NLRB Proposed New Joint-Employer Rule

Issue March/April 2019 March 2019 By Jaimeson Porter
Labor & Employment Law Section Review
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Jaimeson Porter

The National Labor Relations Board (NLRB) recently published a Notice of Proposed Rulemaking aiming to overturn the Obama-era board’s standard for joint-employer relationships.

The current standard, set in 2015 in Browning-Ferris Industries of California, holds that two or more entities can be considered joint employers of a workforce if they “share or codetermine matters governing the essential terms and conditions of employment.”

The new, stricter and more employer-friendly standard proposed by the NLRB seeks to expand the rule by requiring that two entities not just share decision-making powers over the essential terms and conditions of employment, but also that both actually exercise substantial, direct and immediate control over them.

The Traditional Joint-Employer Rule

For nearly 30 years before Browning-Ferris was decided, joint-employer status under the National Labor Relations Act (NLRA) required proof of significant, direct and immediate control over the employees in question. The NLRB consistently held historically that indirect, minimal or hypothetical control over a workforce was insufficient to establish a joint-employer relationship between two entities.

Browning-Ferris (2015)

In 2015, the joint-employer rule changed. In Browning-Ferris, the Democrat-majority board held that “direct and immediate control” of the workforce would no longer be required. Instead, to determine whether an entity was a joint employer of a workforce, the new relevant inquiry was whether the entity had the potential authority to exercise control over the primary employer’s employees, and not whether the company had in fact exercised actual authority over the workforce in question.

Browning-Ferris marked a significant departure from the traditional joint-employer standard, and a victory for employees.

The Proposed New Rule

The Trump-era board’s proposed new rule would undo the more liberal Browning-Ferris standard and revert back to a standard more closely aligning with the traditional joint-employer rule. If the proposed new rule is adopted, indirect influence and contractual reservations of authority over a workforce (without an actual exercise of authority) will no longer be enough to establish a joint-employer relationship. Instead, a business would be responsible as a joint employer of another company’s employees only if it possesses and exercises substantial, direct and immediate control over that workforce’s essential terms and conditions of employment, and has done so in a manner that is not “limited and routine.”

In support of the proposed rule change, the NLRB’s notice explains that the new standard would provide greater predictability, consistency and stability for all in understanding whether a joint-employment relationship is being created, or could be created, by virtue of how two entities are deciding to do business together. It would also decrease the risk that employers who have not played an active role in deciding wages, benefits or other essential terms and conditions of employment, get improperly pulled into a collective-bargaining relationship with a workforce belonging to another entity.

What to Watch for

In December 2018, the D.C. Circuit Court of Appeals reviewed and upheld part of the Browning-Ferris decision, but remanded the case back to the NLRB for reconsideration. Shortly thereafter, in January 2019, numerous United States representatives and attorneys general submitted letters to the NLRB advocating for Browning-Ferris to be upheld. On Jan. 17, 2019, NLRB Chairman John Ring denounced those requests to stop the new proposed joint-employer rule.

Management-side and union-side attorneys should stay tuned in upcoming months to see what the NLRB decides on this important issue. 

Jaimeson Porter is a member of the Labor and Employment Practice group at Schwartz Hannum PC. Porter advises and represents businesses in all aspects of the employer-employee relationship, including wage and hour issues, complex internal investigations, and mitigating future risk of litigation. Porter currently serves on the MBA’s Labor & Employment Section Council as the section’s legislative liaison.