Are You A Joint Employer?
Browning-Ferris Industries of California Case and Its Potential Impact
By now, most employers are aware of the recent and significant decision from the National Labor Relations Board in Browning-Ferris Industries of California, Inc., 2015 NLRB LEXIS 672 (2015)(“Browning-Ferris”). In that case, the NLRB expanded who qualifies as a “joint employer” and effectively called into question many existing business models and relationships. While currently limited to cases brought before the NLRB, time will tell whether this decision will be adopted by other jurisdictions and agencies throughout the country.
Traditionally, an entity was only determined to be a “joint employer” with another entity if it shared and exercised the right to control or determine essential conditions of employment of the employees of the other entity. By way of example, if one entity controlled or had a direct role in the hiring, firing, supervision or termination of employees of another entity, they would be deemed to be joint employers under common law. Put another way, the emphasis in determining joint employer status has traditionally been the exercise of direct, actual and substantial control over a separate entities’ employees.
Now, it is clear from the decision in Browning-Ferris that in ascertaining whether an entity possesses “sufficient control” over another company’s employees to qualify as a joint employer, the NLRB will not only look to whether an entity exercises control over the terms and conditions of employment, but also whether such control is indirect (e.g., through an intermediary) or whether it has reserved the authority to do so. In other words, a company that has either “indirect control” or the “unexercised potential to control” another entity’s employees will be deemed a joint employer.
The Browning-Ferris decision impacts just about every industry. It particularly impacts staffing agencies who temporarily lend employees to companies. The decision also significantly impacts the franchisor-franchisee business model where, under some franchise agreements and in order to ensure quality control of the franchise’s brand, the franchisor retains rights to control certain terms of employment of its franchisees. Already, cases have been filed against McDonald’s arguing that McDonald’s (as franchisor) is liable for the conduct of some of its franchisees. Similarly, contractors and subcontractors have to be aware of the Browning-Ferris decision as any unexercised right to control the other entities’ employees would very likely lead to the conclusion by the NLRB that both are joint employers.
Currently, the Browning-Ferris decision is limited to cases before the NLRB. However, employers should be aware that if courts and other federal and state agencies, including the U.S. Department of Labor, begin adopting the NLRB’s new joint employer standard, employers will inevitably face expanded coverage and increased liability. And, considering the fact that, just months ago, the DOL issued new administrative guidance confirming its position that “most workers are employees” for purposes of the Fair Labor Standards Act, it would not be surprising if the DOL adopted the NLRB joint employer test in the near future.
While it is undoubtedly too early to tell the long-term ramifications of the Browning-Ferris decision, a brief review of court cases citing the decision are very limited at this point. One case that did cite Browning-Ferris was Nardi v. ALG Worldwide Logistics and Transport Leasing Contract, Inc., 2015 U.S. Dist. LEXIS 123355, Case No. 13 C 8723, (N.D. Ill. Sept. 16, 2015). Nardi was a Title VII sex discrimination and retaliation case brought against a transportation company and its professional employment organization (PEO). While the PEO provided human resources services (such as payroll and benefits administration) to the transportation company, the PEO did not have any control over the day-to-day tasks and terms of employment of the employees of its client. Accordingly, citing Browning-Ferris and other prior joint employer decisions from the Seventh Circuit, the court granted summary judgment in favor of the defendants, finding that the PEO was not a joint employer with its client. This case should give employers some comfort that courts may not follow the NLRB’s lead in making joint employer determinations.
Though the true impact of Browning-Ferris may not be known for years, businesses, particularly those that have contractual rights to affect terms and conditions of another entities’ employees, should take heed of this case and work with legal counsel to assess the risks of being deemed a joint employer, as well as strategize on measures to mitigate those risks.
Should you have any questions regarding this article, or should you want to evaluate your company’s potential joint employer liability under the new and expanded NLRB definition, please contact E. Jason Tremblay at 312-876-6676 or your designated Arnstein & Lehr LLP attorney.