Last week the National Labor Relations Board (NLRB or Board) changed over 30 years of labor law by redefining the definition of joint employer. Traditionally, the NLRB would only find that an entity was a joint employer when one entity directly controlled the labor relations and central conditions of the employees of a second entity.

In the recent decision of Browning-Ferris, the Board held that Browning-Ferris Industries (BFI) is the joint employer of its subcontractor, Leadpoint. In this case, BFI had only indirect control over the employees of Leadpoint. The new standard requires the Board to establish that (1) both entities are considered common law employers and (2) the two entities share or “codetermine” the issues governing the essential terms and conditions of employment.

Under the new standard, essential terms and conditions of employment include hiring, firing, discipline, supervision and direction. In addition, the Board also included in essential terms, the directive to the subcontractor (or franchisee) controlling (1) the number of employees to be provided by the subcontractor, (2) controlling scheduling, seniority, overtime, task assignments, and determining the manner and method of work to be performed.

BFI operates a recycling facility. The primary task at the BFI facility is cleaning and sorting recycled products. Leadpoint employees were working at a BFI facility sorting and cleaning the recycled products. BFI only employs about 60 employees, most of whom work outside of the facility. Leadpoint has approximately 240 employees at the facility. The contract between BFI and Leadpoint (called a temporary labor services agreement), provides that Leadpoint is the sole employer of those employees and there are no employment relationships between BFI and the Leadpoint employees. The agreement requires that Leadpoint can only hire individuals who have the appropriate qualifications, including any certification or required training. Leadpoint also must make “reasonable efforts” to determine if an applicant was previously a BFI employee and if so, whether that individual is prohibited from re-employment with BFI.

BFI also required Leadpoint to utilize a five-panel drug test and could not hire any individual who did not pass the drug test. BFI also required that Leadpoint employees remain free from the effects of alcohol or drugs. The agreement with Leadpoint also provided that BFI had the authority to reject any individual for employment for any reason or no reason.

BFI scheduled the shifts and hours to be worked. It also determined the work process and which conveyor belts would be used. Leadpoint had to provide a summary of hours worked each week, and the employees had to obtain the signature of an authorized BFI representative attesting to the accuracy of the hours worked. The agreement also limited the amount of wages that Leadpoint could pay its employees. The Leadpoint employees were trained by Leadpoint supervisors, but occasionally, BFI employees trained the Leadpoint employees.

Based on the foregoing facts, the NLRB determined that BFI was a joint employer of Leadpoint. Because this case was initiated as a representation petition filed by a Teamster’s local, the case will now go back to the Region to conduct an election. If the Teamsters win the election, then BFI can ultimately appeal this decision. It may take up to two or more years before an appellate court has an opportunity to review this decision.

In the meantime, the Board will follow this new standard and begin to certify bargaining units which have joint employers. So, for example, if a union petitions to represent employees of a McDonald’s franchise, and wins the election, both the franchise and the franchisor (McDonald’s Corporation) will be required to bargain with that union concerning the wages, hours and terms and conditions of employment of the franchisee’s employees.

Needless to say this ruling could have a disastrous effect on common business relationships including franchise operations as well as subcontractor relations. If you receive a petition from the NLRB claiming that your company is a joint employer with another entity, you should consult a labor attorney.