General Counsel Office Advocates Dramatic Change to Joint Employer Standard
Earlier this year, in the case of Browning –Ferris Industries of California, Inc., 32-RC-109684, the NLRB invited parties to submit briefs on whether the Board should change its long-held standards for assessing when two separate entities should be treated as “joint employers”. Late last week, the Board’s General Counsel submitted a brief advocating for a change to the three decades old joint employer standard. If the General Counsel’s view is accepted, it could have significant repercussions for employers in virtually every industry.
For the past thirty years, the Board has determined whether two separate entities are joint employers under the Act by assessing whether they exert such direct andsignificant control over the same employees such that they “share or codetermine those matters governing the essential terms and conditions of employment . . . .” TLI, Inc., 271 NLRB 798, 798 (1984). To make this determination, the Board evaluates whether the putative joint employer “meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction” and whether that entity’s control over such matters is direct and immediate. TLI, Inc., 271 NLRB at 798 (citing Laerco Transp., 269 NLRB 324 (1984)). That standard has been challenged on several occasions in the past, but the Board majority, in both Democratic and Republican administrations, adhered to the direct control standard.
Asserting that the existing standard undermines fundamental principles under the Act, the General Counsel’s office urged the Board to adopt a broader “totality of the circumstances” test – - finding joint employment whenever a putative joint employer “wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence.” The proposed test (which the General Counsel has inappropriately characterized as a return to a “traditional” joint employer standard) would ensnare entities with onlyindirect or worse, only potential control over the employee’s terms and conditions of employment. In the General Counsel’s view, this change is needed to take into account the “industrial realities” where a party is necessary to meaningful collective bargaining. As specific examples, the General Counsel’s brief specifically identifies entities contracting for temporary or contingent workers, franchisors, and companies that outsource functions integral to the business as targets for its broadened joint employer standard.
A change to the joint employer standard, even one that is less dramatic than that advocated by the General Counsel, can have widespread impact across virtually every industry. More than a dozen other briefs were filed by employer and labor associations taking positions on all sides of this hot button issue, including a brief filed by this firm on behalf of the Coalition for a Democratic Workplace and fourteen other business associations advocating to retain the existing standard and not jettison thirty years of settled law.
We will continue to monitor this issue and will report on new developments.