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The National Labor Relations Board (“NLRB”) has issued
a notice of proposed rulemaking, which would significantly alter
the standard to determine who is a “joint employer” under
the National Labor Relations Act (“NLRA”). The proposed
rulemaking seeks to end what NLRB Chairman Lauren McFerran
described in the NLRB’s press release as a “great deal of
uncertainty and litigation in recent years” surrounding the
joint employer standard, and provide “a clear standard for
defining joint employment that is consistent with controlling
law.” This move not only changes the prior understanding of
the joint employer standard, but is also indicative of the Biden
Administration turning into a reality the President’s campaign
promises aimed at strengthening worker protections and labor
unions, reversing prior Board decisions, and restoring the broad
definition of joint employment. We previously discussed other
recent actions taken by the NLRB in an earlier blog post, which you
can find here.
Background
It is worth first taking a step back to review how the Board
arrived at this most recent iteration of the joint employer
standard. The joint employer standard has been a topic of
significant interest over the better part of the past seven years,
beginning with the Board’s 2015 decision in Browning-Ferris
Industries of California, Inc., 362 NLRB 1599 (2015)
(BFI), which declared that employers were joint employers
if they “share or codetermine those matters governing the
essential terms and conditions of employment,” and further
held that employers were not required to actually exercise control
to constitute a joint employer, only that they possessed the right
to control, whether directly or indirectly. The D.C. Court of
Appeals later upheld portions of BFI, but directed the
Board to reevaluate its application of indirect control in
the joint-employer inquiry.
The Board in 2018—now a different composition than in
2015—then issued a notice of proposed rulemaking to establish
a new joint-employer standard, which proposed to return to a
pre-BFI standard requiring that the employer both possess
and actually exercise substantial direct and immediate control over
the employees’ terms and conditions of employment to qualify as
a joint-employer. The Board adopted this standard in February 2020,
and it remains the controlling standard to date.
This proposed rule would rescind and replace the current
joint-employer standard, largely returning the standard to the one
set forth in BFI, and, according to the NLRB, “ground
the joint-employer standard in established common-law agency
principles, consistent with Board precedent and guidance that the
Board has received from the U.S. Court of Appeals for the DC
Circuit.”
With this relevant history in mind, we describe the proposed
rule below.
The Newly Proposed Joint Employer Standard
The proposed joint employer standard would provide that:
“two or more employers of the same particular employees are
joint employers of those employees if the employers share or
codetermine those matters governing employees’ essential terms
and conditions of employment” (emphasis added). This
would mark a significant departure from the current standard, which
requires that an employer exercise “substantial direct and
immediate control over the employees’ essential terms and
conditions of employment.”
The proposed standard would not require that the employer
actually exercise power or control over the employee, but
rather it must only possessthe authority to
control one or more of the employees’ terms and conditions of
employment—a distinction that exemplifies the NLRB’s
desire to build this standard on a foundation of common-law agency
principles. Equally as important, an employer with either direct
or indirect control over one or more of the employees’
terms and conditions of employment could qualify as a joint
employer under the proposed rule, even if the employer exercises
such control through an intermediary person or entity.
This proposed broad standard includes other aspects worth
breaking down further. First, the proposed rule defines
“essential terms and conditions of employment” as a
non-exhaustive list of bargaining topics, including but not limited
to: “wages, benefits, and other compensation; hours of work
and scheduling; hiring and discharge; workplace health and safety;
supervision; assignment; and work rules and direction governing the
manner, means, or methods of work performance.” While the
non-exhaustive nature of this list is more expansive than the
Board’s current list—which includes only “wages,
benefits, hours of work, hiring, discharge, discipline,
supervision, and direction”—it is unclear if this
proposed change would have significant impact in practice. Second,
and not dissimilar from the current standard, an employer must only
possess authority to control or exercise the power to control
“one or more” of these essential terms and conditions of
employment. Given the expanded list of terms and conditions
combined with the emphasis on applying “common law agency
principles,” entities could be found to be joint employers at
an increasingly frequent rate.
Takeaways
Practically speaking, this rule—if adopted—could
increase potential exposure for employers, including where the
connection is tenuous, especially if the concept of what
constitutes “indirect control” is not further clarified.
It also greatly enhances the risk profile where an employer enters
into relationships with staffing agencies or other third-party
vendors, and in the franchisor-franchisee context.
That said, it is important to note that this is a notice of
proposed rulemaking, meaning this rule is not yet final.
We are still in the midst of the commentary period where the Board
will receive important feedback from the public. Additionally, it
is also worth noting that even if adopted, this rule would only
immediately impact the definition of “joint employer”
under the NLRA, not any other federal law, such as the Fair Labor
Standard Act or Title VII. Nevertheless, given the potential
ramifications of this proposed rule, we will stay on top of any
developments that emerge during the notice and comment period, and
provide updates accordingly.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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