What Employers Need to Know About the NLRB’s New Joint Employer Standard

October 31, 2018
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The National Labor Review Board Recently Proposed a New Joint Employer Standard That Will Make it More Difficult for Plaintiffs to Impose Joint Liability

The National Labor Review Board (NLRB) recently proposed a new joint employer standard that will make it more difficult for plaintiffs to impose joint liability. The “new” standard is actually a return to the test in place prior to the NLRB’s August 2015 decision in Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery (Browning-Ferris). 

NLRB Introduces New Joint Employer Standard

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NLRB’s Prior Browning-Ferris Test

The National Labor Relations Act (NLRA) does not expressly define who is an employer, whether joint or sole. In relevant part, Section 2(2) of the NLRA states only that “[t]he term ‘employer’ includes any person acting as an agent of an employer, directly or indirectly.” The definition is important given that the NLRB may compel a joint employer to bargain over the terms and conditions of employees employed by another employer. Among other legal consequences, each company comprising the joint employer may be found jointly and severally liable for the other’s unfair labor practices.

Under President Barack Obama, the NLRB established the Browning-Ferris test, where the primary question was whether the putative joint employer possesses the authority, even indirectly, to control terms and conditions of employment.  Accordingly, the test no longer required that a company have direct and immediate control over terms and conditions of employment, nor that a company actually exercise that authority.

On December 14, 2017, the NLRB expressly abandoned the Browning-Ferris standard. In its decision in Hy-Brand Industrial Contractors, the Board outlined several criticisms of the Browning-Ferris test, writing:

We find that the Browning-Ferris standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations. Accordingly, we overrule Browning-Ferris and return to the principles governing joint-employer status that existed prior to that decision.

In sum, the criteria for determining joint employer status reverted back to a requisite showing of employer control in order to find a joint employer relationship.    

Earlier this year, the NLRB was forced to vacate the Hy-Brand Industrial Contractors ruling due to a conflict of interest on behalf of a Board member who participated in the decision. The NLRB is now moving forward with codifying the joint employer test via regulation.

NLRB Proposed Joint Employer Standard

The NLRB’s proposed new rule establishes a strict standard under which indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship. As set forth in the Notice of Proposed Rulemaking, the proposed rule states:

An employer, as defined by Section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate 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. A putative 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.

The NLRB further advises that, under the proposed rule, there must exist evidence of direct and immediate control before a joint-employer relationship can be found. “Moreover, it will be insufficient to establish joint-employer status where the degree of a putative joint employer’s control is too limited in scope (perhaps affecting a single essential working condition and/or exercised rarely during the putative joint employer’s relationship with the undisputed employer),” the rulemaking states. The proposed rule also contains several examples to help clarify what constitutes direct and immediate control over essential terms and conditions of employment. The NLRB cautions that the examples are intended to “be illustrative and not as setting the outer parameters of the joint- employer doctrine established in the proposed rule.”

According to the press release by the NLRB, the proposed 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.”

What’s Next?

The NLRB is now accepting public comments on the proposed rule. As the Board noted in its Notice of Proposed Rulemaking, public comment on the joint employer standard is important “given the recent oscillation on the joint-employer standard, the wide variety of business relationships that it may affect (e.g., user-supplier, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, lessor-lessee, parent-subsidiary, and contractor-consumer), and the wide-ranging import of a joint-employer determination for the affected parties.”

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Scott Heck, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.