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September 4, 2015

On August 27th, the National Labor Relations Board (NLRB) dramatically reinterpreted the “joint-employer” doctrine. Under the National Labor Relations Act (NLRA), “joint employers” are two separate employers that both control the terms and conditions of shared employees-shared in the sense that the employees are employed by an entity that provides temporary labor to work for another employer or with whom that employer subcontracts. Previously, the NLRB’s definition of “joint employer” required both employers to have direct and immediate control over the employee(s) in question. The NLRB has expanded the definition to include any employer that has the right of “actual control whether direct or indirect.”

In Browning-Ferris Industries of California, Inc., (“BFI”), BFI engaged a subcontractor to perform “sorting” work at a recycling facility. The employees were employed by another company, Leadpoint, but were indirectly governed by BFI’s rules and pay structures. The NLRB cited two examples in which BFI asked Leadpoint to terminate an employee for BFI rules violations. BFI did not participate in day-to-day labor relations with the Leadpoint employees, and did not participate in the hiring or general retention of those employees. Nevertheless, the NLRB held that BFI had overarching indirect control over Leadpoint’s employees and consequently should be required to participate in collective bargaining negotiations with a union representing the Leadpoint employees.

We expect this case to be appealed to a United States Circuit Court of Appeals and ultimately to the Supreme Court. We also expect Congress to attempt to amend the NLRA to make this definition unlawful. Nevertheless, unless and until this case is reversed, employers, whether currently organized or not, must be aware that the hiring of contingent workers to augment a regular work force will put them at risk of being found an “employer” of the temporary employees or the subcontractor’s employees. The consequences of that finding may include placing the employer under a duty to bargain and may impose shared liability for any unfair labor practice charges that are filed on behalf of those employees.

The NLRB made it quite clear that this new definition of “joint employer” will replace the prior definition immediately and each case will be decided on its own facts. Consequently, it is necessary that employers that subcontract any work or hire contingent/temporary employees review existing rules and policies regarding such employees.

This case does not directly apply to franchisor/franchisee relationships. However, in a case involving McDonald’s fast food restaurants the NLRB is currently considering whether or not franchisors and their franchisees should be considered joint employers. Browning-Ferris could portend the outcome of this case as well.

Contact: Marc J. Bloch