When does a person who works within a business, but isn’t on the ‘books’ of the business owner, become an employee? This issue has been litigated many times in Australia but, to date, courts have been reluctant to embrace the concept of ‘joint employment’ – that is, where an employee is employed by two different entities in relation to the same job, and each of those entities has responsibilities to the employee. Despite this, it is an issue that has increasing prominence, particularly given how many modern working relationships operate – for example, where a company uses labour hire employees to supplement its workforce or where a business enters into franchise arrangements.

Joint employment in the US

Joint employment is a concept recognised in the United States. There, a ‘joint employer’ is an entity that does not directly hire, fire, supervise or determine the wages and benefits of another entity’s employees but, because it has the ability to affect the terms and conditions of employment of those employees, has responsibilities to those employees.

In a long-awaited development on joint employment law, (reported by our colleagues in the US), the US National Labor Relations Board (NLRB) recently handed down its decision in Browning-Ferris Industries. The decision will affect many business relationships in the US, as the NLRB has expansively broadened the definition of who will be treated as a ‘joint employer’.

Importantly, the NLRB said that they ‘will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but must also exercise that authority. … The right to control … is probative of joint-employer status …’  That is, simply having the right to control terms and conditions (even if that right is not actually exercised) will be enough to create the joint employer relationship. The question is whether each entity has the authority to control terms and conditions, whether they exercise that authority or not.

The decision has implications for many US businesses including:

  • those that regularly use contractors, such as cleaning or janitorial services, maintenance services, caterers, or a management company to staff and operate its business;
  • investors, real estate holding companies and general contractors;
  • businesses that outsource non-core work;
  • businesses that use staffing agencies to obtain additional or temporary help; and
  • franchisors

What does this mean for Australia?

At present, Australian courts have not accepted that there is a concept of joint employment at common law.

Readers may be familiar with the recent press around alleged underpayment of workers in franchise arrangements. That is a situation in which the concept of joint employment might have had more direct implications – in other words, if joint employment was accepted in Australia, a franchisor might be directly legally responsible for the payment of the workers’ wages (as opposed to being able to decide whether to take that responsibility).

This is now a matter that has now been picked up by political parties – the Australian Greens party have recently issued a press release announcing that they will seek to introduce legislation that makes head office franchisors responsible for any underpayments by their franchisees. While it is unclear exactly what impacts the bill will have (a draft is not available yet), the way in which the proposal has been described means it is likely to operate differently to the way the NLRB sees joint employment working in the US. Under the Greens’ proposal, even though the franchisor might have no direct ability to control or influence terms and conditions of employment, it might still be liable for any underpayment by franchisees – that is, the liability arises from the franchise relationship, rather than because the franchisor has any ‘ability to control’ terms and conditions. However, this might be the start of a broader movement towards the acceptance of a ‘joint employment’ concept in Australia.

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