Loosening Standards to Tighten Responsibilities: An Overview of the NLRB’s “New” Joint Employer Standard

By: Elizabeth Driscoll

The world we live in is constantly changing; however, the great debate lies in whether change is for better or for worse. The NLRB’s recent decision[1] in Browning Ferris Industries of California, Inc.[2] promises immense change for franchises.[3] Instead of adhering to the same joint employer standard that has been the norm for the past 30 years,[4] the NLRB has chosen to revert back to a broader standard.[5] This new standard imposes joint employer status on franchisors and others who may “share or codetermine those matters governing the essential terms and conditions of employment.”[6]

Under the narrow standard, the NLRB “(a) require[ed] evidence of direct and immediate control over employees; (b) look[ed] only to the actual practice of the parties rather than their contract; and (c) require[ed] an employer’s control to be substantial and not ‘limited and routine.’”[7] The new standard no longer requires the franchisor to exercise actual control; rather, the fact that a franchisor has the potential to exercise control will be used to determine whether the franchisor is a joint employer.[8] Furthermore, indirect control may be sufficient to establish joint employer status.[9]

In an attempt to combat the use of the new NLRB standard, and reinstate the narrow standard that has been used for decades, Rep. John Kline introduced the Protecting Local Business Opportunity Act to the House of Representatives.[10] This bill amends the NLRA to “clarify the treatment of two or more employers as joint employers.”[11] If the bill is passed, a singular sentence will be added to the end of Section 2(2) of the NLRA[12] stating that multiple employers can only be considered joint employers if “each shares and exercises control . . . and such control . . . is actual, direct, and immediate.”[13] Proponents of this bill believe that the new standard set forth by the NLRB will negatively affect the daily operations of small businesses, franchises, and independent contractors.[14] Additionally, they fear that the broader standard will be abused and allow for intrusion into company contracts.[15] Because of the ambiguous language of the new standard,[16] a wide array of employment subjects[17] could be included as evidence for joint employer status. Franchisors may be held liable for the business practices of their franchisees, which some argue will undermine the business model; therefore, making it a less appealing organizational structure.[18]

On the other side of the spectrum, the NLRB’s broad standard can be seen as a symbol of hope for unions and those who wish to unionize. If the franchisor is held to be a joint employer, the ability for workers to organize will greatly increase.[19] Franchisors will no longer be able to terminate a franchise where employees were attempting to organize in order to avoid the creation of a union.[20] Furthermore, under federal labor law, unions are legally entitled to collectively bargain with the employer.[21] As joint employers, franchisors will also be available to the unions for bargaining purposes.[22]

The NLRB believes that the broader joint employer standard is in accordance with the Board’s duty under the NLRA to “encourage[e] the practice and procedure of collective bargaining.”[23] If the proposed Protecting Local Business Opportunity Act is not passed, then it is certain that we will see a shift in union leverage, as well as a shift in the franchise model in general. Both sides present compelling arguments for why the standard should not or should be changed. Only time will tell if these shifts will prove to be a beneficial change for the United States.

[1] Decided August 27, 2015.

[2] Browning-Ferris Industries of California, Inc., 362 N.L.R.B. 186 (2015).

[3] Id. at 15 (adopting a new standard for joint-employer determination).

[4] Id. at 1.

[5] Id. at 2.

[6] Id. at 2 (quoting NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117, 1123 (3d Cir. 1982).

[7] Id. at 7-8.

[8] Id. at 15-16.

[9] Id. at 16.

[10] The bill was introduced on September 9, 2015.

[11] Protecting Local Business Opportunity Act, H.R. 3459, 114th Cong. (2015).

[12] 29 U.S.C. § 152(2).

[13] H.R. 3459 at § 2 (emphasis added).

[14] Pamela Wolf, ‘Protecting Local Business Opportunity Act’ Hearing Examines NLRB Joint Employer Standard, Wolters Kluwer Employment Law Daily, http://www.employmentlawdaily.com/index.php/news/protecting-local-business-opportunity-act-hearing-examines-nlrb-joint-employer-standard (last visited Oct. 10, 2015).

[15] Id.

[16] The Board uses an inclusive approach to define the “essential terms and conditions of employment” that will be used to determine joint employer status. Browning-Ferris Industries of California, Inc., 362 N.L.R.B. 186, 15 (2015).

[17] Subjects include but are not limited to: “hiring, firing, discipline, supervision, and direction.” Id.

[18] See Barry M. Heller, Franchising Faces a Major Threat, Inside Counsel, Jul 2015.

[19] Molly L. Kaban & Raymond F. Lynch, Looking Ahead After NLRB Joint Employer Ruling, The Recorder, Sept. 22, 2015.

[20] Noam Scheiber & Stephanie Strom, Labor Board Ruling Eases Way for Fast-Food Unions’ Efforts, N.Y. Times, Aug 28, 2015, at A1.

[21] 29 U.S.C. § 157.

[22] See id.

[23] Browning-Ferris Industries of California, Inc., 362 N.L.R.B. 186, 2, 20 (2015).

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