The Browning-Ferris decision overturns 30 years of precedent and opens up a wide variety of business relationships to allegations of joint-employer status, including staffing agencies, on-site contractors, outside suppliers, and franchise relationships.
In a decision issued on August 27, the National Labor Relations Board (NLRB or the Board) overruled 30 years of joint-employer jurisprudence, announcing that it will no longer require direct and immediate control over terms and conditions of employment to establish a joint-employer relationship. Instead, a joint-employer relationship may be found based on the right to control terms and conditions of employment, even if that control is indirect and/or unexercised. This new standard can be applied to a wide variety of business relationships in which one employer contracts for the work of another business entities’ employees, including outside suppliers, on-site contractors, and franchisees.
The Board, with court approval, has historically applied the joint-employer analysis set forth in TLI and Laerco Transportation to determine whether a particular group of employees is solely or jointly employed by one or more employers. In TLI and Laerco, the Board rejected the notion that indirect, minimal, or hypothetical control should establish a joint-employer relationship and concluded instead that joint-employer status would require proof of a significant degree of direct and immediate control over the employees in question.
In Browning-Ferris Industries of California, Inc., the Board held that a joint-employer relationship exists if two or more entities “share or codetermine those matters governing the essential terms and conditions of employment.” In applying that standard, the Board announced that it will no longer require direct and immediate control by an alleged joint employer over the terms and conditions of employment to establish a joint-employer relationship. Instead, the right to control, even if indirect and/or unexercised, may be sufficient to establish a joint-employer relationship.
In analyzing whether a joint-employer relationship exists, the Board stated that a case-by-case, fact-intensive evaluation of the allocation and exercise of control in the workplace must be undertaken. This case-by-case analysis will be informed by several key principles:
This case-by-case approach does not yield any bright-line rules that would provide clear guidance about when a joint-employer relationship is present. However, the Board included a potentially significant qualification of the scope of its decision when it disclaimed that “a putative employer’s bare rights to dictate the results of a contracted service or to control or protect its own property constitute probative indicia of employer status.” Thus, it seems that the Board analysis in future cases will focus on whether the alleged joint employer, in protecting those basic business interests, “affects the means or manner of employees’ work and terms of employment.”
Although these general principles are subject to definition in future cases, the application of the standard to the facts of this case are illustrative of the type of control that will give rise to joint-employer status under the Browning-Ferris standard. In finding that Browning-Ferris Industries (BFI) was a joint employer with its subcontractor, Leadpoint, the Board relied on the following factors:
The Browning-Ferris decision opens up a wide variety of business relationships to allegations of joint-employer status, including staffing agencies, on-site contractors, outside suppliers, and franchise relationships. Employers should review their contracts and business practices with respect to suppliers, contractors, and other business partners to evaluate the risk of a joint-employer finding. The Board made clear that a finding of joint-employer status under the National Labor Relations Act (NLRA) “does not govern joint-employer determinations under the many other statutes, federal and state, that govern the workplace.” But, as noted by the dissent in Browning-Ferris, a finding of joint-employer status under the NLRA can have many significant implications:
In short, the impacts of the Browning-Ferris decision are wide ranging and affect many types of business relationships in many industries. Morgan Lewis will host a webinar in the near future to discuss these issues in more detail.
If you have questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
David A. McManus