NLRB Significantly Expands "Joint Employer" Test Exposing Employers to Greater Liability

In a case that dramatically expands the concept of “joint employer” under the National Labor Relations Act (“NLRA”), the National Labor Relations Board (“NLRB” or “Board”) determined that a company that contracted for the supply of workers through a third party was a joint employer because it exercised “indirect control over working conditions or if it reserves the authority to do so.” BFI Newby Island Recyclery. [1]

A joint employment relationship exists when “two entities exercise significant control over the same employees.” [2] A finding of joint employment status is significant because all joint employers may be individually and jointly responsible for compliance with the NLRA. [3]Prior to the Board's decision in BFI, two employers were found to be "joint employers" only when the two entities exerted such direct and significant control over the same employees that they shared or co-determined matters governing the essential terms and conditions of employment. [4] Relevant factors in making this assessment included the right to hire, terminate, discipline, supervise and direct the employees. The control exercised by the putative joint employer must be actual, direct and substantial. [5]

Now, under the new standard announced by the Board in BFI, a company using a staffing agency will be considered a joint employer if it affects the means or manner of those employees' work and terms of employment, either directly or indirectly. This includes not only matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction, but also "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."

The Bottom Line. BFI is a “game changer,” affecting franchisors and any company using a staffing agency, leasing company or PEO. Companies deemed joint employers may find that they have obligations under the NLRA which prevent them from unilaterally terminating a services contract with a unionized contractor or demanding that an unsatisfactory employee be removed from the premises. They may even be found liable for adverse employment actions taken against a worker employed by the third party contractor. We, therefore, urge all employers to review immediately their services contracts and the extent to which they may directly or indirectly control the terms and conditions of employment. The risk of exposure is significant and should not be ignored. If you have any questions or wish our assistance, please contact M.J. Dobbs or Jed Marcus.