Last Thursday, the NLRB overruled the Obama-era NLRB’s decision in Browning-Ferris Industries, a 2015 ruling that loosened the standard for determining how much control over employees is required before a business entity can be held liable for infractions of federal labor law as a joint employer.
Prior to Browning-Ferris, for two or more entities to constitute joint employers of a workforce, they had to share the ability to control only the essential terms and conditions of employment like hiring, firing, and directing employees. Further, this control must have been direct and immediate, and must have actually been exercised before an entity would be found a joint employer.
Browning-Ferris changed that to a standard where “two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.” How much of a departure this was from the previous standard only became clear as Browning-Ferris was applied and interpreted in successive Board decisions. Under these decisions, the Browning-Ferris standard would consider as a joint employer any entity with even indirect or unexercised-but-reserved authority to control or affect “essential terms and conditions of employment” reaching beyond the basics of hiring, firing, and supervising employees to management tasks like setting work hours, making staffing decisions, and approving overtime, among others.
This expansion of joint employer status was controversial from the start as many management-side voices argued it unnecessarily injected instability and uncertainty into longstanding relationships and arrangements. Among those particularly affected by Browning-Ferris, for example, were franchise businesses, whose management of franchisees became much more likely under the new standard to result in a joint employer status, opening up new and unexpected avenues of employment liability.
With Thursday’s new ruling, however, things revert to the status quo ante, wherein a business must have direct and immediate control over truly essential terms and conditions of employment before it can be held liable as a joint employer under federal law.
A never-ending partisan tug-of-war on the issue of joint employer status is neither a permanent nor a desired solution. The nature of business requires the long-term certainty to be able to plan beyond the next presidential election. A legislative solution, like the one introduced by Rep. Bradley Byrne (R-Ala.), which was passed in the U.S. House of Representatives last month, appears to be the best way to achieve meaningful and necessary stability on this controversial topic.
But, for at least as long as the NLRB’s composition remains as is, businesses dealing with franchisees and subcontractors have one fewer thing to worry about.