NLRB Creates Revised Joint-Employer Test; Franchisor-Panic Begins

I want to start this post by saying how much I adore the National Labor Relations Board ("NLRB").  This fantastic (read: fanatic) government agency is the panel that said AT&T service techs can make house-calls wearing inmate jumpsuits as a uniform (later overturned by the D.C. Circuit who aptly cited "commonsense" as one of their reasons for overturning).  The NLRB also introduced us to the NCAA athlete-employee who can unionize while playing college sports (also recently overturned, crushing college athlete dreams of fast cars, lots of money, and a Teamsters card).  The NLRB is entertaining, revolutionary, and they literally don't GAF. 

So what have they done now?  The NLRB has decided to redefine "joint employer" by changing a test that had been on the books (and in the courts) for over 30 years.  The three Democrats on the panel cheered while the minority Republicans shook their heads.  

Prior to this decision, "joint employer liability" was judged on the actual level of control the joint employer exerts over its employees. The control had to be both direct and immediate.  In other words, no actual/direct control = not a joint employer. 

The new test suggests that anytime an employer shares or co-determines matters governing the "essential terms and conditions" of the employment, the employer will be a joint employer.  "Essential terms and conditions" is inclusive of anything from hiring and firing to discipline, supervision, setting wages and hours, controlling work schedules, assigning work, and determining overtime.  In other words, mere possession of control (even if you don't use it) = joint employer. 

In the case at hand, the "joint employer" (Browning-Ferris Industries of California - a.k.a. "BFI")  used a staffing agency to employ over 200 workers in its California location.  The staffing agency directly controlled most aspects of the workers' employment including benefits, wages, scheduling, on-boarding, and job performance evaluations. BFI had some control and assigned limited tasks to workers, conducted required training sessions, and adopted a "wage ceiling" for employees hired through the staffing agency. Even though BFI's control over the staffing agency employees was minimal at best, it was enough to push them over the threshold into the joint employer zone under the newly revised joint employer test.  

What does this mean for you?  If you are a Franchisor, your liability may have increased exponentially.  If courts adopt this new joint employer test where "mere control" is enough, franchisors may be liable for their franchisee's employees - even if they never meet them, never know them, or never directly manage them.  If you are a contractor, the same may be true of your subcontractor relationships.  And finally, if you staff your company via a staffing agency, consider this NLRB opinion a new warning regarding employment liability.  No one is safe from this decision. 

Luckily, the NLRB is a government agency (read: not a court) and their opinions are not binding, nor are they legal precedent a court must follow.  However, their opinions are suggestions that do often turn into case law as the agency decisions bleed into the courts.  Once again, this is a cautionary tale and something I will be tracking carefully for all my clients.