Sample Language for Contractor Agreement in Context of Joint Employer Liability under the NLRA

A controversial National Labor Relations Board (NLRB) decision in 2015 announced a new standard for determining joint employer status under the National Labor Relations Act (NRLA). Under the Board’s (now) former standard, a joint employer relationship existed only where “two separate entities share or codetermine those matters governing the essential terms and conditions of employment.” In particular, an employer had to “meaningfully affect[] matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” In Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), the Board expanded the standard to include employers who may only affect employees’ terms and conditions of employment indirectly, such as through an intermediary or through contractual provisions that preserve the right to control, whether or not that right is ever exercised. As a result of the decision, which is currently under appellate review, many contractors and contractees, franchisor/franchisees, distributors and their representatives, and other companies that share common operations are now at risk for being classified as joint employers. In all cases, employers should evaluate whether they have the right to control, either directly or indirectly, a contracted employee.

Some terms to consider for the contractor agreement to minimize the risk of joint employer liability under the NLRA include:

  • Company B’s employees are solely employed by Company B; the parties do not intend to create a joint employer relationship.
  • Recite that Company B alone retains the sole right to…and then include a list of employment decisions…such as hire its employees, determine their wages and benefits, assign, schedule, train, discipline, and terminate its employees.
  • Include a statement that Company A shall not and does not have the right to ….and include all of the rights Company B alone has in this list.

Employers should also review indemnification language and consider requiring Company B to indemnify Company A for any costs incurred in opposing a joint employer claim.

  • Include language that Company B will cooperate with you in presenting your defense to the joint employer claim by making available management representatives to prepare for hearings and to testify at hearings, and to provide documents reasonably requested by Company A relating to this issue.
  • Should Company B reimburse Company A’s representative for the cost of bargaining?

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