Dark sky over the United States Capitol in Washington DC(Washington, DC – August 27, 2015) The National Labor Relations Board issued a landmark ruling in Browning-Ferris Industries that changes the standard for determining whether one employer may be responsible for a separate company’s employment decisions. If the decision stands, it will fundamentally change the dynamics that companies must employ when making fundamental business decisions. Browning-Ferris vastly expands the target-pool of employers who are vulnerable to unfair and illegal labor practice charges, and it restricts the ability of principals, contractors, and vendors to establish, modify, or terminate business relationships.

Browning-Ferris Industries (BFI) is the California subsidiary of a multistate business venture. Leadpoint Business Services is a contract staffing agency that supported BFI operations by supplying additional workers (sorters, cleaners, and housekeepers) on a flexible basis. The NLRB concluded that BFI and Leadpoint were “joint” employers of Leadpoint workers at a California recycling facility controlled by BFI. As joint employers, each company was effectively responsible for the other’s employment decisions.

Prior law had created a joint-employer standard that required direct, immediate, and actual exercise of control over workers before a separate company would become responsible for an employer’s decisions. However, the current NLRB concluded that this rule was outdated, because of the increased use of contingent workers in American workplaces.

Wal-Mart Stores has felt the sting of such rules for over 10 years. As immigration lawyers will tell you, the company agreed to pay $11 million to settle charges by the Department of Homeland Security that company subcontractors had violated laws concerning employment verification of undocumented immigrants. Additionally, and part of the settlement, Wal-Mart agreed to adopt a comprehensive audit program for all of its contractors that remains in effect today.

If the NLRB decision stands, its importance for companies of all sizes probably cannot be overstated. For example, we expect the Board to use the Browning-Ferris standard as a basis for finding franchisors and franchisees to be joint employers, which will obviously have far-reaching implications for the restaurant and hospitality industries, among others. Davis Miles will continue to keep its clients informed of all developments.