Newly Constituted NLRB Overrules Unworkable Joint-Employer Test

In welcome news for employers, the newly constituted National Labor Relations Board (NLRB) overruled the board’s 2015 decision, Browning-Ferris Industries, 362 NLRB No. 186 (2015), establishing an unworkable joint-employer liability standard. The announcement deals a blow to labor unionization efforts and returns to the pre-Browning-Ferris standard that had been in place for more than 30 years. This decision restores balance in the labor arena and is a big win for employers utilizing staffing agencies, franchisor/franchisee relationships, and others with contractual work relationships.

In Browning-Ferris the 2015 NLRB ruled that employers could be deemed joint employers simply by reserving control or exerting indirect control over the same workers. This eliminated the previously long-standing requirement that an employer actually exercise control rather than simply having a contractual right to do so. The board in the case also threw out the precedent that an employer must exercise direct, immediate, and not limited and routine control over an employee ruling that indirect control, such as through an intermediary, was sufficient to establish joint employment.

Thus, under the Browning-Ferris decision, simply having a contractual right to control could create joint-employment between two separate businesses. As previously stated, this is especially problematic for businesses utilizing a staffing company or those that use the franchise model because both parties to the relationship could be deemed joint employers for purposes of unionization, collective bargaining, and defense of unfair labor practice allegations. Further, there was concern the standard in this decision would bleed over into other areas of the law.

Thankfully, the now Republican controlled NLRB, in a 3-2 decision, overruled the Browning Ferris decision. The board clearly stated, “we return today to a standard that has served labor law and collective bargaining well, a standard that is understandable and rooted in the real world.” The decision reverts to the previous standard that would establish joint employment status under the National Labor Relations Act (NLRA) only when an employer has exercised control over the essential terms of employment and has done so directly and immediately in a way that is not limited and routine.

This is an early holiday gift for employers and hopefully a sign of more favorable decisions to come.

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