The National Labor Relations Board’s (“NLRB’s”) revised joint-employer standard spells trouble for businesses that rely on temporary employees or contingent workers and businesses that use the franchisor-franchisee model. Citing the dramatic growth in contingent employment relationships, on August 21, 2015, in Browning-Ferris Industries of California, Inc., the NLRB abandoned its more limited joint-employer standard and adopted an expansive new standard designed to encourage collective bargaining. Under the NLRB’s old test, an entity could be found to be a joint employer only if it had the authority to control workers’ terms and conditions of employment and if it actually exercised direct and immediate control over the workers. Under the new test, an entity may be found to be a joint employer if it has the authority to control workers’ terms and conditions of employment, even if it never exercises that authority.

Applying its new test, the NLRB concluded that BFI Newby Island Recyclery (“BFI”) and Leadpoint Business Services (“Leadpoint”) were joint employers of the workers that Leadpoint supplied to BFI under a temporary labor services agreement. Under the temporary labor services agreement, Leadpoint recruited, interviewed, tested, and hired workers to perform work for BFI. In determining that BFI was a joint employer, the NLRB found it significant that BFI required that any workers supplied by Leadpoint had (1) to have appropriate qualifications to perform the general duties of the assigned positions; (2) to meet or exceed BFI’s own standard selection procedures and tests; and (3) to pass a drug test. The NLRB also relied on the fact that the temporary labor services agreement required Leadpoint to make reasonable efforts not to refer workers who had been deemed ineligible for rehire at BFI and permitted BFI to reject or discontinue the use of any worker placed at BFI by Leadpoint for any or no reason. In addition, the NLRB determined that BFI exercised control over the workers’ day-to-day activities by controlling the speed of sorting lines, implementing productivity standards for the workers, specifying the number of workers required, dictating the timing of the workers’ shifts, and deciding when overtime was needed.

If it stands, the NLRB’s decision threatens to subject many additional employers to joint-bargaining obligations and potential liability for unfair labor practices. The NLRB Office of the General Counsel has already named McDonald’s along with some of its franchisees as joint employers in several cases alleging unfair labor practices. Under the NLRB’s new standard, it will be more likely that a franchisor like McDonald’s or a company that uses temporary workers like BFI will be considered a joint employer with a duty to bargain collectively. As the Browning-Ferris decision illustrates, the NLRB will consider many typical provisions in temporary labor services agreements as evidence that a company is a joint employer. This issue promises to be the subject of further developments before the NLRB and federal courts.