On August 27, 2015, the National Labor Relations Board (NLRB) overturned 30 years of its own precedent and redefined the meaning of “joint employer” under the National Labor Relations Act. 

Under the new standard, established by a 3-2 decision (available here), two or more entities may be considered “joint employers” if (1) the entities are each “employers” under common law; and (2) each entity has authority to control the terms and conditions of employment—even if an entity does not actually exercise that authority. The majority determined that this change was justifiable, given the recent growth in contingent employment relationships.

It is clear that the immediate impact of this decision will be felt by companies that rely on franchising, contracting, and staffing agency labor. Specifically, the new standard makes it easier for unions to organize these companies.

This Board decision may also impact other areas of employment law, such as joint employer liability under the Fair Labor Standards Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act. Although each of these laws has previously required an entity to actually exercise direct control over its workers’ daily activities to create joint employer liability, only time will tell if this NLRB decision will influence other enforcing agencies to also change their standards.