For the past 30 years, the National Labor Relations Board (NLRB) has required “direct control” of essential employment decisions, including hiring and firing, disciplinary matters, supervision and scheduling. This meant that if two companies share and jointly determine essential employment decisions, they would be considered joint employers, but only if there was both the authority to participate in these decisions and actual participation.

That standard underwent a severe renovation Aug. 27, when the NLRB issued a decision overturning the “joint employer” standard for determining when one company is liable for the labor practices of another separate company under the National Labor Relations Act (NLRA) with respect to a certain group of employees.

In the Browning Ferris Industries of California case, the NLRB announced it also will impose joint employer liability if an entity has “indirect” control, or even the “unexercised potential” of control, over another entity’s employees. This decision will have a significant impact on construction employers because of the broadened standard that considers “indirect control” to be the most important factor to determine if a joint employer relationship exists. The NLRB majority found that the previous standard was narrower than required by the law and wanted to broaden the standard to allow for collective bargaining. 

In the Browning-Ferris decision, the board overturned three decades of precedent and established a two-part test, including analysis of:
  • if there is a common-law employment relationship with the employees and, if so,
  • whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.  
In Browning-Ferris, the NLRB held that the previous requirement of direct and immediate control is not a necessary part of the analysis anymore. It is important to note that the Browning-Ferris decision is not the last word on the joint employer test. The decision likely will be appealed, and litigation also will be necessary to clarify many questions that were unanswered by the board’s decision. 

Potential Problems With the New Standard

With the adoption of the new joint employer standard come possible complications for the construction industry. Two common situations in which the joint employer relationship will need to be reviewed include the subcontractor relationship and the staffing and temporary job agency relationship. Under the previous NLRB joint employer standard, the relationship between a general contractor and a subcontractor rarely implied joint employer status. The use of a staffing company sometimes results in leased employees working under the direct supervision of the contractor’s supervisors, which could create joint employer status under the old joint employer test.

The Browning-Ferris decision, which seeks to broaden the joint employer status, threatens both of these common relationships by expanding the definition of joint employer and broadening the test that implicates a joint employer relationship, which could result in a subcontractor relationship creating joint employer status in the future.

The new standard in Browning-Ferris allows the NLRB to be a part of complicated business relationships that are irrelevant to labor relations even though the board has not given clear standards on how to ensure non-joint employer status is maintained. In order to eliminate potential risk of being found a joint employer, employers will need to reexamine their business practices to assure they are in compliance with the board’s complicated and ambiguous test. The dissenting opinion in Browning-Ferris noted these potential problems, and also asserted that the board’s new test has never been used before and extends beyond congressional intent of the NLRA. 

On Sept. 10, Sens. Lamar Alexander (R-Tenn.) and Johnny Isakson (R-Ga.) and Reps. John Kline (R-Minn.) and Phil Roe (R Tenn.) introduced the Protecting Local Business Opportunity Act (S. 2015/H.R. 3549). The bill would restore the longstanding “joint employer” standard under the NLRA—a standard that has paved the way for contractors and subcontractors to create millions of jobs and have their own small businesses. Associated Builders and Contractors urges Congress to immediately pass this important piece of legislation. 


Ashleigh Davenport is grassroots coordinator at Associated Builders and Contractors. For more information, email davenport@abc.org.