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NLRB Overturns Obama-era Definition of "Joint Employer"

Compliance
Article
01/10/2018
  • The National Labor Relations Board (NLRB) overturned its 2015 Browning-Ferris Industries decision, which had expanded the standard for determining joint employment status under the National Labor Relations Act.
  • The NLRB will revert to the previous standard for determining joint employment status, requiring an employer to have exercised direct control of the employment terms over another entity's employee.
  • This decision and the return to the direct test for joint employment is a welcome development to employers that hire subcontractors, as well as franchisors and staffing agencies.
  • Businesses must remember that other federal laws and agencies, as well as state laws and court decisions may define and enforce joint-employer status differently than the NLRB.

NLRB returns to previous standard for determining joint employer status

On December 14, 2017, the National Labor Relations Board (NLRB) overturned its 2015 Browning-Ferris Industries decision, which had expanded the standard for determining joint employment status under the National Labor Relations Act (NLRA). The NLRB will revert to the previous standard for determining joint employer status under the NLRA, requiring an employer to have exercised direct control of employment terms over another entity's employee.

The NLRB's decision was to some extent expected after confirmation of President Trump's appointees to the board, creating a 3-2 Republican majority for the first time in about 10 years.

Background

When the NLRB decided the Browning-Ferris Industries (BFI) case in 2015, it reversed 30 years of precedent and significantly expanded the scope of potential joint employer status under the NLRA. The case focused on a temporary staffing arrangement in which a nonunion staffing company had assigned employees to work at a unionized recycling plant. In a 3-2 decision, the NLRB expanded its standard for determining joint-employer status in BFI, finding that when evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the NLRB would — among other factors — consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.

Franchisors, staffing agencies, those hiring subcontractors welcome NLRB's decision

This recent NLRB decision and the return to the direct test for joint employment is a welcome development to employers that hire subcontractors, as well as franchisors and staffing agencies. Under the Browning-Ferris standard, these business models often incurred a greater liability under the NLRA (i.e., unfair labor practices) for the actions of their contractors and franchisees. In returning to the prior standard, it will be necessary to show the business entity exercised direct control over another entity’s employee to meet the standard of joint of employer and show joint liability under the NLRA.  

Joint employer status defined and enforced by the board and beyond

Employers should take care: An employer may still be found to be a joint employer even under the direct control test. The return to the direct standard also does not directly affect the determination of joint employer status under other laws, such as Title VII of the Civil Rights Act (discrimination claims), the Fair Labor Standards Act (wage and hour violations), or similar state laws. Employers are encouraged to work with their HR professional or seek legal counsel for additional information on these laws.

Paychex will continue to monitor legislative and regulatory activity around joint employer status under the Trump administration in an effort to keep you updated on significant developments.

Tammy Tyler

Tammy Tyler is a senior compliance analyst with a focus on employment law at Paychex, Inc., a leading provider of integrated solutions for payroll, HR, retirement, and insurance services.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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