Type: Law Bulletins
Date: 09/01/2015

Who Is the Employer? NLRB Decision Affects Companies Using Leased or Borrowed Employees

In a joint-employment situation, each employer has a responsibility to bargain with a union that represents jointly controlled employees, and each employer may be held liable for unfair labor practices. The National Labor Relations Board (“NLRB”) issued a new decision on Aug. 27, 2015, Browning-Ferris Industries of California, 362 NLRB No. 186, that adopts a new standard for joint-employer status, overturning decades of precedent.

The new standard substantially expands the joint-employer doctrine and potentially affects a wide variety of businesses, including those that obtain labor from employee leasing services or staffing firms and those that regularly contract out non-core services (i.e., cleaning, janitorial and maintenance services or shipping services). The decision may also have implications in the franchisor-franchisee setting.

Under the new standard, a company may be a joint employer if it merely has the right to control essential terms and conditions of employment, even if it does not exercise that right. Under the old standard, the employer also had to actually exercise its right to control, and it had to do so directly, immediately and not in a “limited and routine” manner. The NLRB explicitly eliminated those requirements, stating, “[t]he right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect.” 

Essential terms and conditions of employment include “hiring, firing, discipline, supervision, and direction”; “wages and hours”; “dictating the number of workers to be supplied; controlling scheduling, seniority, and overtime; and assigning work and determining the manner and method of work performance.”

Even if your company does not currently have unionized employees, this decision can impact you if there is an organizing campaign at your company or complaint from workers or leased workers.

If a company retains the right to control or it indirectly controls essential terms and conditions of employment, such that meaningful collective bargaining over those subjects would be permitted, that company may well be a joint employer under the National Labor Relations Act (“NLRA”). A company may have indirect control if it imposes requirements or conditions upon the intermediary employer, such as minimum qualifications and pre-requisites for employment, or establishes ceilings on wages the intermediary may pay employees. Retaining the right to reject workers provided by the intermediary may also amount to sufficient control.

In sum, if the company contracting for labor services retains control over or indirectly controls essential terms and conditions of employment, it may be a joint employer. Employers should reexamine and revise current practices to reduce the risk of being found a joint employer under the NLRA.

This test could well be adopted by other governmental agencies. The question of who is actually the employer when there is more than one company involved has been the subject of confusing and often conflicting decisions by different administrative agencies. This decision already has implications for most American companies, and the circumstances under which the test is applied could expand significantly.

For more detailed information or to address a specific question regarding how the NLRB’s recent decision affects you, please contact one of Taft’s Labor and Employment attorneys.

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