• 10/26/2015

    Joint Employment (Browning-Ferris)

    Client Alert

    Written by: Joshua L. Weiner

    The National Labor Relations Board (NLRB) recently issued a decision that dramatically altered the standard to assess "joint employer liability" under the National Labor Relations Act, 29 U.S.C. §§ 151-169 (NLRA), creating a potential legal quagmire for employers and their investors, franchisers, affiliates and contractors.

    In Browning-Ferris Indus. of Cal., 362 NLRB No. 106 (Aug. 27, 2015), the Board substantially altered long-established precedent for deciding when multiple businesses may be deemed joint employers under the NLRA. This new standard makes it easier for labor unions to hold a nonunion company responsible for the collective bargaining obligations and the labor law violations of a unionized employer or one undergoing union organizing efforts by its employees.

    The potential ramifications for businesses cannot be minimized or understated. From here on out, all companies that have contingent or alternative employment relationships, joint business models, subcontract or franchise arrangements must be mindful of Browning-Ferris and begin reviewing these arrangements in order to determine potential joint employer liability.

    Browning-Ferris Standard

    For years, the NLRB found a company to be a joint employer only if it actually exercised direct and immediate control over essential employment conditions and terms of the unit of workers at issue. Under the new standard articulated in Browning-Ferris, however, two different businesses can be found to be joint employers merely because one possesses—even if it does not actually exercise—sufficient control over the workers' essential employment conditions and terms. The Board justified the change by claiming that this new standard is simply a reiteration of past NLRB precedent, but that now also accounts for the underlying need to keep pace with the increase in contingent employment relationships prevalent in the labor market today. In actuality, however, Browning-Ferris is a stark departure from its prior holdings on joint employment.

    Eschewing a traditional Board analysis, the NLRB in Browning-Ferris concluded that control over an employment relationship may exist simply due to the "right to control"—and not solely based on actual control. The NLRB disregarded prior Board precedent, which it found to impermissibly ignore this concept. The NLRB went on to decide that two or more businesses are joint employers of a single workforce "if both are employers within the meaning of the common law, and if they share or co-determine those matters governing the essential terms and conditions of employment." In light of this determination, a company that merely has the right to exercise control or influence over some of the employees' terms and conditions of employment, but nonetheless has not or otherwise chooses not to do so may sufficiently qualify as creating a joint employment relationship.

    Is Browning-Ferris Here to Stay?

    Shortly after the NLRB issued its decision in Browning-Ferris, Congress introduced legislation, called the Protecting Local Business Opportunity Act, S. 2015/H.R. 3459, to attempt to reverse the new Browning-Ferris standard by amending the definition of “employer” under the NLRA to include two or more employers that share and exercise (as opposed to the mere possession of) control over the essential terms and conditions of employment, and that “such control over these matters is actual, direct, and immediate.” It is unlikely the Obama administration will sign any such legislation into law. Thus, the most feasible option to overturn Browning-Ferris is through a direct appeal of the decision to the United States Court of Appeals.

    What Should Employers Do Now?

    For now, businesses, including franchisors and large conglomerates with multiple operating companies, are left with an unclear standard to navigate when entering into subcontracts or investor relationships involving active participation. In those relationships, the governing legal document may be instrumental to establish a joint employer relationship. Also, operational control—or reserving operational control—by one company over another may suffice to create joint employer liability for labor matters.

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