What’s the Difference Between a Joint Employer and a Single Employer Anyway?

A recent case from the U.S. Court of Appeals for the Sixth Circuit highlighted the confusion that can occur between these two different mechanisms to hold separate companies liable for the same violation under the National Labor Relations Act (and other employment laws).

In NLRB v. Bannum Place of Saginaw, LLC, in the context of a union election, a company was found to have committed unfair labor practices. The Board issued a compliance specification and notice of hearing to both the company and its parent, as the single and/or joint employer. Following the hearing, the Board then issued a decision that ordered remedies against both the company and parent as a single employer. The two companies requested review of the Board’s order by the Sixth Circuit, arguing that they were not joint employers. As both the Board and the Sixth Circuit noted, however, the companies ignored the issue of whether they should be considered a single employer.

Joint Employer. Under the Act, two separate (and typically unrelated) entities will be considered to be joint employers of the same employee where the two entities share or co-determine essential terms and conditions of employment for the employee. A joint employer is required to bargain with the union selected by its jointly-employed workers and may be held liable for the unfair labor practices committed by the other employer.

The standard by which joint employer status is determined has been the subject of much contention, shifting with each change between Republican and Democratic presidential administrations (the Democrats favor a much broader interpretation that favors the finding of joint employer status). We explained the NLRB’s most recent joint employer rule in our October 26, 2023 E-lert, as well as the court decision blocking the implementation of the rule in our March 11, 2024 E-lert. At the current time, it would appear that the historic common-law test applies, which assesses whether direct and/or actual control is exercised by each potential employer over the worker in question.

Single Employer. Under this concept, one entity is so interrelated with the named employer of the workers in question that the two actually constitute a single integrated employer of those workers. The interrelated entity is therefore liable for any unfair labor practices committed by the named employer, and will be bound by the collective bargaining agreement between the named employer and the union.

To determine if two entities are a single employer under the Act, four factors are considered: (1) common ownership, (2) common management, (3) centralized control of labor relations, and (4) interrelation of operations. No one factor is determinative, and not all need to be met, although the Sixth Circuit noted that the third factor is “a central concern.”

Applying those factors to the present case, the Sixth Circuit found them to support a single employer status. The company was a wholly owned subsidiary of the parent. There was substantial overlap in management and officers of the parent and subsidiary. The parent had hiring and firing power over the subsidiary’s employees, had conjoined payrolls, and shared personnel policies. There were interrelated operations in that the parent owned the facility where the subsidiary was run, the employees’ paychecks and W-2s reflected the parent’s address, the parent ran the payroll for the subsidiary, the parent facilitated the subsidiary’s insurance and retirement plans, and the parent’s managers filled in for the subsidiary.

Parent-Subsidiary Liability? There is actually a third mechanism applicable to parent-subsidiary relationships. Under the Act, a parent may be liable for the unfair labor practices of its subsidiary where the parent “directly participated” in the unlawful conduct. In this case, however, the Sixth Circuit declined to weigh in on whether this applied, given that it found liability based on the single employer determination.

Lessons for Employers. As the companies in this case demonstrated, there can be some confusion about the different types of relationships that can trigger liability under the Act. It is important for employers to understand how their relationships with others, including affiliates, parents, subsidiaries, staffing agencies, franchisors and/or franchisees might be viewed by the Board or a Court. It is also important to note that the joint employer and single employer concepts apply in the context of other federal and state laws (including the Family and Medical Leave Act, Title VII, the Americans with Disabilities Act, and the Fair Labor Standards Act), although they may be subject to different tests.