National Labor Relations Board Adopts Expansive Joint-Employer Standard: In Decision with Potentially Large Ramifications, NLRB Holds That Joint-Employer Status Is Based on the Power to Control Terms and Conditions of Employment, Even If Such Control Is Indirect or Unexercised

Sullivan & Cromwell LLP - September 8, 2015

In Browning-Ferris Industries of California, Case 32-RC-109684, decided on August 27, 2015, the National Labor Relations Board (“NLRB” or the “Board”) abandoned its long-standing test that an entity must both possess and exercise direct control over employees’ terms and conditions of employment in order to be considered a joint employer and, thus, be required to bargain with a union.  The new standard adopted by the Board provides that a joint-employer relationship may be found merely based on the putative joint employer’s right to control terms and conditions of employment, irrespective of whether such control is directly exercised or exercised at all.  The decision is of interest to any entity that uses the services of vendor employees on its premises, pursuant to agreements that give the entity at least some control over the selection of vendor employees or the manner in which those vendor employees work.  It also poses potentially significant consequences for franchisors and franchisees.