Too Close For Comfort? NLRB Departs From Long Standing Joint Employer Standard

Citing "changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships," in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015), a 3-2 National Labor Relations Board majority (Pearce, Hirozawa, McFerran) significantly revised and broadened the standard for assessing joint-employer status under the National Labor Relations Act. The primary justification for the Board's sweeping departure from the current standard was that it did not "best serve the Act's policies of encouraging the practice and procedure of collective bargaining," considering the expansion of workplace arrangements including a diversity of subcontracting and contingent employment relationships since the 1990s.

Going forward, the Board will now find joint employer status where one entity either actually directly controls another employer's employees' terms and conditions of employment OR where that entity has "indirect" control of terms and conditions of employment OR has simply reserved the right to exert such control.

The Board's decision was rooted in its view of the general "common law" definition of an employer and focused on "whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining." Particularly, the Board examined the common law definition of an employment relationship and concluded that the scope of control under common law principles incorporated both direct and indirect control. In reaching its decision, the Board majority rejected and overturned 30 years of precedent that limited joint-employer findings to actual use of direct control situations (including TLI, Inc., 271 NLRB 798 (1984), enfd., 772 F.2d 894 (3d Cir. 1985), and Laerco Transportation, 269 NLRB 324 (1984)).

The Board noted a number of factors that it will examine to evaluate whether an entity affected terms and conditions of employment either directly or through an intermediary including: establishing the number of workers to be supplied; control over scheduling, seniority, and overtime; the assignment of work and the method of performance.

The Board also cited a number of examples of prior cases that it now believed took an inappropriately narrow view of joint employer status. For example, the Board...