NLRB Joint Employer Standard: Not Just for Franchises

NLRB Joint Employer Standard: Not Just for Franchises

A reworking of the National Labor Relations Board’s joint employer standard appears to be a near certainty. The first sign of a major change on the horizon came in May when the board issued a call for briefs on the current standard, in relation to a case that the Teamsters filed against Browning-Ferris Industries of California Inc., a waste-management services company. Then in July, NLRB general counsel Richard Griffin Jr. threatened to charge franchisor McDonald’s USA over violations that allegedly occurred at franchisee-owned restaurants.

An Ogletree, Deakins, Nash, Smoak & Stewart webinar held this week, “Joint Employers and the NLRB: Potential Changes May Impact All Employers,” explained what a new joint employer standard might look like and what the practical impacts might be. Although the joint employer standard is often discussed in the context of nationwide fast-food joints such as McDonald’s, it’s clear that a change in NLRB thinking on the issue would likely have effects far more widespread, reaching contractors and subcontractors, not just franchisors and franchisees.

Brian Hayes, a shareholder at Ogletree Deakins and cochairman of the firm’s traditional labor practice group, as well as a former member of the NLRB, said in the webinar that it looks like changes to the standard are on their way—and employers should stay aware. “Contrary to some reports, the NLRB hasn’t decided anything with respect to this issue yet,” he said. “But the operative word is yet.”

The current joint employer standard, as articulated by the NLRB in its decisions, is already fairly expansive, Mark Kisicki, an Ogletree Deakins shareholder, said in the webinar, and has much to do with the level of control over workers. “You cannot make decisions that are immediately and directly affecting the subcontractor or the franchisee’s employees—setting individual wages, setting individual schedules, being involved in the hiring and disciplining of those employees,” said Kisicki. Contractors, he added, may make general notes, such as pointing out that workers aren’t doing a good job, but they may not actually discipline them if they want to avoid establishing joint employment.

It’s impossible, of course, to predict exactly how the NLRB might change this standard, but the webinar indicated that there have been some pretty good hints dropped by the board and its general counsel. Kisicki pointed out that Griffin’s amicus brief in the BFI case lays out an updated definition for joint employers.

In the brief, the GC calls for the status to be applied when “under the totality of the circumstances” the contractor or franchisor “wields sufficient influence over the working conditions of the other entity’s employees such that meaningful bargaining could not occur in its absence.” Using this approach, Griffin adds, the labor board would “make no distinction between direct, indirect and potential control over working conditions,” and instead identify a joint employer situation when “‘industrial realities’ make an entity essential for meaningful bargaining.”

If the board does in fact adopt more expansive standards like those articulated by Griffin, there will be plenty of practical changes afoot. The most obvious might be a distinct advantage for unions that want to recruit more workers and would get a leg up when more of them are under a joint employer. “The other obvious implication is that in a joint employer situation, both entities that are involved become liable for any unfair labor practice violations,” said Hayes.

Hayes went on to explain other, perhaps less obvious, potential impacts. Contractors and franchisors might lose their secondary boycott protections under the National Labor Relations Act. “Typically, if they are separate entities, the nonemploying entity would be protected under section 8b4 from secondary boycott activity,” he said. “But that secondary boycott protection may disappear if those two entities are deemed to be joint employers of the employees in question.”

Then, Hayes noted, there’s a good possibility that if a new joint employer standard comes into play, the NLRB will revert to its old Sturgis doctrine for determining how easy it would be for the employees of two companies with a service-provider relationship to have employees under the same union umbrella. Today, Hayes explained, the employees of a supplier company that provides a second company with services cannot be in the same bargaining unit or under the same bargaining agreement as the user company without the consent of both companies involved. If Sturgis is reinstituted though, that requirement would disappear.

And then there’s the Malbaff doctrine, which might also be toast. Malbaff permits contractors in some cases to stop working with subcontractors if the subcontractor’s employees cause union-related concerns. “That kind of doctrine, that insulating doctrine for the contractor, may go by the boards if the contractor and subcontractor relation is deemed to be not one of two separate entities, but a joint employment one with respect to the subcontractors employees,” Hayes said.

So how should companies get ready for the joint employer standard changes that seem to be in the pipeline? Right now, without definitive guidelines for what a new standard would entail, explained Hayes, the position employers find themselves in is “frankly, a fairly uncomfortable one.” It will likely take until the board makes a clear ruling on BFI to get more details, and given the fact that the NLRB has a post-Noel Canning decision backlog to tend to, BFI might be up in the air for a while.

According to Hayes, the best employers can do right now is follow the current joint employer standard as closely as possible—and that means creating well-structured agreements about who will make important calls about employees. “You really want to make clear in whatever writings or agreements that you have that the control over all employment decisions rests solely with the franchisee or with the subcontractor,” he advised. “And most importantly, stick with what you write.” The NLRB, he added, is pretty focused on how employment situations play out on the ground, and not just on how they look on paper.

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