On August 27, 2015, the National Labor Relations Board (“NLRB”) issued its highly anticipated decision in Browning-Ferris Indus. of California, et al. v. Sanitary Truck Drivers, 362 NLRB No. 186. In deciding to “revisit and revise” its joint-employer standard, the NLRB held in a 3-2 decision that Browning Ferris (BFI) was a joint employer of workers provided by a staffing agency at a BFI recycling plant. BFI owns and operates a recycling facility and employs approximately 60 employees who work outside of the facility to move materials and prepare them to be sorted inside the facility. These BFI employees are represented by a union. BFI contracts with Leadpoint to supply the workers who sort garbage and recyclable materials inside the facility. BFI and Leadpoint both employ supervisors who direct the work of their respective employees. Although BFI establishes the work process and sets the plant’s working hours, Leadpoint conducts the hiring, firing, and payroll of the Leadpoint-supplied employees. BFI in turn payed Leadpoint the cost of each worker’s labor plus a markup.

In June 2013, Teamsters Local 350 sought to represent approximately 240 workers provided by Leadpoint to BFI. The union argued that BFI and Leadpoint were joint employers as BFI either directly or indirectly controlled the essential terms and conditions of employment for the Leadpoint employees. BFI asserted that it did not actually exercise any control over the Leadpoint employees and that Leadpoint has the sole authority to hire, fire, discipline, supervise, direct, train, and schedule its employees.

In ruling that BFI and Leadpoint are joint employers, the NLRB’s Browning-Ferris decision “refined” existing NLRB precedent regarding its joint employer standard, which required an entity to demonstrate actual and direct control over workers to establish a joint employment relationship. Under the new standard announced in Browning-Ferris Industries, a company is a joint-employer if it exercises “indirect control” over working conditions or if it has “reserved authority” to do so. In other words, the mere right to control (even if not exercised) can lead to joint employment. Under this standard, the NLRB found that BFI exercised sufficient control over the Leadpoint employees stating, “[t]he fact that many of their directives are communicated through Leadpoint supervisors hardly disguises the fact that BFI alone is making these decisions.”

The decision potentially exposes employers to collective bargaining obligations for employees supplied by staffing agencies and companies may potentially be held responsible for labor violations committed by their labor contractors if a joint employer relationship is found. In addition, the Browning-Ferris decision most likely will impact the McDonald’s franchisor/franchisee cases currently pending before the NLRB. Although franchisors have historically been found to not be joint employers of their franchisees’ employees, the Browning-Ferris decision increases the chances that the NLRB will find that McDonald’s is a joint-employer of workers at its franchised restaurants.

The Browning-Ferris decision is in line with other legislation broadening the scope of joint-employer theory of liability. On Sept. 28, 2014, California Governor Jerry Brown signed into law a bill that holds employers liable for certain California Labor Code violations committed by their labor contractors, regardless of the employer’s control over or direct participation in such violations. Effective January 1, 2015, under Labor Code section 2810.3, each affected California employer will “share” responsibility and liability with its labor contractors with respect to the “payment of wages” to contracted temporary workers assigned to the employer, regardless of the employer’s control of or participation in the payment of wages to assigned temporary employees.

Although joint employment status is a factual inquiry that will vary from employer to employer, companies should consider reviewing their employment practices and contractual arrangements with any staffing agencies they use in light of this significant change in the law. Please do not hesitate to contact our office if you have any questions or concerns about this new decision and how it potentially impacts your business.