On Thursday, August 27, 2015, the National Labor Relations Board (NLRB) issued a decision with far-reaching implications for companies that do business with contractors and franchisees.
The decision, issued against Browning-Ferris Industries of California, a waste-management firm, issued new standards for determining whether a company qualifies as a joint-employer in contractor and franchisee situations. (Interestingly, the NLRB’s old standards, the joint-employer definition arose from a case also involving a Browning-Ferris Industries subsidiary company).
Under the old standard, a joint employer had to both possess and exercise directly the authority to control the terms and conditions of employment. Thus, a company could avoid this status by reserving this authority but never exercising it. Petitioners seeking to hold a company liable as a joint-employer had to prove that the company exercised direct, immediate, and substantial control over workers. This standard started in approximately 1984 and replaced a more relaxed definition of joint-employer that focused on a company’s ability to “share or codetermine” the conditions of employment.
The Board, as part of its August 27 decision, has now rejected explicitly the need for direct and immediate control in determining joint-employer status. The decision makes clear the Board’s intention to revert its previous standard of examining the extent to which a putative joint-employer possessed the right to control employment and focus less on how and to what extent the company exercised that control. Instead, the Board has reverted to common law definitions of employment: “The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”
The Board has laid out specific factors to examine in determining whether two or more entities share or codetermine the conditions of employment. These include examining the employment relationship as to issues such as wages and hours, hiring, firing, discipline, supervision, and direction. The Board will also look to whether labor agreements provide for control over the number of workers, scheduling, and determining the method of work performance.
This restated standard has led to a lot of fear and uncertainty as it relates to sub-contracted labor agreements. The dissenting opinion in the NLRB decision was three times as long as the decision itself. Business owners have warned that the new standard will alter significantly franchise agreements for restaurants such as McDonald’s and Burger King. A case against McDonald’s is already pending. Other business owners have voiced concerns that the ruling may lead to many businesses refusing to work with staffing agencies and subcontractors for fear of being held liable.
As a result of the ruling, Browning-Ferris can now be pulled into collective bargaining negotiations with contractor’s employees who are looking to form a union.
browning ferris nlrb, joint employer definition, HR Insights