Rhetoric vs. Reality: The Joint Employer Standard

Examining the Real-World Impact of the NLRB’s Controversial Browning-Ferris Decision

In the aftermath of the National Labor Relations Board’s (NLRB) Aug. 27, 2015 decision in Browning-Ferris Industries (BFI), which saw the creation of a new “joint employer” standard in federal labor law, questions have been raised about the real-world impact of the ruling on millions of local businesses. As Congress considers the Protecting Local Business Opportunity Act (PLBOA), legislation to repeal the NLRB’s harmful joint-employer ruling, it’s important to separate the common myths from the facts. Get the facts here .

Myth:

BFI is an isolated case decision and joint employer will be determined on a case-by-case basis.

Fact:

The NLRB appears poised to broadly apply the BFI standard. The NLRB’s majority wrote in their BFI decision: “(W)e have decided to restate the Board’s legal standard for joint-employer determinations and make clear how that standard is to be applied going forward (page 15, BFI decision).” Employers have no clarity as to where the line will be drawn moving forward.

Myth:

While BFI was an isolated case, the Freshii “case” shows that the NLRB is reasonable to franchising and not out to destroy the franchise business model.

Fact:

Freshii was an effectively meaningless advice memorandum authored by the NLRB’s Division of Advice that does not have the force of law. BFI, which was issued after the Freshii memo, was a case decided by the full National Labor Relations Board that has precedential value on all subsequent cases.

Myth:

BFI is a contracting case, not a franchising case. Franchises need not worry about being considered joint employers.

Fact:

Franchising is contracting. Every franchisor-franchisee relationship is based on a franchise agreement, which is a contract. BFI sets a precedent that is greatly disruptive to the future of all franchise businesses. The language of BFI is written broadly to apply to an array of business contracts.

Myth:

Supporters of the PLBOA really just want to prevent workers from being able to collectively bargain.

Fact:

S. 2015/H.R. 3459 is a one-sentence bill that restores the pre-Aug. 27 joint employer standard in the National Labor Relations Act (NLRA), which protects small businesses and entrepreneurs from liability that is not theirs. Nothing in the bill changes employee collective bargaining rights provided by Section 7 of the NLRA.

Myth:

The BFI decision means that only a company that has “direct” control or “substantial” control over another company’s employment terms – such as who to hire and how much to pay – will be deemed a joint employer under the NLRB’s new standard.

Fact:

The NLRB’s new joint employer test, based on direct, “indirect” or even “potential” control of another company’s employees, is so ambiguous that no contractual relationship is safe from a joint employer finding. While the new joint employer standard refers to an indirect or potential control test, it does not reference “substantial” control, which means employers could be found joint employers by participating in limited business acts.