Labor & Employment News Alert

In September 2018, the National Labor Relations Board issued a proposed rule to establish a new standard for determining joint employer status under the National Labor Relations Act. Under the proposed rule, an employer may be considered a joint employer of another employer’s employees only if the two employers share or co-determine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. Further, an alleged joint employer “must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.”[1]

The proposed rule would be a welcome change for employers. If adopted, the rule would overturn the current Browning-Ferris standard, which does not require that employers exercise actual control over another company’s employees to be considered a joint employer. The proposed rule would make it substantially more difficult to hold employers liable for alleged labor and employment law violations by staffing companies, franchisees, and other related organizations.

The Board issued a press release on September 13, 2018 describing the intent behind the proposed rule, and noted that the rule “reflects the Board majority’s initial view, subject to potential revision in response to public comments, that the National Labor Relations Act’s intent is best supported by a joint-employer doctrine that does not draw third parties, who have not played an active role in deciding wages, benefits, or other essential terms and conditions of employment, into a collective-bargaining relationship for another employer’s employees.”[2] The Board also determined that the new joint-employer standard should be established via public rulemaking because of the broad reaching effects of the law. The new standard may affect a wide variety of business relationships (e.g., user-supplier, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, lessor-lessee, parent-subsidiary, and contractor-consumer). Further, using the rulemaking procedure “enables the Board to clarify what constitutes the actual exercise of substantial direct and immediate control…[and] will provide unions and employers greater certainty beforehand as to when [they] may proceed to reach decisions without fear of later evaluations labeling [their] conduct an unfair labor practice.”[3]
 

Finally, the Board found that public rulemaking is appropriate in light of the recent fluctuations in the law. For more than 30-years the Board had held that two companies could only be considered joint employers if they shared matters governing the essential terms and conditions of employment and actually exercised the right to control.[4] In 2015, however, the Board overruled this standard in Browning-Ferris, abolishing the requirement that an employer actually exercise control over another company’s employees. In 2017, the Board briefly overturned Browning-Ferris in the Hy-Brand Industrial Contractors, Ltd. case. Nonetheless, mere months later in February 2018, the Board issued an order vacating its decision in Hy-Brand on the grounds that a member of the Board had a conflict of interest at the time the decision was issued.