On August 27, 2015, in a long-awaited and 3-2 decision, the National Labor Relations Board announced a new, lowered standard for determining whether a business is a joint employer of a work force hired by a separate employer for purposes of the NLRA. Browning-Ferris, 32-RC-109684 (Aug. 27, 2015). Prior to Browning-Ferris, the test for joint employer status was whether the entity actually exercised direct and immediate control over the union-represented employees and had sufficient control over their terms and conditions of employment. Under the prior standard the Board would find against joint employer status where the business was careful not to behave like the employees’ employer, and either avoided entirely direct instruction of employees as to their work performance, or provided only “limited and routine” instruction.

Browning-Ferris overrules decades of case law precedent, introduces a lower threshold for a finding of joint employer status, and allows the Board to find that an entity is a joint employer of a workforce if the entity satisfies a two-prong test. First, the entity must meet the common law definition of employer, in that it must have the right to control employees’ essential terms and conditions of employment, but need not actually exercise this control. The Board describes this inquiry as “not always a simple task.” Second, the entity must share or codetermine “those matters governing the essential terms and conditions of employment.” Regarding the second prong of the test, the NLRB will evaluate on a case-by-case basis the extent to which the entity shares control over and codetermines working terms and conditions. The Board declined to provide employers a “quick, definitive formula as a comprehensive answer” but stated that this area of the law will require an evolutionary process for its rational response” considering the “total factual context … in light of the pertinent common-law agency principles.” However, the Board clarified that it will not require proof of direct control over working conditions, and that indirect and even potential control will suffice to make the entity a joint employer. The entity found to be a joint employer will be required to bargain with the employees’ union, but only over those terms and conditions of employment over which it has retained control.

The NLRB reversed the Regional Director’s finding that Browning-Ferris did not control or codetermine the daily work of sorters, screen cleaners and housekeepers who were employed by a staffing agency and assigned to work at Browning-Ferris’ production facility. Despite Browning-Ferris’ lack of direct control over the employees’ day-to-day terms and conditions of employment, the Board still found that Browning-Ferris was a joint employer because it indirectly codetermined employee wages, hours and other conditions of employment, through its contract with the staffing agency, and its enforcement of production standards and setting of work hours and shifts for the temporary agency’s employees.

The implications of the new Browning-Ferris test may reach well beyond a business’s relationship with a temporary staffing agency and affect the relationship between franchisors and their franchisees, and other business relationships where one party reserves contractual rights that potentially or in fact affect the working terms and conditions of the employees of the business partner.