In Browning-Ferris Industries of California d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015), the Board reversed a Regional Director’s decision and direction of election, and predictably, changed the standards for finding joint employers. Claiming that previous precedent was “increasingly out of step with changing economic times”, and that it was merely applying sound “common law” precedent to “encourag[e] the practice and procedure of collective bargaining … when otherwise bargainable terms and conditions of employment are under the control of more than one statutory employer”, the NLRB reversed long-standing precedent and relaxed the requirements for the finding of joint employer status:

[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 of employment, even if not exercised, is clearly relevant to the joint-joint employment inquiry. As the Supreme Court has observed, the question is whether one statutory employer “posesse[s] sufficient control over the work of the employees to qualify as a joint employer with” another employer.

Nor will [the Board] require that, to be relevant to the joint-employer inquiry, a statutory employer’s control must be exercised directly and immediately. If otherwise sufficient, control exercised indirectly – such as through an intermediary – may establish joint-employer status. (Citations and footnotes omitted and emphasis (underline) added).

More succinctly stated, the Board’s new test is summarized below. Employers may be found as joint employers 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.

“Essential terms and conditions” of employment consist of matters such as “hiring, firing, discipline, supervision and direction” –

Other examples of control over mandatory terms and conditions of employment … include dictating the number of workers to be supplied; controlling scheduling, seniority,  and overtime, and assigning work and determining the manner and method of work performance.

This is exactly the type of control typically exercised by franchisors and businesses which employ temporary employees through staffing agencies.

The Background Leading to this Point

This controversial NLRB decision reverses the Director’s decision issued in August of 2013, which concluded that Leadpoint Business Services was the sole employer of workers at a BFI-owned recycling plant. In finding that BFI was a joint employer with Leadpoint, as discussed above, the Agency relied on indirect and direct control that BFI possessed over “essential terms and conditions of employment” of the employees supplied by Leadpoint as well as BFI’s “reserved authority” to control such terms and conditions. As a result of the Board ruling, the impounded ballots of the Leadpoint workers will now be opened and counted, and, if the Teamsters were successful, BFI and Leadpoint must bargain with the Teamsters for a CBA with these workers who were hired and employed by Leadpoint. Procedural rules bar an immediate appeal to the Circuit Courts of Appeal though appellate review may occur after additional factual developments and procedural steps.

The Democratic majority on the panel denies the “doomsday scenarios” that the decision spells the death- knell of business relationships governed under franchisor / franchisee or staffing agency rules, and claims that such predications are based upon “exaggerations of the challenges that can sometimes arise when multiple employers are required to engage in collective bargaining.”

The Fall-Out from the Decision

LMVT is not as sanguine as the Board concerning the impact of this game-changing decision. The number of businesses that could be saddled with unfair labor practice findings and bargaining obligations has been significantly expanded by the NLRB.

Pundit responses were quick and predictable. Organized labor supporters praised the ruling, saying that the ruling would help “working people” across the country.

Republican politicians promised to introduce legislation to “nullify the ‘harmful ruling,’ ” and the International Franchise Association (IFA) said the decision ignored “decades of legal precedent and would hurt the U.S economy.” IFA President and CEO Steve Caldeira stated:

[The] Browning-Ferris decision jeopardizes the ongoing viability of franchising and that Congress should step in and halt the NLRB’s ‘out-of- control, unelected Washington bureaucrats.’

Regardless of how this plays out in the Circuit Courts, employers should brace themselves for a significant expansion of joint employer findings. This change arguably sets the stage for labor to contend that various business arrangements – outsourcing and vendor relationships – are appropriate for joint employer status. If this decision stands, and further decisions are  issued over time by the NLRB, this could be the proverbial “shot in the arm” that organized labor has been seeking in order to reverse years of declining membership.

In the short run, this decision does not bode well for McDonald’s in its litigation with the NLRB.

The decision’s impact may spread much broader than NLRA-related decisions. Already, OSHA, in an internal memorandum, stated that it was considering the potential for a joint employer finding between franchisors and franchisees when investigating safety complaints.

Stay tuned for further developments in this area.