NLRB to Reconsider the Joint Employer Standard
The National Labor Relations Board is set to reconsider its current standard for determining whether two or more entities are joint employers under the National Labor Relations Act. Browning-Ferris Indus. of Cal., Inc., NLRB Case No. 32-RC-109684 (Aug. 16, 2013). A decision by the Board to broaden its existing joint employer standard would overturn decades of Board precedent and significantly impact business in various industries that currently have no liability for, or bargaining obligations with regard to, the employees of separate corporate entities, such as franchisors, licensors, contractors, and those who use temporary employment services.
Prior to issuing its decision, the Board invited interested parties to submit amicus briefs addressing the Board's current standard for determining joint employer status, including whether the Board should adhere to its existing principles or adopt new standards, and what factors it should consider in determining joint employer status. Seventeen different amicus briefs were submitted by industry groups, unions, a collection of law professors, and administrative agencies, among others. We have provided here an overview of the Board's current standard for assessing joint employer status under the Act along with a brief summary of the positions taken in amicus briefs submitted by the NLRB's General Counsel, the Service Employees International Union ("SEIU"), the Equal Employment Opportunity Commission ("EEOC") and the U.S. Chamber of Commerce (the "Chamber").
The Board's Long-Held Joint Employer Standard: Under the Board's current joint employer standard, as articulated in TLI, Inc. and Laerco Transportation, the Board considers whether entities "share or codetermine those matters governing the essential terms and conditions of employment" with regard to the employees at issue. The "essential terms and conditions of employment" are those involving such matters as hiring, firing, discipline, supervision, and direction of employment." Furthermore, the proper focus is on the actual control exerted by one entity over another's employees rather than the potential right of control. Where the Board has found joint employer status under its current standard, it has required proof of a significant or substantial degree of "direct and immediate" control by the putative joint employer over the employees at issue.
NLRB General Counsel's Amicus Brief: The NLRB's General Counsel recommends that the Board broaden its current joint-employer standard. He urges the Board to find joint-employer status where, "under the totality of the circumstances, including the way the separate entities have structured their commercial relationship, the putative joint employer wields sufficient influence over the working conditions of the other entity's employees such that meaningful bargaining could not occur in its absence." The General Counsel explicitly mentions franchising relationships and other outsourcing arrangements that could fall within this standard and does not draw a distinction between direct, indirect, or potential control, instead focusing on the more ambiguous "industrial realties" of the relationship. Under this proposed test, indirect or potential control would be sufficient to find joint-employer status even in the absence of proof of actual control over the employees at issue.
SEIU's Amicus Brief: The SEIU's amicus brief also proposes broadening the Board's current joint employer standard to find joint employment in situations where the putative joint employer has potential control over the terms and conditions of employment of the direct employer's employees, even when such control is not exercised. The SEIU explicitly points to three industries that may satisfy this proposed standard : (1) fast food franchisors and franchisees; (2) outsourcing and subcontracting within the healthcare sector for non-clinical services; and (3) the property services industry, including commercial office cleaners and security officers. Like the NLRB's General Counsel, the SEIU supports a broad inquiry into the putative joint employer's right to control rather than the Board's current requirement of proof of "direct and immediate" control. The SEIU lists a number of factors as relevant, including: (1) the right to control compensation; (2) the right to control work schedules; (3) the right to control which employees may work on site; (4) the right to control the manner and extent of supervision; and (5) the right to control contract termination on short notice.
EEOC's Amicus Brief: The EEOC urges the Board to adopt the joint employer standard used by the EEOC, which defines joint employers as "two or more employers that are unrelated or that are not sufficiently related to qualify as an integrated enterprise, but that each exercise sufficient control of an individual to qualify as his/her employer." This proposed test is narrower than those articulated by the NLRB's General Counsel and the SEIU, applying factors from the common law principles of agency, including: who hires and fires the employees, who assigns them work, who controls their daily activities, who furnishes their equipment, who controls where the work is performed, who pays them, who provides their benefits, how they are treated for tax purposes, and whether the workers and the putative employer believe that they are in an employer-employee relationship.
Chamber of Commerce Amicus Brief: The Chamber urges the Board to maintain its existing standard for determining joint employer relationships. It argues that the Board's joint employer test has been well-settled for over 30 years and that businesses and business relationships throughout the country are structured in reliance on the current standard. And even were a change to the joint employer standard appropriate, the Chamber argues, the Browning-Ferris case does not present an adequate vehicle for changing the analytical framework. Further, the Chamber argues that the Board does not have authority to depart from its long-standing formulation in favor of the broader standard proposed by the union because both Congress and the Supreme Court have explained that the common law of agency must be used in defining "employer" and "employee" under the Act. Additionally, the Chamber argues, a broader standard centered on "economic realities" would require an analysis of industry economics and the market for services rather than an evaluation of the factors that define a master-servant relationship, thus resulting in an expensive and time consuming war of economic experts in each instance.
We believe it is important that you take note of this potential expansion of the Board's longstanding joint employer standard. Under the broader standard proposed by the NLRB's GC and the SEIU, many businesses that have reasonably relied on the Board's standard to date would find themselves with potential additional liability and bargaining obligations under the Act.
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