On August 27, 2015, in a 3-2 decision involving Browning-Ferris Industries, the National Labor Relations Board (NLRB) refined its standard for determining joint-employer status. (See, MLB Law Flash: NLRB Vastly Expands Its Joint-Employer Standard). Although the decisions specifically dealt with standards in union organizing campaigns, the breath and ambiguity of the language of the decision raises concerns for outsourcing and other traditional services contracts. In a recent webinar “Four Recent NLRB Issues: Q&A with Harry Johnson,” former NLRB Board Member Harry Johnson, who recently joined Morgan Lewis as a partner in our Santa Monica office, along with Morgan Lewis senior counsel and former Board Member Chuck Cohen, and associate Nicole Buffalano discussed the potential impact of the decision, including the following:
- Changed Standards of “Relevant Control”. Under the new joint-employer standard, the NLRB will consider the potential control or indirect control of “the manner and means of work performance” in determining whether both the customer and the contractor are joint employers. Actual, direct control of the employment terms for a contractor’s employees is no longer necessary for a joint employer determination.
- A Joint Employer Finding Matters Even if the Contractor Is Not Unionized.Even if the third-party contractor with whom a customer is determined to be a joint employer is not unionized and has no significant risk of being unionized, a joint employer determination may nevertheless expose the customer to significant risks of liability for actions by the contractor, as the National Labor Relations Act (NLRA) also covers the majority of employees at non-union companies.
- Properly Manage the Risks of a Joint Employer Determination. Given the expanded risk of joint employer status, customers should review the terms of existing and future agreements with their third-party suppliers to minimize the risk of triggering joint employer status and to provide adequate indemnification protections. Based on the indirect control inherent in many services agreements, customers should also take steps to ensure that their suppliers are well managed and to identify and remove problematic suppliers before poor management leads to NLRA liability or organizing campaigns.