In a highly-anticipated decision, a divided National Labor Relations Board (NLRB) significantly expanded its definition of “joint employers.” The new standard portends to have substantial implications to employers across a broad spectrum, but most significantly in the franchisor-franchisee and temporary labor context. In Browning-Ferris Industries, three members of the five-member Board did away with the long-standing requirement that a putative joint employer must not only possess, but also exercise, authority to control the terms and conditions of employment of employees alleged to be jointly employer with another employer. Under the new standard, an employer must only possess that authority, even if it chooses not to exercise it. The new standard also will allow for a finding of joint employer status based on nebulous concepts of “overall circumstances” and “industrial realities.”

The case before the Board involved Browning-Ferris Industries (“BFI”), which operates a recycling facility in California, and Leadpoint, a temporary labor provider that supplied certain employees to BFI’s facility. The agreement under which Leadpoint supplied employees to BFI specified that Leadpoint was the temporary employees’ sole employer. Leadpoint handled all discipline of Leadpoint employees, hired and fired them, and determined their wages (with the caveat that certain Leadpoint employee wages could not be higher than similarly-situated BFI employees). BFI did not have the authority to fire Leadpoint employees, though it could prohibit them from continuing to work at BFI facilities.

The International Brotherhood of Teamsters sought to represent BFI employees as well as the temporary employees provided by Leadpoint in the same bargaining unit, alleging that, despite the facts described above, BFI and Leadpoint jointly employed the Leadpoint employees. The regional director rejected that theory under the now-former joint employer standard, but the Board’s decision today overturned that decision and found BFI and Leadpoint to be joint employers of the Leadpoint employees under its new, broadened standard.

The Board majority justified its decision on shifting needs in American companies. “As the Board’s view of what constitutes joint employment under the [National Labor Relations] Act has narrowed, the diversity of workplace arrangements in today’s economy has significantly expanded,” the Board stated, citing shifts toward greater use of temporary workers. The majority’s decision explained that its decision returns to what it viewed as a more appropriate definition of joint employer, more firmly grounded in common law principles of control, rather than continuing to apply the requirement that a company actually exercise its control over putatively jointly-employed employees in order to be considered a joint employer.

“The Board may find 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 codetermine those matters governing the essential terms and conditions of employment,” the decision stated. “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 ‘codetermine’ them, as the Board and the courts have done in the past.”

The two Republican members of the Board dissented from the majority opinion, accusing the majority of “rewrit[ing] the decades-old test” for identifying a joint employer “in the most sweeping of recent major decisions.” “This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing,” the dissenters wrote.

Although the specific implications of this decision will vary depending on the facts of each case, the decision almost certainly will lead to more findings of joint employer status by the NLRB and thus greater obligations on the part of employers who use temporary and other contingent workers. It also stands to redefine the extent of the relationships between franchisors and franchisees.