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NLRB Applies a New Standard to Determine Joint-Employer Status

 

On August 27, 2015, the National Labor Relations Board (“NLRB”) issued a decision in Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery that altered the application of the standard used to determine whether or not businesses should be considered joint employers.  In order to determine joint-employer status for labor law purposes, the NLRB will evaluate whether or not the two employers “share or codetermine those matters governing the essential terms and conditions of employment” such as hiring, firing, discipline, supervision, and direction over employees.  In its decision, the NLRB revised its application of this standard, finding that reserved authority to control the essential terms and conditions of employment is relevant to the question of joint-employer status and that indirect authority, such as through an intermediary, is sufficient to establish joint-employer status.  The NLRB found it necessary to revise the standard “to better effectuate the [National Labor Relations] Act in the current economic landscape.”

Although this particular set of facts did not involve a franchisor-franchisee relationship, the potential impact it could have on the franchise model, and other common business relationships, was mentioned briefly by the dissent.  In a thirty-page dissent, two Members of the NLRB argued that the decision fundamentally altered the law as it pertains to the relationships of “lessor-lessee, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer,” as well as, to “small businesses whose separate operations and employees have until now not traditionally been subject to Board jurisdiction.”  The majority addressed the dissenting Members’ concern in Footnote 120 stating, “None of those situations are before us today, and we decline the dissent’s implicit invitation to address the facts in every hypothetical situation in which the Board might be called on to make a joint-employer determination.  As we have made clear, the common law test requires us to review, in each case, all of the relevant control factors that are present determining the terms of employment. In this case we are specifically concerned with only two employers: BFI and Leadpoint.”  As such, only time will tell how the revised standard will be applied in pending and future franchise cases, such as McDonald’s, and what kind of an impact it will have on the franchise model as we know it.  Whether or not franchisors and franchisees should be considered joint employers continues to be a topic of much debate, and will be one for both franchisees and franchisors to keep an eye on moving forward.