NLRB Case Redefines Joint Employer Standard

September 4, 2014

120416_nlrb_logo_ap_328The National Labor Relations Board (NLRB) is reviewing a decades-old standard for deciding when a business under contractual arrangements is deemed a joint employer of workers employed by another business. If the joint employer standard is expanded it could make businesses more responsible for sub-contracted workers.

Over the past three decades the NLRB has deemed that a business couldn’t be held accountable for employment-related matters unless they had shared control over and or direct effect on employment-related matters, such as hiring, firing, wages and disciplinary actions. At a time when companies increasingly use subcontractors and temp agencies, there has been a number of joint employer cases submitted to the NLRB.

A recent case involving complaints of alleged employee rights violations against McDonald’s franchisees and their franchisor, McDonald’s Corp was taken up by the NLRB. Typically, under the existing franchisor-franchisee agreement on employer liability the franchisors have not been considered joint employers. On July 29, the NLRB Office of the General Counsel released a statement ruling that of the 181 cases filed involving McDonald’s 43 complaints had merit and the McDonald’s Corp should be considered a joint employer. For the McDonald’s Corp this decision means that they could be held responsible for any labor violations made by its franchisees.

In another case, NLRB was asked by a Teamsters local union, the Sanitary Truck Drivers and Helpers Local 350, to consider designating Browning-Ferris Industries of California Inc., a waste management company, and Leadpoint Business Services, a Phoenix-based staffing firm, as joint employers for collective bargaining purposes. After an NLRB acting regional director’s decision sided with the companies, the NLRB agreed to review the dispute and asked for input on whether to update the joint employer standard. In response to the board’s request for input, the NLRB’s General Council submitted a brief which recommends that the board “abandon its existing joint-employer standard,” and that the current standard “ignores Congress’s intent that the term “employer” be construed broadly in light of economic realities and the Act’s underlying goals.” The Browning case is pending review by the board. For more information on this case click here.

These decisions have the potential to not only impact these businesses but also other firms that use subcontractors or temp agencies. The ruling could also change how businesses function, impacting many small businesses, job creation and the economy.

At this time, NLRB has not decided whether to change the joint employer standard. NSBA will continue to monitor this rule and provide updates accordingly.