By Kelline R. Linton,
In recent months, the National Labor Relations Board (NLRB) has expressed an interest in redefining the standards for determining joint employer liability. The Board is attempting to change the standards to hold more employers jointly liable (or responsible) for another employer’s employees.
The current standard is that a joint employer relationship exists where two separate employer entities actually share or meaningfully affect control of the employment relationship with respect to the terms and conditions of employment, such as hiring, firing, discipline, and supervision.
However, in May 2014, the Board indicated it wanted to revisit the joint employer standard when it invited interested parties to submit briefs on the standard in the pending case, Browning-Ferris, Inc. The Board’s brief proposed making the joint employer determination based on a totality of the circumstances by examining direct, indirect, and potential control of one employer over the employees of another employer. The Board further stated variables to be considered would include inventory costs, tracking sales data, projections of labor needs, labor costs, involvement in employee work schedules and setting wages, and productivity.
In July 2014, the Board then announced that it intended to issue complaints against McDonald’s in 43 pending cases in which it was alleged that McDonald’s was a joint employer of the franchisee’s employees. These recent developments highlight the Board’s goal to adopt a more relaxed joint employer standard that would make more employers responsible and liable for another entity’s employees.
What does this mean? Franchisors or other employers that use contractors, staffing agencies, or affiliate corporate entities should be on guard and assess whether their involvement in these entities would make them joint employers under the Board’s proposed test. Employers also should be aware that the proposed test would allow unions to exert pressure on more recognized corporate entities, which may open the door to larger scale organizing. While the Board has not yet adopted the new test, we recommend at-risk employers review existing contracts and reexamine day-to-day realities to ensure the business relationship is appropriately separated between the entities. We are available if you have any questions about such an assessment.