NLRB's New 'Joint Employer' Standard: Seismic Impact For California Employers?

Yesterday, the National Labor Relations Board issued its much-anticipated decision in Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015). By a 3-2 vote, the Board announced a new standard to determine whether multiple entities are "joint employers" of a single workforce. The Board will now inquire whether there is a common-law employment relationship with the employees in question (including the "right to control" the employees). If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses enough control over the employees' essential terms and conditions of employment to permit "meaningful collective bargaining."

The Board majority wrote that it was "restating" its joint employer test. "Restate" here means to alter dramatically, as Browning-Ferris overturns decades of precedent. Gone is the requirement of "direct and immediate" control over working conditions, and not of a "limited and routine" nature. Now, indirect control and even the reserved right to control working conditions is enough to establish joint employer status if two or more entities "share or codetermine those matters governing the essential terms and conditions of employment." The essential terms and conditions of employment include hiring, firing, discipline, supervision, direction, "dictating the number of workers to be supplied," scheduling, seniority, overtime, assigning work, and "determining the manner and method of work performance." And this list is illustrative, not exhaustive.

So what does this mean for California employers? Browning-Ferris will likely have a wide-reaching impact. Any business that regularly uses contractors, such as a cleaning or janitorial services, maintenance services, caterers, or a management company to staff and operate its business could be affected. Among the entities possibly affected are:

hotels, tech companies (from start-ups to the well-established), investors, real estate holding companies, and general contractors, any entity that outsources non-core work integral to its business model, such as a manufacturer that contracts with a trucking company for shipping, any entity that uses a staffing agency to obtain additional or temporary help, any franchisor that contracts with others via franchise agreements, and any entity with a relationship to a subsidiary or other corporate entity. The expanded definition of joint employer may result in companies...