NLRB Delivers Big Win for Employers by Overturning Controversial Obama-Era Joint Employer Test

Employers should breathe a sigh of relief.  On December 14, 2017, the National Labor Relations Board overturned the dramatic expansion of the joint employer test it established just two years ago in the controversial Browning-Ferris Industries case.  Once again, a company can only be deemed a joint employer under the National Labor Relations Act if there is proof that it actually exercised direct and immediate control over the terms and conditions of employment.

In the 2015 Browning Ferris decision, the Board held that even when a company has never exercised control over the terms and conditions of employment, and even when control is not direct and immediate, the company can still be a joint employer based on the mere existence of reserved control, indirect control, or control that is limited and routine.  In wake of the Browning-Ferris decision, employers were rightly concerned that they would be deemed a joint employer even when they exercised no control over, and had almost no connection to, another entity’s employees.

On Thursday, the Board voted along party lines to return to its traditional test for joint employment, under which a company must actually exercise direct and immediate control over the terms and conditions of employment [1].  The majority pointed out that, however well-intentioned the Browning-Ferris decision may have been, it was a distortion of the common law, was contrary to the NLRA, was ill-advised as a matter of policy, and its application would actually prevent the Board from fulfilling its primary responsibility of fostering stability in labor-management relations.

What Employers Should Do

This decision only applies to claims asserted under the NLRA, and does not change California’s test for joint employment under its employment statutes.  The California test merely requires that an employer have the right to control the terms, manner and means of an employee’s work.  Employers with vendors who are unionized should review the extent to which they exercise control over the vendor’s employees, and should institute measures to limit the exercise of their control if they want to avoid being pulled into a Board action.