NLRB Establishes New “Indirect Control” Standard to Define Joint Employer Status

On August 27, 2015, in the case of Browning-Ferris Industries of California, Inc., et al. v. Sanitary Truck Drivers and Helpers Local 350, et al., the National Labor Relations Board (“NLRB”) adopted a new “indirect control” standard for determining joint employer status under the National Labor Relations Act (“NLRA”). By a narrow 3-2 decision, the NLRB ruled that Browning-Ferris Industries of California, Inc. (“BFI”) was a joint employer of workers at its recycling plant located in Milpitas, California, even though those employees were hired through an independent staffing agency, Leadpoint Business Services Inc. (“Leadpoint”). The NLRB concluded that, although Leadpoint was acting as an intermediary and had direct control over the employees at BFI’s recycling plant, BFI was still a joint employer because of its indirect, reserved contractual authority over the employment terms and conditions of those employees, such that BFI would be a meaningful party to any collective bargaining under the NLRA.

The NLRB’s “indirect control” test is a sharp departure from the previous standard, which provided that companies, for purposes of the NLRA, were only responsible for those employees under their direct control. Absent the power to set hours, wages or job responsibilities, those companies would not typically be liable for unfair labor practices or other violations of the NLRA or required to collectively bargain. Under the NLRB’s new, broader test, two or more entities will be deemed “joint employers” if they (1) are both “employers” under common law, and (2) they share in matters governing the essential terms and conditions of employment, or, at a minimum, have the reserved authority to do so. The Browning-Ferris decision will greatly impact companies’ labor relations policies and collective bargaining requirements, particularly in restaurant and other franchise-heavy industries where national companies often use local franchisees and contractors for their operations.