In a decision expected to have far-reaching impact for businesses, the National Labor Relations Board (NLRB) issued a decision on August 27 which alters the test for determining joint-employer status. Browning-Ferris Industries of California, Inc., et al. v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters (Case Number 32-RC-109684). The Board's decision makes it easier for unions to organize employees of staffing agencies and franchises.

Under the new joint-employer test, a company that uses employees from staffing agencies or has a franchise relationship may very well find itself bargaining with a union over terms and conditions of employment related to those staffing company or franchise employees.

In the case decided by the NLRB, Browning-Ferris Industries (BFI) hired Leadpoint Business Services, a staffing services company, to staff a recycling facility. The temporary labor services agreement between BFI and Leadpoint states that Leadpoint is the sole employer of the personnel it supplies and that nothing in the agreement shall be construed as creating an employer relationship between BFI and those personnel. The question before the Board was whether BFI was a joint-employer with Leadpoint in a union representation election for Leadpoint's employees.

To support its ruling that BFI and Leadpoint were joint employers under the representation petition filed by Teamsters Local 350, the Board pointed to BFI's indirect control and its reserved contractual authority over essential terms and conditions. Among other contractual authority noted by the Board, the agreement between BFI and Leadpoint contained provisions: (a) requiring that Leadpoint ensure that its personnel have appropriate qualifications; (b) allowing BFI to request that Leadpoint's personnel "meet or exceed [BFI's] own standard selection procedures and tests"; (c) granting BFI the authority to reject any personnel and to discontinue the use of any personnel for any or no reason; (d) prohibiting Leadpoint, without BFI's approval, from paying a pay rate in excess of the pay rate for full-time BFI employees performing similar tasks; and (e) requiring Leadpoint employees to obtain the signature of an authorized BFI representative attesting to the accuracy of their hours worked. In addition to the reserved contractual authority, the Board considered the degree to which BFI controlled scheduling and hours, work processes, and training and safety.

The previous joint-employer test used by the NLRB assessed the level of authority a company possessed with regard to controlling the terms and conditions of employment, and how much the company actually exercised that authority in a "direct and immediate" manner. The Board will no longer require direct and immediate control, and will instead consider whether control exercised indirectly, such as through an intermediary is sufficient to establish joint-employer status. Under the new test, companies are joint-employers if they "share or codetermine those matters governing the essential terms and conditions of employment." The NLRB will now look at how potentially joint-employers share control of the terms and conditions of employment, such as assigning work and supervision, setting wages and hours, scheduling, hiring, firing, disciplining, and determining the manner and method of work. The Board will no longer require that a joint-employer not only possess the authority to control employees' terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions even if not exercised, will be relevant to the determination of whether companies are joint employers.

The NLRB stated that its prior joint-employer standard was "increasingly out of step with changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships." The new standard will now require separate and distinct companies to jointly bargain and be held jointly liable if the other commits unfair labor practices against the employees and/or during collective bargaining negotiations. The decision will likely be appealed and additional litigation is expected to address questions unanswered by the Board.

Employers must assess current employment practices in order to avoid inadvertent joint-employer status. Employers in the franchisor-franchisee context and employers utilizing staffing agencies are at particular risk. While the Board's decision gives little guidance that will enable companies to guarantee that they will not be found to be joint-employers, companies should nevertheless review their franchise agreements and, staffing agency contracts in an effort to mitigate this risk.

View the full decision from the NLRB.