What Expanding Joint Employer Rules Mean for You

The recent trend of expanding joint employer liability means companies should carefully analyze the scope of their potential joint employer status in order to understand and mitigate any risk.

The common law test for joint employer liability has historically required that the putative joint employer exercise actual control over the putative employee – meaning a degree of direct and immediate control over “essential” terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction.

However, both the National Labor Relations Board and the Department of Labor have recently posited that joint employment means having a “right to control” the putative employee, regardless of whether that control is ever exercised.

The NLRB’s August 2015 decision in Browning-Ferris Industries of California, Inc. departed from precedent to establish a broad standard for determining when two entities are “joint employers” under the National Labor Relations Act. The new test is a two-step inquiry: (1) whether there is a common-law employment relationship between the putative joint employer and the workers at issue, and (2), if so, whether the putative joint employers “share or co-determine those matters governing essential terms and conditions of employment.”

Employers should review employee relationships to determine if some of the factors may be adjusted to minimize the risk of finding joint employer status, and review agreements with labor contractors to ensure that there are representations and warranties addressing compliance with applicable employment laws, along with appropriate indemnification provisions.