Blog: The California Workplace Advisor

Yesterday, in Browning Ferris Industries of California, Inc., the National Labor Relations Board (NLRB) overruled 30 years of authority on the issue of joint employers.  In a decision which two Board Members called the “most sweeping of recent major decisions,” a slim 3-2 majority of the NLRB found that any company which has the right, whether used or unused, to “share or codetermine” the terms and conditions of employment are employers subject to its jurisdiction.  This “radical departure” from many years of decisions, if not reversed, will drastically broaden the NLRB’s mandate to thousands of new employers across the country.

Who is an “employer”?

It seems the most basic and the most elusive question in the world of labor employment law, what is an employer?  Few statutes governing the employment relationship actually answer that question and when they do, the definition typically is not helpful.  With technology causing a constant change in how we define a workplace,  this seemingly simple question has perplexed not only “sharing economy” employers like Uber, but companies with large numbers of independent contractors like Federal Express, and franchisors like McDonald’s.

For years, courts and government agencies have struggled in defining what is an employer in an untraditional employment setting. Because the National Labor Relations Act, a statute dating to the 1930’s, does not define “employer,” the U.S. Supreme Court found that the NLRB must use a common law definition.  But, the common law is even older than the NLRA and seemingly even less adaptable to the modern workplace.

The issue of joint employment arises most frequently with staffing and subcontracting agencies.  As the NLRB correctly noted, around 4 percent of all workers in the United States are employed through such a temp agency.

Nevertheless, in the early 1980’s, the NLRB settled on a definition provided by a federal appellate court, namely that multiple employers can be “joint employers” when they “share or codetermine those matters governing the essential terms and conditions of employment.”  While not perfect for today’s economy, that settled decision provided employers with predictability.

Over time, the NLRB refined the definition of an employer so that temp employees were usually not subject to its jurisdiction.  The NLRB’s decisions over the past 30 years were generally distilled down to two requirements: (1) in order to be a joint employer, a company must actually exercise control over the workforce, not merely have the ability to do so; and (2) the employer’s control over employees must be “direct and immediate.”  These limitations made it so that employers who did not exercise day-to-day control over a workforce were not subject to the NLRB’s requirements.

In today’s decision, however, the NLRB abandoned the decision it settled on over 30 years ago and with it went those two requirements.  Yesterday, the NLRB found that: (1) a company is a joint employer so long as it has the ability to exercise control over the workforce, even if that control is not exercised; and (2) the employer need not exercise direct and immediate control over the workforce in order to be considered a joint employer.

The NLRB’s new definition of “control” is also deliberately vague.  According to the decision an employer using a staffing company retains “control” over a workforce when, for example, it sets minimum standards for hiring employees, it requires drug tests, it imposes requirements over the speed at which tasks must be performed by employees, or it sets limits on how much employees can be paid.  So long as a company reserves the right to exercise control over these types of common workplace requirements, it is an employer under the NLRB’s decision.

The Practical Impact Of The Browning-Ferris Decision

As the two dissenting Board members aptly put it, this change in law “will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts and picketing.”  The concept of who is an employer is potentially limitless under this decision.  Are a company’s suppliers, lenders, lessors, parent companies, franchisors, or creditors now an employer?  Are Uber drivers, FedEx independent contractors and employees at McDonald’s franchises now employers of those entities?  While the NLRB won’t make those predictions, surely some of those conclusions are true.  More importantly, the NLRB offers no practical limitations on how their admittedly broad definition will be applied in practice.

The undeniable truth is that union membership, particularly in the private sector, is at a historic low.  Unions have proven in large to be unadapatable to an economy that has changed from one focused on provision of goods to one focused on services.  As that workplace becomes more virtual and the employment relationship less direct, unions — and their supporters in the majority of the NLRB — are concerned that they will fade into obscurity.  This decision — termed sweeping and radical by the NLRB’s employer-friendly minority — seeks to upend that trend.

The way that the NLRB went about it in this case, however, proves to be very disruptive to the economy.  Does a homeowner hiring a plumber or an office hiring a repairman really expect that he has to comply with the NLRB’s requirements?  It seems unlikely, but the broad, deliberately vague language used by the NLRB leaves the question up in the air.

Ultimately, this decision will be reviewed and likely refined by the U.S. Court of Appeals District of Columbia Circuit and perhaps by the U.S. Supreme Court thereafter.  Until then, this perplexing issue is an official statement of the NLRB’s position on the issue and employers around the country will be faced with its consequences for many years to come.