On Thursday, the National Labor Relations Board overturned 30 years of precedent, significantly expanding its definition of joint employer coverage under the NLRA. This decision has wide implications, including possible liability for companies using staffing agency employees, and franchisors with regard to their franchisees’ employees. The 3-2 decision demonstrates the continuing political and ideological rift among NLRB members.

In Browning-Ferris Indust. of Calif., Inc., a Teamsters local challenged the employer’s contention that for purposes of NLRA coverage, the staffing agency was the sole employer of employees placed at the Browning-Ferris facility. The NLRB Regional Director rejected the claim, relying on 1984 NLRB decisions holding that in order to demonstrate joint employment, the company in question must both possess and exercise authority over the employees in question. In its new decision, the NLRB overturned this standard, instituting one that looks at the totality of the circumstances to determine whether the company in question could exercise control over the other employers’ employees, even if the staffing agency actually controls hiring, firing, assignments, pay, discipline, etc.

The NLRB justified this decision using federal court cases predating the 1984 NLRB decisions. The Board stated that the 1984 decisions improperly narrowed the grounds for demonstrating joint employment, and are inconsistent with modern staffing practices. The dissenting Board members complained that the new joint employment standard provides no guidance for companies as to when they will be considered subject to NLRA jurisdiction, and even tangential establishment of work standards will provide the basis for coverage.

This decision means that companies that do not consider themselves to be employers of the workers in question may be required to bargain with unions, and will be subject to unfair labor practice and other administrative claims. Ominously, the NLRB opinion mirrors arguments used by the NLRB General Counsel to argue that franchisors can be considered joint employers of their franchisees’ workers when they set work standards indirectly involving these employees. This decision indicates that the NLRB is inclined to adopt this reasoning in pending matters involving McDonald’s and other franchisors.

The NLRB’s decision will likely be appealed to federal court and may eventually face review by the U.S. Supreme Court. Absent judicial intervention, many companies will face labor law claims and organizing activities from persons they have never considered to be their employees.