The Facts on Joint Employer

In the aftermath of the National Labor Relations Board’s (NLRB) 2015 Browning-Ferris Industries (BFI) decision, which saw the creation of a new “joint employer” liability standard, a joint employer is now any business that exercises indirect, potential, or even reserved control over the practices of another business and its employees. As this issue progresses through Congress and courtrooms throughout America, here are frequently asked questions that may help you understand the facts about this complex issue.

Q. What changes were made to the joint employer standard in the BFI decision?

For three decades, the “direct” and “immediate” control joint employer standard provided clarity about their legal obligations and fairness for businesses of all sizes. But the BFI decision defined a joint employer as any business that has direct, indirect or even reserved yet unexercised control. Nearly any business could run afoul of such unlimited joint employer liability.

Q. How has joint employment liability changed in the last two years since the BFI decision?

Joint employer has quickly expanded beyond the NLRB. Other federal agencies have sought to take advantage of the NLRB’s nearly unlimited joint employment liability policy. In 2016, the Occupational Safety and Health Administration and the Wage and Hour Division released administrative directives expanding joint employer liability under their statutes. The Equal Employment Opportunity Commission supported the NLRB’s new standard in the federal court appeal of BFI. Meanwhile, federal courts have also adopted expansive new joint employment tests under the Fair Labor Standards Act, as the Fourth Circuit Court of Appeals did in its January 2017 Salinas decision.

Q. What is the status of BFI case?

The post-BFI joint employer standard remains law while the BFI case is pending before the D.C. Circuit Court of Appeals, which heard oral arguments in the BFI appeal in March 2017. A decision is expected by Fall 2017. However, due to the expansion of unlimited joint employment liability beyond the NLRB, it is unlikely that this issue will be resolved by the BFI case or by the courts.

Q. Will the eventual ruling in the BFI appeal potentially fix the joint employer problem?

Regardless of outcome, the BFI appeal will not impact the need for a legislative solution. Only Congress can resolve the damage already done to locally-owned businesses throughout the nation. Due to the expanded joint employment liability under myriad federal and state statutes, legislation is the only avenue available to prevent continued damage to local businesses.

Q. Wasn’t the expanded joint employer policy merely intended to give the government tools to take action against the egregious actions of big corporations?

The impact of the new standard is being felt by businesses in all industries, from construction companies, manufacturers and service providers, to small franchise employers and their business partners. The vague and unlimited language of the new joint employer test ensures that no contractual relationship is safe from a joint employer finding.

Q. Shouldn’t the new joint employment standard be good for franchisees and other independent small businesses, because now their deep-pocketed contractor will share liability with them?

No. Local business owners do not want to be relegated to the role of middle manager in a business they built and own outright. Opponents of a return to the direct control standard argue that franchisees should prefer that their franchisor bear the burden of increased liability as if adding an additional litigant to an action will absolve the other from potential liability or its duty to defend itself, when the truth is it only complicates the matter. For its own protection, the franchisor would also be forced to impose other controls over the small business franchisee in order to protect itself from liability.

Q. Isn’t the BFI decision simply a slight reinterpretation of the long-established joint employer standard under the National Labor Relations Act (NLRA)?

The new joint employer standard is an unprecedented reinterpretation of the NLRA. The NLRA covers nearly all private sector businesses and their employees. Therefore, the BFI decision has the potential to impact the operations of all businesses, large and small, including the ability of small businesses to control their own operations and enter into contracts with other entities. The nebulous “indirect” and “reserved” control doctrines provide no clarity for business owners, and no guide for determining whether a joint employer relationship exists under the NLRA.

Q. Does the NLRB’s Freshii memorandum, which was issued in April 2015, offer clarity to small businesses about their legal liability?

No. The often-cited Freshii memo is an outdated document and does not constitute legal authority. Proponents of the new joint employer standard cite the Freshii memo in an effort to lessen the concerns of local businesses regarding the new joint employer standard. However, three months after the Freshii memo was issued, the NLRB created a new standard for all businesses through its BFI decision.

Q. What is the impact of the new joint employer standard on businesses?

Increased joint employer liability comes at a high cost to large and small businesses alike. Businesses of all sizes are now exposed to unlimited and unpredictable joint employment liability. For large businesses, the frequency of joint employer litigation has swelled. In the aftermath of BFI, companies like Amazon, CNN, and Microsoft have been targets of high profile joint employment legal actions. Moreover, small businesses and franchisees are facing more operational and legal costs, decreased business values, less compliance assistance from franchisors, less growth and fewer opportunities to create jobs.

Q. What impact will the expanded joint employer standard have on the ability of large and small businesses to create jobs and support a growing U.S. workforce?

The new joint employer standard harms small businesses and their employees. A recent report from the American Action Forum found that the U.S. labor market could see “1.7 million fewer jobs in the entire private sector” and “500,000 fewer jobs in the leisure and hospitality industry” due to joint employer.

 

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