Last week, the National Labor Relations Board (NLRB or Board) overturned 30 years of well-established precedent and issued a split 3-2 decision in Browning-Ferris Industries of California, Inc. (Browning-Ferris) broadening the scope of joint employer status under the National Labor Relations Act (NLRA). The prior legal test imposed NLRA employer status on the common law employer or parties sharing direct control over material terms of worker employment, such as hiring, pay rate, duties, supervision, discipline and termination. The NLRB’s new standard in Browning-Ferris rewrites the definition of employer status to include companies who have outsourced labor through staffing or subcontracting arrangements but have indirectly retained enough operational or contractual control over the entity employing the workers. The decision does not impact the production company’s relationship with Entertainment Partners (EP) as the motion picture payroll service company because the production company has and will continue to remain the NLRA employer of production workers due to its control over production operations and personnel.

Browning-Ferris outsourced operation of its recycling plant to a staffing company. In its relationship with the staffing company, Browning-Ferris could reject candidates or discontinue use of assigned staffing company personnel for any reason, prohibited the staffing company from paying assigned employees more than Browning-Ferris paid its own employees for comparable work, controlled plant working hours and production lines at the plant, monitored productivity of assigned employees, required that an authorized Browning-Ferris representative approve employee time records, and held pre-shift meetings to instruct staffing company supervisors on which production lines would operate and what tasks should be performed on those lines. The union sought to represent the staffing company personnel, alleging that Browning-Ferris jointly employed the staffing company workers. The Board’s majority concluded that Browning-Ferris was a joint employer of the staffing company personnel under an expanded indirect control standard because of its control over the staffing company employees by virtue of operational and contractual control over the staffing company.

The significance of NLRA joint employer status is that the joint employer may become included in the NLRB unionization election process for joint employees, may be obligated to collectively bargain over those employment subjects under the joint employer’s control, and may be responsible for unfair labor practice charges involving the joint employees. As noted above, Browning-Ferris does not alter the production company’s NLRA employer role over production workers payrolled by EP for production companies. In EP’s relationship with the production company, the production company selects the production workers and maintains full day-to-day control; EP does not recruit or select the workers or exert authority over the production company’s conduct of operations or personnel. Production companies should consult their labor advisors about their other vendor relationships involving outsourced production workers to determine if the control exercised or prescribed through contract reaches a level sufficient to confer joint employer status on the production company.

We anticipate that Browning-Ferris will be appealed to a U.S. Court of Appeals. However, absent reversal of the decision or federal legislative change, the NLRB is expected to apply this broadened standard to impose joint employer status on companies who outsource labor to another company but exercise indirect control or retain the right to exert such control over the terms and conditions of the other company’s workforce.

For questions about this Alert, you may contact Joseph Scudiero, Senior Vice President and Chief Labor Counsel, at 818.955.4335 or jscudiero@ep.com, or Scott Bishop, Senior Labor Counsel, at 818.955.4336 or sbishop@ep.com. Thank you.