In recent years, business relationships have increased in complexity. So, among all the independent contractors, franchises, joint ventures, and internships, just who is an employee? And which company—or companies—is the employer? Federal and state regulators are taking a new look at those questions and responding with new interpretations and new regulations. The federal government, in particular, is currently reshaping federal labor and employment laws by widening the application of those laws to companies it considers to be “joint employers.” 
NLRB reimagines joint-employer doctrine
The National Labor Relations Act (NLRA) governs the relationship between companies, unions, and employees. It defines rules that companies (including nonunionized employers) must follow when dealing with their employees and requires companies to recognize and bargain with unions in certain circumstances.
Typically, employees have just one employer, but the National Labor Relations Board (NLRB) has long interpreted the NLRA to treat some workers as employees of more than one company. For example, an employee referred to a company by a temporary employment agency might be an employee of both the company and the temp agency. In such cases, any or all of the joint employers may be liable for failing to comply with the NLRA. And any or all of the joint employers may be obligated to recognize and bargain with a union that represents the employees.
Since the 1980s, the NLRB has found companies to be joint employers only if each entity exercises immediate control over employees. In August 2015, the NLRB abandoned that approach in a landmark case, Browning-Ferris Industries of California. From now on, the NLRB may deem a company a joint employer even if it doesn’t exercise control in a direct and immediate way. The Board may also declare a company a joint employer even if it doesn’t exercise any authority at all in practice, as long as it has the authority to control employees.
The NLRB is applying its new joint-employer standard now, but the issue isn’t settled with finality. The D.C. Circuit is currently considering an appeal of the Browning-Ferris decision. In addition, Senator Lamar Alexander (R-Tennessee) has introduced a bill in the U.S. Senate to legislatively undo the NLRB’s new joint-employer standard.
McDonald’s case
The change in the NLRB’s joint-employer standard came as the Board was gearing up to prosecute McDonald’s alongside its franchises all over the United States under the theory that they are joint employers. In December 2014, the NLRB issued complaints in which it alleged that McDonald’s was liable for unlawful statements to and actions against employees who engaged in what it deemed “protected concerted activities,” including participating in the well-publicized wage protests by fast-food workers. The Board took the position that McDonald’s was liable for violations of the NLRA even when the allegedly unlawful conduct occurred at local franchises, without any involvement from McDonald’s USA, LLC.
McDonald’s USA operates some stores, but the vast majority of stores bearing the McDonald’s brand are owned by franchisees. McDonald’s USA maintains that its franchisees are independent employers that control the terms and conditions of employment without coordinating with corporate headquarters.
The NLRB’s nationwide case against McDonald’s is taking much longer than usual to litigate. Typically, an NLRB administrative law judge (ALJ) can open the trial record within a few months of the complaint being issued. In this case, the record opened in New York in March 2016, more than a year after the complaint was issued. NLRB trials typically last between one day and two weeks, but the McDonald’s trial is ongoing.
Because the witnesses and attorneys working on the case are spread out across the country, the judge will slowly move the hearings westward, from New York to Chicago and then to Los Angeles, before returning to New York. Once the trial closes, the numerous parties will submit briefs, and the ALJ will issue her decision, which can be appealed to the NLRB in Washington, D.C., and, from there, to a U.S. court of appeals. The decision will likely contain an influential analysis of the joint-employer doctrine.
DOL’s interpretation of ‘joint employer’
Elsewhere in the federal government, in January, the administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued a new interpretation of joint employment under the laws enforced by the WHD, including the Fair Labor Standards Act (FLSA).
Under the administrator’s interpretation, joint employers are jointly and severally liable for violations of federal law. Additionally, an employee’s activities at various joint employers are aggregated, which means the hours she works at two or more employers can be added together for purposes of calculating any overtime she is owed.
Federal coordination and the ripple effect
Other efforts within the federal government complement the NLRB’s new joint-employer standard and the WHD’s joint-employer interpretation. For example, the DOL has increased the reach of the FLSA’s overtime provisions by raising the salary threshold for classifying employees as exempt from overtime.
The momentum created by the changes to the joint-employer standards will likely ripple throughout other federal and state agencies and the courts. State-level labor agencies, in particular, rely on NLRB decisions in deciding the cases before them. State legislatures may also focus attention on the joint-employer issue in their next sessions.
Bottom line
The interpretation of what constitutes a joint-employer relationship will likely continue to change. Don’t assume you can avoid the reach of labor and employment laws simply by using contractors, franchises, or other types of business relationships. Labor and employment 
counsel can advise you about how to structure your business relationships in ways that minimize your potential liability under the joint-employer doctrine.
Ryan Funk is an attorney with Faegre Baker Daniels LLP, practicing in the firm’s Indianapolis, Indiana, office. He may be contacted at ryan.funk@faegrebd.com.
Need to learn more? The Browning-Ferris decision changed the definition of “joint employer” under the NLRA. After the Browing-Ferris, the ability to indirectly control any aspect of the employment relationship may be a sufficient indication of joint employment. This ruling is particularly important for employers involved in an integrated employment relationship with their respective labor forces, such as temporary staffing agencies, subcontractors, and franchisor/franchisees. Listen to BLR’s on-demand webinar “New Risks and Standards for Joint Employers: How NLRB Decision Will Impact Franchises, Temporary Agencies, Subcontractors and Others” to understand how the new standard may affect you businesses and what you can do to minimize potential legal risks stemming from a joint employer relationship. To learn more, click here.