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NLRB Drastically Expands Meaning of “Joint Employer"

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By Tyler Tarney

September 15, 2015

The National Labor Relations Board (NLRB) upended decades-old precedent by redefining “joint employer” in the case of Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015). Now, according to the NLRB, indirect control—including potential contractual authority—can result in joint employment. If Browning-Ferris survives judicial review, it will have a tremendous impact on virtually every employer making use of subcontractor, franchise, staffing, or other similar relationships.

Under the Fair Labor Standards Act (FLSA), two or more employers can simultaneously employ someone. This is significant because joint employers are “individually and jointly” liable for FLSA requirements, including overtime and minimum wage. Historically, joint employment situations required direct and immediate control over the “essential terms and conditions of employment,” which typically involved hiring, firing, discipline, supervision, and exercising discretion. Possible, limited, or routine control didn’t cross this line.

The NLRB, the administrative agency charged with enforcing federal labor laws, ruled that a waste management business jointly employed a staffing company’s employees. The NLRB ruled that—assuming a common law employment relationship exists—indirect control or potential contractual authority over the terms and conditions of employment may result in joint employment. The NLRB called the old standard “narrower than statutorily necessary” and extended the control inquiry to: the number of workers supplied; scheduling restrictions; seniority; overtime; assigning work; and determining method of performance.

Gauging the full impact of Browning-Ferris will take years. Despite the decision and that employees can move to enforce NLRB decisions in the federal courts, this high-stakes dispute will be appealed and could be overturned by the Ninth or D.C. Circuits or the Supreme Court. A White House shift could also end the NLRB’s pro-labor leadership and reverse. But if Browning-Ferris survives judicial review and the political battlefield, it may inject companies into unforeseen national labor disputes, stifle flexibility with contractual arrangements, expand collective bargaining, invite affiliated-employer influence, and expand personal jurisdiction over businesses. Ultimately, businesses and industries relying on contractor-subcontractor, franchisor-franchisee, lessor-lessee, or parent-subsidiary relationships will face an entirely new legal landscape.

For now, employers must understand the uncertainty over the employment relationship. This dispute, as well as related disputes over Uber drivers, showcases the importance and far-reaching impact of this issue. While Browning-Ferris makes its way through the courts, employers must be especially mindful of their direct, indirect, actual, or potential control over workers—who are otherwise subject to contractual arrangements—and clearly define those relationships in writing. Employers must also adapt by reevaluating their policies and practices.

If you have questions about the decision, would like a copy of it, or have a general employment question, do not hesitate to contact a member of our Employment Practices Group.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.

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