One of the principal threats facing employers in the hospitality industry in recent years has been the campaign led by the Service Employees International Union (“SEIU”), known as the “Fight for 15,” to organize workers in the fast food and casual dining industries and to push for a minimum wage of $15.00 per hour for employees in these fields. As the “Fight for 15” website makes clear, the SEIU’s underlying goal is not just to push for higher wages and benefits, but also to organize these workers and to become their collective bargaining representative.

The “Fight for 15” Campaign

A major element of the campaign has been to make the case that (in regard to franchised restaurants and dining establishments) there cannot be meaningful bargaining with a franchisee. The SEIU claims that, because the franchisor dictates many of the operational and economic terms that affect employees, the franchisor must also be at the table and be held accountable as the joint employer of its franchisees’ employees. Unions are making the same argument in the hotel and lodging industries against hospitality employers that operate under franchise.

The McDonald’s Cases—A Call for a New Test for Joint-Employer Status

In numerous unfair labor practice (“ULP”) charges filed by the SEIU against McDonald’s USA, LLC (“McDonald’s”), and franchisees across the nation alleging improper interference with the SEIU’s organizing efforts, the union also alleged that McDonald’s and its franchisees are joint employers for purposes of the National Labor Relations Act (“NLRA”).

The General Counsel of the National Labor Relations Board (“NLRB” or “Board”) agreed with that assertion and issued a series of complaints. In his complaints, the Board’s General Counsel asserted that he would be able to prove a joint employment relationship not only under the new looser test that he was advocating that the Board adopt, but under the existing standard as well.

Browning-Ferris Industries—The NLRB Adopts a New Test for Finding Joint-Employer Status

On August 26, 2015, the Board issued its long-awaited decision in Browning-Ferris Industries in which, as many had predicted, it discarded its long-standing test and adopted a new, far looser standard that is likely to make it far easier for unions, employees, and the NLRB to establish that a franchisor is a joint employer of its franchisee’s employees. Browning-Ferris jettisons the long-standing requirement that, not only must a party have the means to influence the terms and conditions of employment of the other employer’s employees, but the party must also have exercised that right in a meaningful way.

Under the new standard enunciated by the majority, “[t]he Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.” If the decision is upheld and followed, no longer will the Board need to find that an employer retains and exercises direct control over another employer’s employees for the Board to determine that the employer is liable as a joint employer of those employees.

So what exactly is changed? Previously, an employer had to exercise direct and immediate control over the terms and conditions of employment to be found to be a joint employer. Under the new standard, what matters is whether the purported joint employer possesses the authority to control the terms and conditions of employment, either directly or indirectly. In other words, the ability to exercise control, regardless of whether the company has, in fact, exercised such authority, is the focus of the Board’s inquiry. As the Board puts it, “[r]eserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry” (emphasis added).

Why This Matters for Hospitality Employers

While the full import of Browning-Ferris may unfold over years of administrative litigation and court review, we know that the obvious (and intended) effect of the decision is to permit the Board to find joint-employer status where it did not previously exist. Notwithstanding the arrangements that employers and contractors have made in years past to guard against joint-employer exposure, unions will be at the ready with ULP charges and representation petitions as vehicles for the Board to apply its new standard and examine or reexamine relationships forged before the pronouncements of Browning-Ferris. Thus, employers should anticipate a role in newly filed proceedings alleging joint-employer status—even as they contemplate reforming or redefining terms by which they engage with contractors and other providers of services supportive of their business.

Especially troubling is the fact that the Board, in its zeal to create new applications for its joint-employer criteria, intends to ignore existing facts showing no actual exercise of control by one employer over the employee relations of another, and instead look for control that potentially could be exercised in an ordinary arm’s length business relationship. Given these circumstances, even those employers that do not exercise any direct or indirect control over the employees of its contractors should review carefully the terms of such arrangements, keeping in mind the Board’s stated intention of expanding joint-employer status.

What to Do Now

It is not an exaggeration to say that while the new standard will impact employers in almost every industry, hospitality employers, who rely on a variety of contactors for a range of services—from food service operations and valet services to room cleaning and many others—are particularly at risk. As a first step, hospitality employers will want to closely examine their relationships with those who provide them with temporaries and other contingent workers, as well as their contracts and relationships with those other businesses that provide integral services and support, to assess whether there is a vulnerability to findings of joint-employer status.