The National Labor Relations Board (NLRB) overruled Browning-Ferris Industries and returned to the pre-BFI standard that governed joint employer liability.
The BFI decision set forth a broad definition of “joint employer” imposing liability and requiring bargaining in situations where a business posses only potential and indirect control over the employees in question. The BFI test was unpredictable and fundamentally altered the law applicable to a number of business relationships including: user-supplier, contractor-subcontractor, franchisor-franchisee, parent-subsidiary, predecessor-successor, lessor-lessee, and creditor-debtor.
Under BFI, a company could be deemed a joint employer of another company’s employees even if the company had never exerted overt control over workers’ terms and conditions of employment. This law wreaked havoc on the modern way businesses are run. Much like the Tasmanian devil in Looney Tunes cartoons, BFI spun onto the scene, stirred up trouble, and has now quickly went away.
The Hy-Brand Board wrote: “the BFI standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”
Hy-Brand announced the Board was returning to the principles governing joint employer status that existed prior to BFI and applying this standard prospectively to all pending and future cases.
Thus, under the new Hy-Brand standard, “a joint-employer finding shall once again require proof that the putative joint employer entities have actually exercised joint control over essential employment terms,” like the right to hire, terminate, discipline, supervise, and direct those employees.
This is welcome news for the business community because gone are the days when “reserved authority” to control will automatically render two entities joint employers of one another’s employees. Rather, an employer may be considered a joint employer in relation to the other employer’s employees only if such employer “directly and immediately” and not in a “limited and routine” manner – exercises significant control over the essential terms and conditions of employment.
With the reversal of BFI, a variety of employers may still be at risk of joint employment finding under the NLRA, including but not limited to some of the relationships described above (e.g. user-supplier, contractor-subcontractor, franchisor-franchisee). Therefore, employers wishing to avoid a joint employer finding should assess these and other corporate/employment relationships under Hy-Brand and the pre-BFI cases and develop a labor policy consistent with these principles.
Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can reach Matt by calling him at (614) 843-3041 or emailing him at Matt@MattAustinLaborLaw.com.