National Labor Relations Board Adopts Expansive New Joint Employer Standard

National Labor Relations Board Adopts Expansive New Joint Employer Standard

In a highly anticipated decision, the National Labor Relations Board (the "Board" or "NLRB") reversed more than 30 years of established precedent and liberalized the standard for determining whether two or more entities are joint employers for purposes of the National Labor Relations Act (the "Act"). Browning-Ferris Indus. of Cal., Inc., 362 NLRB No. 186 (Aug. 27, 2015). Since 1984, the NLRB has required proof of a significant or substantial degree of "direct and immediate" control, not merely potential control, by a putative joint employer over the hiring, firing, discipline, supervision, and direction of employment of another company's employees before finding that a joint employer relationship exists. However, in Browning-Ferris Indus. of Cal., Inc., the Board, in a 3-to-2 decision, substantially modified that standard to lower the evidentiary threshold necessary to establish a joint employer relationship for purposes of the Act. It held:

"[T]he Board may find that two or more statutory employers are joint employers of the same statutory employees if they "share or codetermine those matters governing the essential terms and conditions of employment." In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining."

Id. at 2 (internal citation omitted). The NLRB majority explained that "central to both of these inquiries is the existence, extent, and object of the putative joint employer's control." Id. The majority proceeded to substantially relax the level of control that a putative employer needs to exert to establish a joint employer relationship:

"We will no longer require that a joint employer not only possess the authority to control employees' terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry…. Nor will we require that, to be relevant to the joint-employer inquiry, a statutory employer's control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly—such as through an intermediary—may establish joint-employer status."

Id. (emphasis in original). In so holding, the Board explicitly overruled several well-established cases including Laerco, TLI, and Airborne Express. Id. at 16. The Board relied heavily on the recent growth of the contingent workforce (e.g., staffing and subcontracting arrangements) to justify its departure from these precedents. Id. at 11. Thus, in the majority's view, its decision advances the Act's policy of encouraging collective bargaining because its redefined joint employer standard accounts for "the full range of employment relationships wherein meaningful collective bargaining is, in fact, possible." Id. at 13.

A joint employer finding has the potential to greatly affect such businesses since the consequences of a joint employer finding by the Board include, but are not limited to:

  • Conferring joint and several liability on both companies for unfair labor practices committed by the direct employer, including both monetary and injunctive relief;
  • Requiring a company to engage in collective bargaining with, and provide access to information to, labor organizations representing the direct employer's employees; and
  • Allowing union activity on the property of a business (e.g., picketing, boycotting) that would otherwise be considered unlawful secondary activity in violation of Section 8(b)(4) of the Act.

The Browning Ferris Indus. of Cal. case involved a representation petition filed by the Teamsters union seeking to represent approximately 240 employees of a supplier, Leadpoint, who provided contract labor to staff a waste recycling plant operated by Browning-Ferris Industries ("BFI"). Initially, the NLRB's Regional Director concluded that the employees covered by the union's petition were Leadpoint employees, not employees of BFI. In reversing the Regional Director's decision, the Board concluded that BFI and Leadpoint were joint employers of the Leadpoint employees, notwithstanding substantial evidence demonstrating that BFI did not share, or co-determine, those matters governing the essential terms and employment of those Leadpoint employees:

  • "BFI and Leadpoint employ separate supervisors and lead workers at the facility." Id. at 3.
  • "The Agreement between BFI and Leadpoint provides that Leadpoint will recruit, interview, test, select, and hire personnel to perform work for BFI. BFI managers … testified that they are not involved in Leadpoint's hiring procedure and have no input into Leadpoint's hiring decisions." Id.
  • Leadpoint determines the wages and benefits to provide its employees. Id. at 4.
  • "Leadpoint alone schedules which employees will work each shift…." Id.

In concluding that BFI and Leadpoint were joint employers, the NLRB majority largely disregarded these facts and instead emphasized the following ways in which BFI had some involvement in the employment of Leadpoint's employees:

  • "Although BFI does not participate in Leadpoint's day-to-day hiring process … BFI retains the right to reject any worker that Leadpoint refers to its facility." Id. at 18.
  • "Although Leadpoint is responsible for selecting the specific employees who will work during a particular shift, it is BFI that makes the core staffing and operation decisions that define all employees' work days." Id. at 19.
  • "Under the parties' contract, Leadpoint determines employees' pay rates, administers all payments, retains payroll records, and is solely responsible for providing and administering benefits. But BFI specifically prevents Leadpoint from paying employees more than BFI employees performing comparable work … In addition, BFI and Leadpoint are parties to a cost-plus contract, under which BFI is required to reimburse Leadpoint for labor costs plus a specified markup." Id.

As a result of that finding, if the union prevails in the representation election, both BFI and Leadpoint will be required to bargain with Teamsters over the terms and conditions of employment for the Leadpoint employees.

In a scathing nearly 30-page dissent, Members Miscimarra and Johnson attacked what they referred to as "the most sweeping of recent major decisions" and argue that "the Board majority rewrites the decades-old test for determining who the 'employer' is." Id. at 21. The dissent noted:

"This [decision] will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing…."

"This new test leaves employees, unions, and employers in a position where there can be no certainty or predictability regarding the identity of the "employer…."

"The number of contractual relationships now potentially encompassed within the majority's new standard appears to be virtually unlimited: insurance companies that require employers to take certain actions with employees in order to comply with policy requirements of safety, security, health, etc.; [f]ranchisors; [b]anks or other lenders whose financing terms may require certain performance measurements; [a]ny company that negotiates specific quality or product requirements; [a]ny company that grants access to its facilities for a contractor to perform services there…; [a]ny company that is concerned about the quality of the contracted services; [and] [c]onsumers or small businesses who dictate times, manner, and some methods of performance of contractors." Id. at 21-37.

Companies should take note of the majority's definition of "joint employer" and evaluate how it may affect their operations. If a company is found to be a joint employer, it may be subjected to statutory collective bargaining obligations with respect to their contracting partners' employees as well as liability for unfair labor practices committed by those businesses with which they contract. Businesses could also be subject to picketing, boycotts, and other protest activities that, absent the joint employer finding, would otherwise be unlawful secondary activity.

Businesses should continue to monitor developments in the Board's joint employer standard, since the new standard is inconsistent with the joint employer standard in other contexts such as Title VII and the Fair Labor Standards Act, and it is unclear whether a circuit court, if presented with an opportunity to review the revised standard, will uphold it.

Lawyer Contacts

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Michael J. Gray

Matthew W. Lampe
New York

Doreen S. Davis
New York

Michael S. Ferrell

Willis J. Goldsmith
New York

Stanley Weiner

Elizabeth B. McRee

Aaron L. Agenbroad
San Francisco

George S. Howard Jr.
San Diego

E. Michael Rossman

Brian W. Easley

Joanne R. Bush

Donald J. Munro

Patricia A. Dunn

Fred W. Alvarez
Silicon Valley

F. Curt Kirschner Jr.
San Francisco

Joshua M. Grossman, an associate in the New York Office, assisted in the preparation of this Alert.

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