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Employers Await Clarification On Joint Employment Standards Following NLRB Shift

Published by on October 15, 2015

The National Labor Relations Board’s (NLRB) recent ruling in Browning-Ferris Industries of California, et al., Case 32-RC-1009684 (August 27, 2015), has raised concerns among employers for its apparent shift in position regarding the standard for assessing joint employer status under the National Labor Relations Act (NLRA). For decades, the NLRB adopted the position that a […]

The National Labor Relations Board’s (NLRB) recent ruling in Browning-Ferris Industries of California, et al., Case 32-RC-1009684 (August 27, 2015), has raised concerns among employers for its apparent shift in position regarding the standard for assessing joint employer status under the National Labor Relations Act (NLRA).

For decades, the NLRB adopted the position that a business had to exercise “direct and immediate control” over any contractor’s employees to be considered a joint employer. In Browning-Ferris, however, the NLRB lowered the standard for joint employer status: a business need only have the potential to exert control over the employees’ terms of employment to be considered a joint employer. Indeed, no actual control need be asserted – a business’s ability to control the contractor’s employees, by contractual terms or other “economic circumstances,” is sufficient to establish a joint employment relationship.

While the NLRB’s new standard is limited to determinations of who can engage in collective bargaining, there is concern that other federal agencies, such as the Equal Employment Opportunity Commission (EEOC), will adopt the NLRB’s new joint employer standard. Such a shift would undermine volumes of settled legal precedent, and would expose prime contractors and franchisors to unlimited liability for the actions of their subcontractor’s employees, regardless of the control actually asserted.

In response, both the House and Senate labor committees have introduced bills to “clarify the treatment of two or more employers as join employers under the National Labor Relations Act.” The House version, entitled the “Protecting Local Business Opportunity Act” (introduced September 9, 2015), effectively codifies the NLRB’s prior joint employer standard.

It provides: Section 2(2) of the National Labor Relations Act (29 U.S.C. 152(2)) is amended by adding at the end the following: ‘‘Notwithstanding any other provision of this Act, two or more employers may be considered joint employers for purposes of this Act only if each shares and exercises control over essential terms and conditions of employment and such control over these matters is actual, direct, and immediate.’’.

Laconic Lookout:

Employers should assess their current business relationships to assess whether they have any contractual arrangements that might expose them to joint employer treatment. Franchisors and prime contractors should reassess any Independent Contractor provisions in their contracts in order to identify language that could be construed as providing the potential to exert control over another business’s employees. Congress has the authority to limit and/or reverse the NLRB’s position, but employers must prepare for this new avenue of liability as they operate in the “new economy.”

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