The National Labor Relations Board (NLRB) issued a decision yesterday in a long-litigated case that further defined how two entities could be considered joint employers under the National Labor Relations Act (NLRA). The decision overturned the Regional Director’s finding that workers provided by a staffing agency to a recycling plant were not considered employees of “joint employers.” The basis for the Regional Director’s holding was that the recycling plant did not “share or co-determine those matters governing the essential terms and conditions of employment” of the workers sent from the staffing agency. The agreement between the staffing agency and the recycling plant required that the two entities employed separate supervisors at the facility; the staffing agency had the sole authority to recruit and hire its workers; and the staffing agency had the power to set the wages of its workers.

The Teamsters Union challenged the Regional Director’s decision. The Board then asked for input from employers and unions as to whether they should alter their past analysis in determining joint-employer status. Meanwhile, the Board made a telling decision that workers at a McDonald’s restaurant should be considered a joint employee of the McDonald’s national corporation and the local McDonald’s franchisee.

In a 3-2 decision, the Board held that the recycling plant and the staffing agency should instead be considered joint employers. In doing so, the Board tracked the evolution of the standard—stating that the driving factor over the years has been the common-law concept of control and how it is shared between the entities. The Board went on to note, however, that it felt that there has never been a clear and comprehensive explanation of the standard. So, the Board decided to give one.

The “restated” joint-employer standard, as articulated in this decision, states that:

“Two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or co-determine those matters governing the essential terms and conditions of employment. In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may ‘share’ control over terms and conditions of employment or ‘co-determine’ them.” 

The Board noted that it has an “inclusive approach” as to what is considered terms and conditions of employment. Examples of things to examine are hiring, firing, discipline, supervision, controlling of scheduling, assignment of work and determining the manner and method of work performance. Essentially, this is an all-inclusive and broad test.

Importantly, the Board also notes that it will no longer require that a potentially joint-employer actually directly exercise the right of control that it may have. As pointed out by the dissent, this may give the Board license to find joint-employer status based on the slightest, “most tangential” evidence of control and “any degree of indirect or reserved control over a single term.”

As you can imagine, much of the criticism of the dissent (and from employers in the media) is that the Board decision does not actually provide any employer with guidance as to what level of control would constitute joint-employer status. In addition, this broad expansion may result in consequences in other areas—how an employer may be held liable for safety violations or claims under other employee protection statutes. The Board attempts to tamp down these concerns by claiming that the purpose of the decision is only to “encourage the practice and procedure of collective bargaining.” However, simply stating that purpose is not likely to stop the large ripples across the employment sphere that are expected. Unfortunately, the broad nature of the decision will make it extremely difficult for employers who want to avoid joint-employer liability to be able to craft relationships with other companies that accomplish that goal. Conventional wisdom is that this decision will further increase the possibility that an employer may be held liable for the labor infractions of one of its contractors.