november 9, 2015
Labor and Employment
Confusion Expected Over ‘Joint-Employer’ Definition
National Labor Relations Board’s new test hinges on companies’ influence over working conditions.
By Zachary Fasman
gnotigor/iStockphoto.com
T
he National Labor Relations Board’s
decision on Aug. 27 in BrowningFerris Industries of California Inc., 362
NLRB No. 186, is a sweeping change
in labor law. Abandoning 30 years of
settled law, a 3-2 board majority created
a new standard for determining whether a business retains enough control
over the workplace to qualify as a “joint
employer” under the National Labor
Relations Act.
The NLRB traditionally determined
whether two separate entities were joint
employers by assessing whether each
exerted such significant control that
they “share or codetermine those matters governing the essential terms and
conditions of employment,” TLI Inc.,
271 NLRB 798 (1984). The board evaluated whether a putative joint employer
“meaningfully affects matters relating
to the employment relationship such as
hiring, firing, discipline, supervision and
direction” based upon whether the entity’s control was direct and immediate.
This standard was based upon the
actual conduct of the parties, thus
allowing businesses to define their
workplace commitments while preserving collective bargaining with the
employer that directly controlled the
workplace.
on whether to alter the board’s jointemployer standard. Numerous amicus
briefs argued pro and con. The NLRB
general counsel advocated a new standard based not upon actual or direct
control but upon whether “an employer wields sufficient influence over the
working conditions of the other entity’s
employees such that meaningful bargaining could not occur in its absence.”
Employer groups argued for retention
of the existing standard, which had
been approved by every circuit court to
have considered it.
The NLRB did not adopt any of the
proposed approaches. The board’s
New Standard Advocated
majority held that joint-employer staIn Browning Ferris Industries, two tus may be found when entities are
members of the NLRB invited briefing both employers within the meaning of
the common law, which according to
the majority includes indirect as well
as direct control over the workplace;
and if they “share or codetermine
those matters governing the essential
terms and conditions of employment.”
Under this standard, joint-employer
status will be found when one entity
either actually directly controls another
employer’s employees’ terms and conditions of employment or when that
entity has “indirect” control of terms
and conditions of employment or has
simply reserved the right to exert such
control. The majority expressly overturned four key cases upon which the
“direct and immediate control” standard was based, saying that “we will
no longer require that a joint employer
the national law journal
not only possess the authority to control employees’ terms and conditions
of employment, but must also do so
directly, immediately, and not in a ‘limited or routine matter.’”
The two-member dissent argued
against the uncertainty of an indirect
or “reserved” control standard, stating
that “anyone contracting for services,
master or not, inevitably will exert
and/or reserve some measure of indirect control by defining the parameters of the result desired to ensure
he or she gets the benefit of his or her
bargain.” The dissent claimed that the
new standard provided “no certainty
or predictability regarding the identity
of the employer,” to the detriment of
all parties to the relationship.
Indeed, the board majority in
Browning-Ferris emphasized that
“the total factual context” must be
“assessed in light of the pertinent
common law principles” and that the
board would consider various ways in
which joint employers may “share” or
“codetermine” terms and conditions
of employment, including ordering
the number of workers to be supplied;
control over scheduling, seniority and
overtime; the assignment of work
and the method of performance. How
these factors will be applied in any
given case remains to be seen.
Huge Impact
It is difficult to overstate the impact
of this new standard. The majority cited “changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships,” but the dissent
claimed the revised test “fundamentally alters the law applicable to
user-supplier, lessor-lessee, parentsubsidiary, contractor-subcontractor,
franchisor-franchisee, predecessorsuccessor, creditor-debtor and contrac-
november 9, 2015
tor-consumer business relationships
under the act”—and that the revised
standard has the potential to affect a
“substantial group of business entities
without any reliable limitations.” The
new test certainly will lead to a variety of complications at the bargaining
table.
For example, the majority said that,
“[a]s a rule, a joint employer will be
required to bargain only with respect
to such terms and conditions which it
possesses the authority to control” but
will not extend to terms that are limited in scope so as to negate “meaningful collective bargaining.” Defining
the scope of mandatory bargaining
under this standard places the parties
in uncharted waters, because terms
and conditions of employment are
interrelated; how much an employer
is able to afford in wages, for example,
is always influenced by the cost of
its operations. May a joint employer
refuse to bargain about a mandatory
subject of bargaining because it does
not “control” that particular issue?
How will such bifurcated bargaining
work in practice?
The dissent argues that “[n]o bargaining table is big enough to seat all
of the entities that will be potential
joint employers under the majority’s
new standards.” Collective bargaining always takes place against an economic background; terms and conditions of employment may be set by
local or federal law or by provisions
of a procurement contract. In the
defense industry, for example, wages
of contractor personnel are directly affected—if not established—by
defense procurement contracts. Yet
the Department of Defense need not
appear at the bargaining table with
government contractors to allow
“meaningful bargaining.” Similarly,
state and municipal governments are
not required for “meaningful bargaining” between a contractor and its personnel, even though state or municipal contracts may directly limit the
wages and benefits of unionized workers. “Meaningful bargaining,” to use
the general counsel’s phrase, need not
include every entity that affects the
outcome of bargaining.
The presence of multiple parties
at the bargaining table—particularly under a regime envisioned by the
board majority, where a joint employer need only bargain about the terms
and conditions which it “directly, indirectly or potentially controls—is certain to complicate the bargaining process.” Adding “too many entities with
diverse and conflicting interests” is sure
to make agreements more difficult;
it is hard enough to bargain a labor
contract between one employer and
a union. Injecting a related business
into the mix, without any certainty
about which business is responsible for
what aspects of the employment relationship, would not seem a recipe for
“encouraging the practice and procedure of collective bargaining.”
Zachary Fasman is a partner in
the labor and employment practice at
Proskauer Rose.
Reprinted with permission from the November 9, 2015 edition of
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