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The NLRB Broadens the Joint Employer Liability Test

September 8, 2015

In a much-anticipated landmark decision, the National Labor Relations Board (NLRB) has revised the test used in defining “joint employers” for the purposes of the National Labor Relations Act (NLRA). This decision has serious implications for many employers.

Commonly, an employee who works for one employer may be contracted to perform work for another organization, such as an appliance repairman sent from his company to repair a dishwasher at a restaurant. The NLRB has long recognized that it is possible for both companies to have enough control over the worker to be considered “joint employers” of the worker and thus jointly liable for NLRA violations. The NLRB, in Browning-Ferris, 362 NLRB No. 186 (Aug. 27, 2015), has broadened the current “joint employer” test to encompass more employers, with the purpose of expanding collective bargaining rights for the contingent workforce. While the full scope and impact of the new test are not yet known, the ruling could potentially create NLRA liability for many employers engaged with contractors, temp agencies, or even franchisees.

Prior to the Browning-Ferris decision, the test for whether an employee had two joint employers was whether each employer possessed and exercised control over terms and conditions, and did so directly, immediately, and not in a “limited and routine manner.” Under this test, if a company had the contractual rights to hire, fire, or otherwise control the duties of workers, but never actually exercised those rights, it could escape liability as an employer under the NLRA.

The NLRB opined that the test was unnecessarily narrow and did not satisfy the purpose of the NLRA, which is to protect the right of workers to negotiate terms and conditions with their employers. Under the new test, two entities may be joint employers of the same workers if they are deemed employers under common law, and share or co-determine matters that govern essential terms and conditions of employment. The Board disposed of the requirement that an employer actually exercise control over terms and conditions, instead requiring only the right to exercise control. The new test aims to create an employment relationship in any situation that would permit workers to meaningfully collectively bargain over those terms and conditions.

The Board noted the importance of possessing control over certain terms and conditions, including the right to hire, fire, control wages, set working hours, approve of overtime, supply a set number of work hours, determine the manner and method of work performance, inspect and approve work, and terminate the contract at will.

In this case, Browning-Ferris (BFI) contracted with LeadPoint to use LeadPoint employees in its recycling facility, operating conveyor belts. The contract gave BFI the authority to discontinue the use of any LeadPoint employee, and give certain parameters for who LeadPoint could hire, even though BFI did not exercise these rights. BFI also controlled the speed of production, provided a wage cap on LeadPoint employees, and gave instructions and trainings to LeadPoint employees regarding the efficiency and speed of their work. Further, BFI controlled the shifts to be worked and the number of employees that would work each of those shifts. According to the NLRB, BFI was a joint employer for NLRA purposes because the level of control that it possessed over the employment terms and conditions made it impossible for workers to collectively bargain with LeadPoint over those terms and conditions without simultaneously bargaining with BFI.

The new NLRB test may change the way many employers conduct business with other contractors. For example, an employer that outsources cleaning, janitorial, maintenance, or management services, or one that uses temp agencies, now needs to review its contract in light of the new test to gauge the extent of its right to control terms and conditions of employment. While the full scope of the Board’s ruling is not yet known, franchisors may likewise need to observe their franchise agreements with franchisees to determine whether they may now be jointly liable for NLRA violations against workers.

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