The federal National Labor Relations Board ("NLRB" or the "Board") has recently adopted a broad standard for assessing joint-employer status under the federal National Labor Relations Act ("NLRA"). The "joint employer" standard is used to determine whether an entity that is not the official employer of an employee or group of employees must nonetheless be considered an employer, comply with various obligations required of the official employer and be subject to liability for failing to comply with such obligations. Joint employment typically arises with respect to employee leasing firms and temporary staffing agencies, but in certain circumstances, joint employer liability may also be imposed on franchisors, controlling equity holders, parent companies, secured lenders and other third-party entities.
As we reported in our November 2014 Client Alert, the General Counsel of the Board had advocated for the Board to broaden the "joint employer" standard applied under the NLRA. The Board has now broadened the standard, but not as broad as the standard advocated by the General Counsel. The General Counsel had suggested that the Board adopt a "totality of the circumstances" approach to the joint employer test that would focus on "industrial realities." The Board declined to adopt the General Counsel's suggested new test "insofar as it might suggest that the applicable inquiry is based on 'industrial realities' rather than the common law." The Board instead stated that "[t]he right to control, in the common law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect." The Board's new standard considers not only an entity’s actual use of direct and immediate control over terms and conditions of employment, but also reserved authority to control such terms and conditions and any indirect control—such as through an intermediary—over such terms and conditions.
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