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NLRB changes joint-employer standard: possession of authority to control essential terms and conditions of employment will suffice

September 01, 2015

On August 27, 2015, the National Labor Relations Board (NLRB) undid over 30 years of joint-employer jurisprudence with regard to the factors used to determine whether an entity is a joint-employer for collective bargaining purposes.

Since 1984, putative employers not only had to possess authority to control the terms and conditions of employment, but also had to exercise such control. In addition, putative employers had to exercise that control directly and immediately. In Browning-Ferris Industries of California, Inc., the NLRB reversed course. Now, the simple fact that a party possesses authority to control the terms and conditions of employment will suffice to establish joint-employer status, even where the right to control is exercised indirectly through an intermediary (such as a staffing agency).

In its decision, the NLRB claims that this ruling will provide “a clearer and stronger analytical foundation” to determine joint-employer status and will “best serve the Federal policy of ‘encouraging the practice and procedure of collective bargaining.’” Although the NLRB’s claim of clarity is unlikely to materialize (the two NLRB dissenters state as much), the Board has certainly made it easier for unions to seek joint-employers for their collective bargaining efforts.

So what is the takeaway for potential joint-employers, whether in the contractor/subcontractor, franchisor/franchisee or placement agency context? Parties to these contractual relationships must determine whether their need to retain control over certain terms and conditions of employment is worth the risk of a joint-employer determination. If no such need exists, the parties’ agreement should reflect that reality.

Stay tuned for additional developments regarding this issue…

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