Anticipating the National Labor Relations Board’s decision in Browning-Ferris Industries of California, Inc. (32-RC-109684), in which the Board will address the standard for determining whether two discrete employers are joint employers for purposes of union recognition and unfair labor practice liability under the National Labor Relations Act, and a question which has caused many employers (especially those whose business models rely on independent staffing services, subcontractors, and franchisees) consternation over expanded legal exposure, the Senate Committee on Health, Education, Labor and Pensions (“HELP”) has heard from a former NLRB official and other witnesses to help explore the issues involved. 

NLRB General Counsel Richard F. Griffin in the Browning-Ferris case urged the Board to abandon the current “direct control” joint employer standard, which has been in place since 1984, and replace it with a “totality of the circumstances” test. Direct control requires that a putative joint employer have control over terms and conditions of employment of the subject employees. This includes hiring and firing, setting work hours, determining compensation and benefits, and exercising day-to-day supervision. Instead, the General Counsel has urged that the Board consider a standard based on whether an alleged joint employer exercises either direct or indirect control over the subject employees who work for another employer, and even to consider whether the alleged joint employer has “unexercised potential to control working conditions” of those employees.

In December, General Counsel Griffin announced the NLRB issued 13 unfair labor practice complaints against a well-known fast-food franchisor alleging it is liable as joint employer of workers at franchise locations nationwide for the unfair labor practices purportedly committed by a number of its franchisees nationwide. (On February 13, Griffin announced his office had issued an additional six unfair labor practice complaints against the franchisor). The Browning-Ferris decision may affect the outcome of these cases significantly. 

U.S. Senator Lamar Alexander (R-TN), Chairman of the Senate HELP Committee, opened the Hearing, stating the pending NLRB decision could destroy a small business opportunity for nearly 700,000 Americans who are franchisees operating health clubs, barber shops, child care centers, restaurants, and many similar businesses. 

Several witnesses gave testimony (franchise owners Gerald Moore and John Syms, former Board Member Marshall Babson, and Marquette University Law School Professor Paul Secunda) on both sides of the debate. Babson, who served as a Board Member from 1985-1988, testified that the Board has no authority to expand the definition administratively. Since Congress and the U.S. Supreme Court have long held that the statutory definitions of an employer and employee are to be construed consistently with the common law definitions, a joint employer must be a statutory employer. He testified that there simply is no support in NLRA jurisprudence for a broad, sweeping expansion of the scope of joint employer relationships. Rather, “it is up to this committee and, ultimately, the Congress to adjust the statute if they believe that there have been sufficient economic changes to the business model to warrant such changes.”

Moore, testifying on behalf of the International Franchise Association, explained the practical implications of a revised definition of a joint employer. He noted that, as a franchise owner, he decides who to hire, discipline and discharge, and what benefits to offer his employee — the franchisor does not play any role in these business decisions. Moore expressed concern that, under an expanded joint employer standard, since a franchisor would be jointly responsible for all employment-related liabilities, the franchisor would necessarily become more involved in the day-to-day operation of franchisees, resulting in less autonomy for them. 

Secunda, Professor of Law and Director, Labor and Employment Law Program, Marquette University Law School, testified about trends and changes in the economy since 1984. He stressed that the definition of joint employer is fact-intensive and that the NLRB has the authority to interpret the NLRA to ensure the law reflects the changing economy and the modern workplace. 

Board watchers had expected the Browning-Ferris decision to be issued before the end of former-Board Member Nancy Schiffer’s term (December 16, 2014).