One day after Labor Day, the National Labor Relations Board (“NLRB” or the “Board”) issued a proposed rule that would rescind and replace the Trump Administration’s 2020 rule that established the current test for determining whether two entities are joint employers. Predictably, the proposed rule, if adopted by the Board, will result in more findings that two entities are joint employers. Under federal labor law, a joint employer is required to bargain with a union selected by its jointly-employed workers and may be held liable for the unfair labor practices committed by the other employer.
The Prior Standard
Few issues have occupied more of the Board’s time and resources over the last decade as the test for determining joint employer status.
In 2015, in Browning Ferris Industries, the Board under the Obama Administration revised the joint employer standard. Specifically, the Board held that it would not require proof that an alleged joint employer exercised “direct and immediate” control over the essential working conditions of another company’s workers. Additionally, the Board stated that it would find joint employment even where a company’s control over another employer’s workers was indirect, limited and routine, or contractually reserved but never exercised.
In 2020, under the Trump Administration, the Board issued a final rule narrowing the circumstances under which the Board would find joint employment. Under the 2020 rule, the Board would require proof of “direct and immediate control” over workers’ essential terms and conditions of employment, including wages, benefits, hiring, and discipline, among other working conditions. The Board further stated that indirect control or contractually-reserved but unexercised control would be insufficient to establish a joint employer relationship.
The Proposed Rule – What Does it Say?
The proposed rule will nix the Trump Administration’s 2020 rule and effectively reinstate and expand the Browning Ferris Industries standard. Once again, the Board will find joint employment where two employers “share or co-determine” essential terms and conditions of employment, even if one of the employers possesses only “indirect” or “contractually reserved” control.
Under the proposed rule, two companies will be joint employers of workers if “they possess the authority to control (whether directly, indirectly, or both), or to exercise the power to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” The draft rule broadens what is deemed an “essential term and condition of employment.” In addition to wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction – which constituted an exhaustive list of essential terms and conditions under the 2020 rule – the proposed rule adds control over workplace health and safety, assignment of work, and “rules and directions governing the manner, means, and methods of work performance.” Unlike the 2020 rule, the Board majority stated that the list will be non-exhaustive, likely permitting the Board to characterize other terms and conditions of employment as “essential” depending on the circumstances of a case (or, more cynically, to find a joint employer relationship).
The Board majority, comprised of the Board’s three Democratic appointees, opined that the draft rule will bring the Board’s joint employer test back in line with common-law agency principles, from which the majority stated the 2020 rule inappropriately departed. Accordingly, the Board majority indicated it would do away with “control-based restrictions that unnecessarily narrow the common law…” Republican Board members John Ring and Marvin Kaplan, who sat in the majority for the 2020 rule, dissented. The dissenters asserted there was no reason to depart from the 2020 standard less than three years after its implementation, and adoption of the draft rule would be “arbitrary and capricious.”
The proposed rule is being published today in the Federal Register. Interested parties will have until November 7 to comment on the proposed rule, which may be submitted here, and the Board must consider such comments prior to issuing a final rule. We will keep you updated concerning developments related to this proposed joint employer standard.
The proposed rule, which will likely be adopted as a final rule in 2023, will result in increased Board findings of joint employer relationships. This will occur even where one company’s control over essential terms and conditions of employment is “indirect” or “reserved” but not exercised. Employers utilizing staffing agencies will likely be significantly impacted by this rule once it is finalized. And similarly, the franchise relationship will be fertile ground for the assertion of joint employer status. Further, companies utilizing onsite contractor employees subject to certain work rules of the host company may be unwittingly ensnared by this new standard if the rules govern “the manner, means, and methods of work performance.”
It appears that a return to the Browning Ferris Industries standard of joint employment is imminent. If recent history is a guide, however, this proposed standard may again be revisited if and when the political pendulum swings right and Republicans return to the majority on the Board.