Employers in the fields of health care and life sciences have, in recent years, come to rely on an increasing number of employee leasing and staffing arrangements, outsourcing of an ever-growing number of functions and tasks to third-party service providers, and joint ventures and other innovative arrangements to meet the challenges they face. Critical to success in these endeavors has been the ability to ensure that vital services and functions are performed in a manner that meets the health care employers’ own standards and the requirements of governmental and independent regulators.

On August 27, 2015, the NLRB issued its long-anticipated decision in Browning-Ferris Industries, 362 NLRB No. 186, establishing a new test for determining joint-employer status under the NLRA. This revised standard is aimed at the types of employee leasing and staffing arrangements and third-party service contracts that are commonly relied upon by health care and life science entities to supplement and flex their own workforces and to provide a range of services—such as laboratory operations, claims processing, food service, housekeeping, security, and the like—that they choose not to perform themselves. It is clear that unions are seeking to take advantage of the new joint-employer test to assert that the end user of the services is actually a joint employer of its vendors’ and contractors’ employees because they either directly or indirectly control or affect, or have the ability to control or affect, the vendors’ and contractors’ employees terms and conditions. For this reason, employers in these fields should be mindful of the decision’s potential impact upon relationships with service providers that are supportive of, or critical to, their operations. The new standard will result in many more claims by unions, employees, and governmental regulators that health care employers, based on rights they reserve but may never exercise to ensure that contracted-for services are performed in a safe and appropriate manner, are joint employers with respect to their vendors’ and contractors’ employees.

By fashioning a new standard in Browning-Ferris, the Board springs open new questions of which legally distinct entities will bear responsibility in NLRB cases addressing union recognition and bargaining obligations, as well as for any unfair labor practices that may follow. Given the Board’s lead in fashioning a new standard, described as based on common law principles, it is likely to be relevant to other agencies, such as the EEOC and DOL.

A New Standard for a Different Economy

Under the new standard, “[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.” Browning-Ferris jettisons the long-standing requirement that not only must a party have the means to influence such matters, but it must also have exercised that right in a meaningful way. If the decision is upheld when it is reviewed by the courts, no longer will the Board need to find that an employer retains and exercises direct control over another employer’s employees to be liable as a joint employer of those employees.

In the decision and press release, the Board suggests that “the current economic landscape,” which includes some 2.87 million people employed by temporary agencies, warrants a “refined” standard for assessing joint-employer status. As the majority states, “If the current joint-employer standard is narrower than statutorily necessary, and if joint-employment arrangements are increasing, the risk is increased that the Board is failing what the Supreme Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial life.’”

What Is the New Test for Finding a “Joint Employer”?

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 merely possesses the authority to control the terms and conditions of employment, either directly or indirectly.

In other words, the actual or potential 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, “Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry” (emphasis added). The Board’s decision also extends joint-employer status to employers that only exercise a degree of indirect control over the work performed by the employees of another.

Why Browning-Ferris Matters

The majority opinion in this 3-2 decision makes clear that its objectives are far reaching: to address “the diversity of workplace arrangements in today’s economy,” including the increase in “[t]he procurement of employees through staffing and subcontracting arrangements, or contingent employment,” and thereby fulfill a “primary function and responsibility” of the NLRB, which the Board describes as encouraging the spread of collective bargaining and union representation for employees.

One significant indicator of how broadly the Browning-Ferris decision will be applied can be seen by the Board’s issuance of an Order Consolidating Cases and Complaint issued on October 19, 2015, in Community Health Systems, Inc. That case arises from a coordinated union organizing campaign targeting independently operated health facilities owned by Community Health Systems (“CHS”) and assertions that CHS and seven wholly owned hospitals spread across the country comprise a “common integrated enterprise.” Based on those allegations, each individual hospital allegedly is a joint employer of the employees of all of the other hospitals owned by CHS, and each hospital is alleged to be jointly responsible for the unfair labor practices of the other hospitals. In many respects, this is similar to the pending unfair labor practice charges in which McDonald’s is alleged to be a joint employer of the employees of various franchisees.

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. Indeed, the Board majority notes that extending joint-employer status is necessary to “encompass the full range of employment relationships wherein meaningful collective bargaining is . . . possible.” 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 unfair labor practice 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.

Given these circumstances, even those employers that do not exercise any direct or indirect control over the employees of their 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 the new standard for determining joint-employer status will impact employers in almost every industry across the country. As a first step, employers will want to closely examine their relationships with those who provide them with temporaries and other contingent workers, and 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.