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Out With the New and in With the Old? Board Issues Proposed Rule Which Would Restore Prior Joint-Employer Standard

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September 17, 2018

By Amy Moor Gaylord and Erin Walsh

On Thursday, September 13, the National Labor Relations Board (the “Board”) signaled its intent to return to its pre-Obama Board test for establishing joint-employer status. The Board issued a Notice of Proposed Rulemaking in the Federal Register proposing to establish a standard whereby “an employer may be found to be a joint-employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine.”

The current joint-employer standard, which was set forth in the 2015 Browning – Ferris decision, permits a joint-employer finding in situations where a company has “indirect” control over the company’s workers. Browning-Ferris Industries, 362 NLRB No. 186 (Aug. 27, 2015). See our prior Alert here. Under the Browning-Ferris standard, “[t]he Board may find that two or more entities are joint-employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.” The primary inquiry is whether the purported joint-employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the company has in fact exercised such authority. The practical effect of this standard is that a company found to be a joint-employer can be forced to bargain with the jointly employed workers and held liable for any unfair labor practices committed by the primary employer. This standard has been viewed as employee and union-friendly, leading to joint-employer findings in an increased number of circumstances.

If the proposed rule is adopted in its current form, indirect influence and contractual reservations of authority will no longer be sufficient to establish a joint-employer relationship. Rather, the joint-employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. By including such a requirement, the proposed rule will limit the number of companies that may be found to be a joint-employer.

It should be noted that the Board previously attempted to reverse the Browning-Ferris joint-employer standard in its decision in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (Dec. 14, 2017). Just two months later, in February 2018, the Board reversed and vacated Hy-Brand based upon Member William Emanuel’s participation in the decision, finding that Member Emanuel should have recused himself due to a conflict of interest. We previously wrote about that reversal here. With that said, a standard issued through rulemaking is generally considered stronger than a standard established by a Board decision since, as evidenced in the attempt above, Board rulings can be overturned when the Board majority flips during the presidency of the opposing party.

The proposed rule will be open for public comment by interested parties and members of the public for sixty (60) days or until November 13, 2018. The Board will then have the opportunity to review and respond to those comments and hold public hearings while promulgating a final rule.

In light of the proposed rule, we recommend that employers and other parties with matters before the Board involving joint-employer issues, whether in the context of unfair labor practice cases or representation cases, consider both the Browning-Ferris standard and the proposed standard to ensure that they preserve all arguments and issues. 

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