NLRB Expands Joint-Employer Standard: Exercising Direct Control No Longer Required

The National Labor Relations Board ("NLRB") overturned decades-old precedent by vastly expanding its definition of "joint employer," upending established federal labor law and creating tremendous uncertainty for companies. Under the standard announced in Browning-Ferris Industries ("BFI"), the NLRB will no longer require direct and immediate control over terms and conditions of employment to find a joint-employer status. Rather, the right to indirectly control terms and conditions of employment, even if never exercised, is sufficient to create a joint-employer relationship.

New Standard Enunciated For the 30 years that preceded BFI, host companies avoided legal obligations to collectively bargain with represented subcontracted employees by forgoing their authority to exercise direct and immediate control over those employees. The proposition was simple and logical: an employer that does not directly set terms and conditions for employees is not required to collectively bargain those terms and conditions of employment.

Under the standard announced in BFI, the NLRB will define two or more entities as joint employers of a single work force if "they share or codetermine matters governing the essential terms or conditions of employment." In determining whether a company satisfies this burden, the NLRB will evaluate whether: (1) a common-law employment relationship exists; and (2) the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining.

Relevant factors the NLRB will consider include the ability to:

Hire, fire, discipline, supervise and direct employees Set wages, hours, schedules, seniority and overtime Assign work and determine the manner and method of work performance Critically, a company must only possess and does not have to exercise these abilities to be a joint employer.

While the NLRB emphasized that this standard requires a case-by-case, fact-intensive inquiry, the analysis performed in BFI provides some insight into how the NLRB will scrutinize this criteria. There, BFI contracted with Leadpoint Business Services ("Leadpoint") to supply approximately 60 employees to a recycling plant.

During the representation proceedings before the NLRB, BFI argued that Leadpoint constituted the sole and proper employer of its employees. The NLRB rejected BFI's argument, finding a joint-employer relationship based on the following:

Hiring While BFI...