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Browning-Ferris Decision Expands Definition Of "Joint Employer" For Collective Bargaining Purposes, Full Impact Of Decision Remains To Be Seen

Debrai Haile
10.05.2015

Until recently, the National Labor Relations Board (NLRB) had held that an entity must have “direct control” of the essential terms and conditions of employment in order to be obligated to collectively bargain as a joint employer, and had further held that no joint employer relationship could exist unless the entity actually exercised such direct control, as opposed to merely retaining the right to exercise control.  However, on August 27, 2015, the NLRB majority reversed its long-standing "direct control" test in its decision in Browning-Ferris, in which it  held that two entities can be joint employers if there is a joint determination of important terms and conditions of employment, such as hiring, firing, scheduling, disciplining, dictating the number of employees, determining when the facility is open and the hours to be worked, and other terms and conditions.  Further, the NLRB held that an entity merely retaining the right to determine these criteria is enough to result in joint employment status.  Browning-Ferris raises serious questions for companies in many industries, particularly those who use professional employment organizations (PEO) and staffing agencies as well as franchisors.  For example, many companies use PEOs and/or staffing agencies to obtain both temporary and permanent employees.  They operate on the premise that the employees provided to them by these third-parties are not their employees for collective bargaining purposes and that any duty to collectively bargain would reside with the agency that supplies the employees to them.  However, if these employers retain, by policy or practice, the right to directly supervise or dictate other terms and conditions of these employees, then these employers and their PEO/Staffing Agency may be deemed a joint employer for collective bargaining purposes (at least with respect to those employees supplied by the PEO/Staffing Agency).  Moreover, if a franchisor retains control over some terms and conditions of a franchisee's employees, such as training, personnel policies, and/or compensation, the franchisor may now have a duty to collectively bargain with the franchisee's employees to the extent they are, or one day become, covered by a collective bargaining agreement.  This, potentially, could make unionization of even small franchisees more attractive, as covered employees may be able to negotiate better terms if a large corporate franchisor is involved in the collective bargaining process.  In addition, if a company is deemed a "joint employer" for collective bargaining agreement purposes under Browning-Ferris, it substantially increases the risk that, for example, a franchisor could similarly be considered a joint employer for purposes of state and federal employment laws, including, but not limited to, wage and hour and discrimination laws.  This would substantially increase a franchisor's exposure to any alleged errors or omissions relating to employment laws on the part of their franchisees.  While the full consequences of Browning-Ferris will only become clear over time, businesses should examine each relationship with third-parties and determine whether or not they are exercising, or retaining the right to exercise, authority over the terms and conditions of employees supplied to them by third-parties that are not necessary (nor desirable given the potential impact of Browning-Ferris) and excise such rights from relevant agreements as well as take action to prevent the exercise of such rights at the operational level.  The Fast Laner will continue to monitor the practical impact of Browning-Ferris on businesses and provide additional guidance as warranted.

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