NLRB Restores Former Standard for Determining Joint Employer Relationship

Joshua Rosenberg Business Law, Franchise

On December 14, 2017, the National Labor Relations Board (NLRB) issued a decision which turns back the clock on the standard for determining a joint employer relationship. The standard had been changed on August 27, 2015, by the NLRB’s decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015), which held that “[t]he Board may find that 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.”

The 2015 NLRB decision named the following as essential terms and conditions of employment: hiring, firing, discipline, supervision, and direction; wages and hours; dictating the number of workers to be supplied; controlling scheduling, seniority, and over-time; and assigning work and determining the manner and method of work performance. The 2015 NLRB had removed the requirement that a joint employer actually control employees’ terms and conditions of employment directly, immediately, and not in a “limited and routine manner.” Only the contractual right to exercise this control was required for a finding that the non-direct employer is a joint employer. In the context of franchising, this meant that the franchisor could easily be found to be a joint-employer of franchise employees with the franchisee. The Board at that time reasoned, “The right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect.”

Essentially, the result of the NLRB’s decision in Browning-Ferris was a much higher likelihood that a joint-employer relationship be found to exist between a franchisor and franchisee, where the intent of the Franchise Agreement between those parties was for them to remain independent entities. Instead, both could potentially be deemed responsible for fulfilling the obligations of an employer. This lead to much confusion as to employment relationships, especially in the franchise world.

The Board’s recent decision, however, made in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017), overruled Browning-Ferris, returning the NLRB’s review criteria to the principles governing joint employer status that existed prior to that decision. This step is expected to foster stability in labor-management relations.

Now many businesses, such a McDonald’s, the world’s largest franchisor, undoubtedly breath a collective sigh of relief. McDonald’s in particular has been highly publicized for the litigation it found itself involved in over its alleged joint employer status after the NLRB brought multiple complaints against it for alleged violations of labor standards, relying on the Browning-Ferris decision.

Time will tell what effect, if any, the return to the pre-Browning-Ferris standard will have on the NLRB’s complaints against McDonald’s and similarly situated franchisors, but in the meantime the pressure on these businesses is greatly relieved.