On June 3, 2016, Hunton & Williams LLP published a video discussing a 2015 ruling by the National Labor Relations Board (“NLRB”) as it relates to the real estate industry, which fundamentally alters the joint-employer standard. The ruling has already been making waves in the retail industry as the NLRB seeks to apply the new standards to hold certain franchisors liable for the employment violations of its franchisees. The decision comes in an era of increased reliance on third party contractors and staffing agencies to fulfill companies’ staffing requirements and, with recent NLRB action, is being expanded to hold franchisors liable as joint-employers. Under the new standards, an entity can be held liable, as a joint-employer, for the violations of another if the entity retains to itself the ability to effect the terms and conditions of the other’s employees.
If the standard is satisfied, a joint-employer can be held liable for all of the labor and employment liabilities of the employer, including financial liabilities for wage and hours violations, pension and benefit liabilities and the obligation to sit at the bargaining table with employee unions. While the immediate expansion of this concept is in the franchisor-franchisee context, other areas may include retailers being held liable as a joint-employers with third party subcontractors, service providers or its temporary staffing agencies.
Potential joint-employers will need to identify potential red flags in their contracts, such as those provisions that grant the right to control its third party contractors in a way that will impact their employees, and examine the interactions with third party providers on a day-to-day basis, such as controlling over-time. Changes intended to reduce the likelihood of liability will need to be balanced with the business reality. Some situations can be managed to minimize risk of becoming a joint-employer, whereas some situations will be unavoidable.