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:

The BFI decision is simply a return to the traditional or common law, pre-1984 joint employer standard.

Fact:

There is no pre-1984 common law joint employer standard under the NLRA. The NLRB clarified its joint employer test based on “direct control” in its 1984 TLI and Laerco decisions. Overall, courts and the NLRB have consistently and repeatedly found that for a joint employer relationship to exist, a company must exercise direct, significant control over the terms and conditions of employment of the other entity’s employees.

Myth:

The new joint employer standard will actually be good for small business because, faced with increased NLRA liability, brand companies and franchisors will yield more control to the small businesses with which they hold contracts.

Fact:

Small business livelihoods are threatened because the new “indirect control” standard may compel brand companies to either exercise more direct control over subcontractors or sever relationships altogether.

Myth:

Brand companies and franchisors often share brands, logos, marketing materials, and other resources with subcontractors and franchisees. Therefore, they should be jointly liable for NLRA violations.

Fact:

Marketing and advertising have nothing to do with employment practices. The NLRA’s old joint employer standard was intended to protect businesses from unnecessary involvement in labor negotiations or fights involving workplaces where they do not exercise any direct control. In adopting this new indirect control standard, the NLRB makes employers potentially liable for employees they do not employ and whose working conditions they do not directly control.

Myth:

Employees working in franchises are employees of the franchisor.

Fact:

Local franchise business owners hire and manage their own employees. Moreover, they run their own businesses and have direct control over their own hiring practices, working conditions, wages, and hours of operations. They have distinct employer identification numbers, file their own taxes and are responsible for following all applicable local, state, and federal laws. A franchisor has no direct control over the hiring, firing, discipline, supervision and direction of its franchisee’s employees.

Myth:

The new joint employer standard established in the BFI decision is simply a slight reinterpretation of the NLRA.

Fact:

The NLRB’s embrace of the nebulous “indirect control” joint employer standard is unprecedented and massive; resulting in almost any economic or contractual relationship now triggering a finding of joint employer status under this new standard. The NLRB’s long-held standard deemed businesses joint employers only when they share direct and immediate control over essential terms and conditions of employment, including hiring, firing, discipline, supervision, and direction.