By Erica K. Rocush, Shareholder

The National Labor Relations Board (NLRB) has finally issued its much-anticipated decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (August 27, 2015). The NLRB’s decision alters long-established precedent by significantly changing the standard regarding when two separate entities constitute a single “joint employer” under the National Labor Relations Act (NLRA).

In the case, BFI Newby Island Recyclery (BFI) owned and operated a recyclery, and had subcontracted a portion of the recycling operation to a staffing company, Leadpoint Business Services. Leadpoint was the direct employer of the workers in question, and was responsible for hiring, disciplining, firing, training and paying the employees. BFI had no direct control over the employees, but did set the hours when the operation needed to be staffed and the speed at which the production line had to move. The contract between Leadpoint and BFI also mandated that Leadpoint workers could not be paid more than BFI workers, gave BFI the right to discontinue the use of any Leadpoint staff with which it was not satisfied, and required Leadpoint employees to pass a drug test and adhere to BFI’s safety policies.

At issue before the NLRB was whether BFI and Leadpoint were joint employers for purposes of a union representation election for Leadpoint employees.

In a 3-2 decision, the majority of the Board concluded that the existing standard for determining joint employer status was too narrow and not in line with the realities of the modern workplace. Under the pre-existing standard, in order for two entities to be considered joint employers, both of them had to exercise “direct and immediate” control over the terms and conditions of the workers’ employment. The Board majority found that this standard did not accord with the NLRA’s purpose of fostering collective bargaining among as many employees as possible. Therefore, overruling years of established precedent, the majority determined that even if a right to control is only potential and not exercised, and is only indirect, such control is sufficient to establish joint employer status. The Board also expanded the relevant terms and conditions of employment that it will examine to determine control, to look not only at hiring, firing and supervision decisions, but also decisions relating to overall staffing and production levels.

Applying this new standard, the Board majority found that BFI was a joint employer with Leadpoint, because it exercised potential and indirect control over Leadpoint’s employees. The majority justified this conclusion by finding that BFI controlled the schedule and speed of the conveyor belts and therefore controlled the speed at which the employees were required to work, even though Leadpoint directly oversaw the work of its employees; that BFI indirectly controlled worker pay by prohibiting Leadpoint from paying its employees more than BFI paid its employees, even though Leadpoint determined the pay for all its employees, and that BFI required Leadpoint to meet its hiring selection procedures, even though BFI did not participate in the hiring process for Leadpoint employees.

The Board majority acknowledged that it was rejecting the existing standard regarding joint employer status and implementing a new, broader standard. The Board’s holding in this case will have potentially broad-reaching impacts, as it will impact the potential joint employment status of parent companies and subsidiaries, franchisors and franchisees, contractors and subcontractors, and leasing companies and temporary service providers. Although the Board’s decision will likely be appealed and therefore may not be the final word on the issue, for now, all companies that use any workers employed by a separate entity should closely examine the relationship that they have with those workers to avoid being found to be a joint employer based merely on indirect or unexercised control of the workers.