harry Johnson states that the majority overstepped the powers granted them by Congress. The outcry from the business community is deafening. Given the opposition, we anticipate that there is are several more chapters left to be written to this story.