The National Labor Relations Board has announced the issuance of its final rule governing joint-employer status. The new rule, which was first proposed in September 2018 and has been the subject of extensive public comment, will become effective April 27, 2020.

The critical elements for finding a joint-employer relationship under the new rule is the possession and the exercise of substantial direct and immediate control over the terms and conditions of employment of those employed by another employer.  The essence of the new rule is described in the Board’s February 25, 2020 press release:

To be a joint employer under the final rule, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees. The final rule defines key terms, including what are considered “essential terms and conditions of employment,” and what does, and what does not, constitute “direct and immediate control” as to each of these essential employment terms. The final rule also defines what constitutes “substantial” direct and immediate control and makes clear that control exercised on a sporadic, isolated, or de minimis basis is not “substantial.”

Evidence of indirect and/or contractually reserved control over essential employment terms may be a consideration for finding joint-employer status under the final rule, but it cannot give rise to such status without substantial direct and immediate control. Importantly, the final rule also makes clear that the routine elements of an arm’s-length contract cannot turn a contractor into a joint employer.

The new rule marks a return to a standard similar to that which the Board followed from 1984 until 2015.  In 2015, in Browning-Ferris Industries, the Board adopted a much more liberal test under which a finding that the putative joint employer possessed indirect influence and the ability (including through a reserved contractual right) to influence terms and conditions, regardless of whether the putative joint employer actually exercised such influence or control, could result in it being held to be a joint-employer of a second employer’s employee.

As a practical matter, the standard under the Board’s new rule should make it much more difficult to establish that a company is a joint-employer of a supplier, contractor, franchisee, or other company’s employees. The new rule will mean that a party claiming joint-employer status to exist will need to demonstrate with evidence that the putative joint-employer doesn’t just have a theoretical right to influence the other employer’s employees’ terms and conditions of employment, but that it has actually exercised that right in a substantial, direct and immediate manner.

This new rule is likely to make it much more difficult for unions to successfully claim that franchisors are joint-employers with their franchisees, and that companies are joint-employers of personnel employed by their contractors and contract suppliers of labor, such as leasing and temporary agencies.

Our colleague Steven Swirsky is featured on Employment Law This Week – DOL Proposes New Joint-Employer Rule speaking on the recent Department of Labor (DOL) ruling regarding joint-employers status under the Fair Labor Standards Act while the The National Labor Relations Board’s (NLRB) joint-employment rule proposed in September 2018 is still pending.

Watch the interview below.

Since 2015, employers have faced continued uncertainty regarding which standard the National Labor Relations Board (“NLRB” or the “Board”) will apply when determining joint-employer status under the National Labor Relations Act (“NLRA”). Businesses utilizing contractors and staffing firms or operating in partnering arrangements, as well as those engaged in providing temporaries and other contingent workers, have faced a moving target before the Board when it comes to potential responsibility in union recognition, bargaining obligations, and unfair labor practice cases.

We’ve previously reported on the somewhat tortured history of the evolving joint-employer standard, which the Board first significantly revised in 2015 in Browning-Ferris Industries, 362 NLRB No. 186. In that decision, the Board held that an employer which merely possesses the authority to control the terms and conditions of employment, either directly or indirectly, and even when that authority is not exercised, may nonetheless be a joint-employer under the NLRA.

In 2017, following a shift in the composition of the Board to a majority of Republican appointees, the Board discarded the Browning-Ferris standard in its decision in Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co., and returned to its prior test for determining joint-employer status. Under Hy-Brand, the Board reverted to a test based on the common law, which required a putative joint-employer to possess “direct and immediate” control over the essential terms and conditions of employment of employees of another business, and actually exercise joint control, rather than simply reserve the right to exercise such control.

The return to the traditional joint-employer test, however, was short-lived. In 2018, the Board vacated its decision in Hy-Brand due to a finding by the Board’s Designated Agency Ethics Official that Member William Emanuel should have been disqualified from participating in the Hy-Brand decision because of potential conflict-of-interest concerns. As a result of the decision to vacate Hy-Brand, the Board once again returned to the Browning-Ferris standard for determining joint-employer status, which remains the applicable legal standard at this time.

However, the joint-employer roller coaster continued to roll when the Board published a notice of proposed rulemaking regarding the standard for determining joint-employer status on September 14, 2018. The proposed rule would again reverse the Browning-Ferris decision and provide that employers will only be considered joint-employers where the putative employer possesses and exercises “substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.” The Board received a large number of submissions in the public comment period, resulting in three extensions of the time for the submission of comments regarding the proposed rule to accommodate the overwhelming response.

After the conclusion of the public comment period, Representatives Bobby Scott and Frederica Wilson issued a letter to Board Chairman John Ring regarding what the Representatives perceived was an inappropriate method for internally reviewing the nearly 29,000 public comments the Board received in response to the proposed rule. In particular, Representatives Scott and Wilson raised concerns that the Board was freezing out agency professional staff in the review process by outsourcing the substantive review of public comments to private contractors, and that such outsourcing raised potential conflict-of-interest concerns.

On March 22, 2019, Chairman Ring submitted a response back to Representatives Scott and Wilson regarding the Board’s process for reviewing the public comments received in response to the proposed joint-employer rule. In the response, Chairman Ring agreed that outsourcing substantive review of public comments could create the appearance of conflicts of interest, but stated that the Representatives were “misinformed” about the Board’s review process.

Ring clarified that the Board was utilizing a temporary employment agency contracted through the General Service Administration’s bid process, and that the temporary employees’ work would be limited to sorting and coding the public comments for later substantive review by the Board’s staff. Countering the lawmakers’ suggestion of Board impropriety, Chairman Ring stated that the Board took due consideration of all conflict-of-interest issues in the bid process for contracting out the work. The response further emphasized the routine nature of federal agencies contracting out such coding and sorting work, and the inefficient use of resources that utilizing the Board’s attorneys to perform ministerial document-processing work would entail. Lastly, Ring noted that the Board previously shared the decision to contract out the initial sorting work to its staff and received no negative reaction to the announcement.

As has been the case each step of the way, the joint-employer saga has evoked impassioned responses from both management and labor alike. There is little doubt the Board’s final joint-employer rule will elicit anything less. Stay tuned for the next chapter when the Board publishes its final rule in the coming weeks.

The National Labor Relations Board has announced publication of a proposed rule that will establish a new and far narrower standard for determining whether an employer can be held to be the joint-employer of another employer’s employees. The rule described in the Notice of Proposed Rulemaking published in the Federal Register on September 14, 2018, will, once effective essentially discard the Board’s test adopted in Browning-Ferris Industries (“Browning-Ferris”) during the Obama Administration, which substantially reduced the burden to establish that separate employers were joint-employers and as such could be obligated to bargain together and be responsible for one another’s unfair labor practices.

The Proposed New Standard

Under the proposed new rule, the Board will essentially return to the standard that it had followed from 1984 until 2015. As the Board explained when it announced the proposed new rule

Under the proposed rule, 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. Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship.

Under Browning-Ferris, the Board held that indirect influence and the ability to influence terms and conditions, regardless of whether exercised, could result in an employer being held to be the joint-employer of a second employer’s employees.

As a practical matter, the new standard should make it much more difficult to establish that a company is a joint-employer of a supplier or other company’s employees. The new standard will mean that a party claiming joint-employer status to exist will need to demonstrate with evidence that the putative joint-employer doesn’t just have a theoretical right to influence the other employer’s employees’ terms and conditions but that it has actually exercised that right in a substantial, direct and immediate manner.

This new standard is likely to make it much more difficult for unions to successfully claim that franchisors are joint-employers with their franchisees, and that companies are joint-employers of personnel employed by their contractors and contract suppliers of labor such as leasing and temporary agencies.

The New Standard Marks a Return to that Announced in Hy-Brand Industrial Contractors, Ltd.

As readers may recall, in December 2017, in Hy-Brand Industrial Contractors, Ltd. (“Hy-Brand”), in a 3-2 decision joined in by the Board Chairman Miscimarra and Members Emanuel and Kaplan, the Board overruled Browning-Ferris and adopted a standard that required proof that putative joint employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control), the control must be “direct and immediate” (rather than indirect), and joint-employer status will not result from control that is “limited and routine.”

Hy-Brand however, was short-lived. On February 26, 2018, in a unanimous decision by Chairman Marvin Kaplan and Members Mark Pearce and Lauren McFerren, the Board reversed and vacated Hy-Brand, following its finding that a potential conflict-of-interest had tainted the Board’s 3-2 vote in Hy-Brand.

The standard announced this week however marks an attempt by the Board to breathe life back into Hy-Brand.

What Happens Now?

Under the Administrative Procedures Act, the public and interested parties will now have sixty days to submit comments “on all aspects of the proposed rules” for the Board’s consideration.

Democratic Senators Elizabeth Warren, Kirsten Gillibrand, and Bernard Sanders previously announced in a May 2018 letter, when the Board indicated it was looking into rulemaking concerning the test for determining joint-employer, that it was their view that the same conflicts of interest that resulted in the Board’s decision to vacate Hy-Brand at least raised ethical concerns.

While there is nothing inherently suspect about an agency proceeding by rulemaking, it is impossible to ignore the timing of this announcement, which comes just a few months after the Board tried and failed to overturn Browning-Ferris, and appears designed to evade the ethical constraints that federal law imposes on Members in adjudications. The Board’s sudden announcement of rulemaking on the exact same topic suggests that it is driven to obtain the same outcome sought by Member Emanuel’s former employer and its clients, which the Board failed to secure by adjudication.

According to Politico, Senator Warren has now renewed her concerns about the proposed rule and the conflict issues that resulted in the Board vacating Hy-Brand. “After getting caught violating ethics rules the first time, Republicans on the Board are now ignoring these rules and barreling towards reaching the same anti-worker outcome another way.”

Given these considerations, it is quite foreseeable that opponents of the proposed rule may seek to at least delay, if not defeat the proposed rule’s taking effect by litigation.

On February 26, 2018, in a unanimous decision by Chairman Marvin Kaplan and Members Mark Pearce and Lauren McFerren, the National Labor Relations Board (“NLRB” or the “Board”) reversed and vacated its December 2017 decision in Hy-Brand Industrial Contractors, Ltd. (“Hy-Brand”), which had overruled the joint-employer standard set forth in the 2015 Browning-Ferris Industries (“Browning-Ferris”) decision. The decision followed the release of a finding that a potential conflict-of-interest had tainted the Board’s 3-2 vote. What this means, at least for the moment, is that the lower standard for determining joint-employer status in Browning-Ferris is the law once again.

What Is The Browning-Ferris Standard?

As we previously reported, 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.”  Under Browning-Ferris, 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.  This standard is viewed as employee and union-friendly, and led to the issuance of complaints alleging joint-employer status in an increased number of circumstances.

What Did Hy-Brand Set As the Test for Joint-Employer Status?

Later, in Hy-Brand, as we noted, the Board rejected the Browning-Ferris standard and returned to a more employer-friendly standard, based on the common law test for determining whether an employer-employee relationship exists as a predicate to finding a joint-employer relationship and adding more than just the right to exercise control.  Under Hy-Brand, a finding of joint-employer status would require proof that putative joint employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control), the control must be “direct and immediate” (rather than indirect), and joint-employer status will not result from control that is “limited and routine.”  This decision had stopped at least some cases relying on Browning-Ferris in their tracks.

What Happens Next?

While Hy-Brand has been reversed for the time being, we expect the Board, once the Senate acts on President Trump’s nomination of John Ring to fill the seat vacated this past December by then Chairman Philip Miscimarra, to reinstate the joint-employment standard articulated in Hy-Brand or a similar standard.

As noted above, the reversal of Hy-Brand follows the ethics memo published by NLRB Inspector General David Berry finding that Member William Emanuel should have abstained from the decision in Hy-Brand because of the fact that the law firm of which he was a member was involved in the case.  There are a number of other cases in which similar conflict issues have arisen, also arguing that Member Emanuel should recuse himself.

Congress May Act

Separate and part from a future Board decision, as we noted in November, the House of Representatives passed the Save Local Business Act (H.R. 3441) which, if enacted, would amend the National Labor Relations Act and the Fair Labor Standards Act to establish a Hy-Brand-like direct control standard for joint employer liability.  The reversal of Hy-Brand may now put increased pressure on the Senate to pass the bill.

What Should Employers Do Now?

Employers and other parties with matters before the Board involving joint-employer issues now, whether in the context of unfair labor practice cases or representation cases, now will need to focus on both the Browning-Ferris standard and the Hy-Brand test to ensure that they preserve all arguments and issues recognizing the likelihood that sooner rather than later the Board will adopt a test that requires more than is required under Browning-Ferris to establish the existence of a joint-employer relationship, with all of the attendant responsibilities.  We will continue to follow this issue and report on developments.

It should come as no surprise that recent days have seen a stream of significant decisions and other actions from the National Labor Relations Board as Board Chairman Philip A. Miscimarra’s term moves towards its December 16, 2017 conclusion and as a new majority has recently taken shape with the confirmation of Members Marvin Kaplan and William Emanuel.  Chairman Miscimarra, while he was in a minority of Republican appointees from his confirmation during July 2013 until last month, has clearly and consistently explained why he disagreed with the standard adopted in Lutheran Heritage Village for determining whether a work rule or policy, whether in a handbook or elsewhere would be found to unlawfully interfere with employees’ rights under Section 7 of the National Labor Relations Act to engage concerted action with respect to their terms and conditions of employment as we as  the actions  of the Obama Board in a range of areas, including the 2015 adoption of a much relaxed standard for determining joint-employer status in Browning-Ferris Industries, and his disagreement with the expedited election rules that the Board adopted through amendments to the Board’s election rules.

The Board’s New Standard for Determining Joint Employer Status

In Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co., decided on December 14, 2017, in a 3-2 decision, the Board has discarded the standard adopted in Browning-Ferris, and announced that it was returning to the previous standard and test for determining joint-employer status and returning to its earlier “direct and  immediate control standard.” Under this standard, “A finding of joint-employer status shall once again require proof that putative joint employer entities have exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine,’” and once again adopting a test that requires a showing that a putative joint –employer possesses “direct and immediate” control over the terms and conditions of employment of the employees of another employer.

In rejecting Browning-Ferris, the majority returns to a standard based on the common law test for determining whether an employer-employee relationship exists as a predicate to finding a joint-employer relationship.  Under Hy-Brand, a finding of joint-employer will require proof that putative joint employer entities have exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”

The majority, consisting of Chairman Miscimarra and Members Kaplan and Emanuel explained why they were rejecting Browning-Ferris:

We think that the Browning-Ferris standard is a distortion of common law as interpreted by the board and the courts, it is contrary to the [National Labor Relations 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.

The Board’s New Standard Governing Workplace Policies

In The Boeing Company, also decided on December 14, 2017, the Board adopted new standards for determining whether “facially neutral workplace rules, policies and employee handbook standards unlawfully interfere with the exercise” of employees rights protected by the NLRA.

In Boeing, the Board establishes the following new test:

when evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.”

Boeing offers assistance to employers and others who wish to evaluate the legality of any particular rule or policy, by creating three categories of rules for this purpose:

Category 1 will include rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.  Examples of Category 1 rules are the no-camera requirement maintained by Boeing, and rules requiring employees to abide by basic standards of civility.  Thus, the Board overruled past cases in which the Board held that employers violated the NLRA by maintaining rules requiring employees to foster “harmonious interactions and relationships” or to maintain basic standards of civility in the workplace.

Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.

Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.  An example would be a rule that prohibits employees from discussing wages or benefits with one another.

While the Board’s setting of these categories offers guidance, it will remain critical for employers and others to carefully assess each proposed rule and policy since the potential for substantial overlap between the categories will exist.

Equally important will be the application of rules and policies that may be facially lawful but subject to unlawful or inconsistent application.

An Assessment of the 2014 Expedited Election Rules

Because the expedited election rules were adopted through administrative rule making under the Administrative Procedures Act, the Board cannot simply discard or revise the 2015 amendments.

Noting that the 2014 Election Rules were adopted over the dissent of Chairman Miscimarra and then Member Harry Johnson, and the fact that these rules have now been effect for more than two years, on December 14th, the Board, over the dissents of Members Mark Pearce and Lauren McFerren, both of who were appointed by President Obama, published a Request for Information, seeking comment on the following three questions:

  1. Should the 2014 Election Rule be retained without change?
  2. Should the 2014 Election Rule be retained with modifications? If so, what should be modified?
  3. Should the 2014 Election Rule be rescinded? If so, should the Board revert to the Election Regulations that were in effect prior to the 2014 Election Rule’s adoption, or should the Board make changes to the prior Election Regulations? If the Board should make changes to the prior Election Regulations, what should be changed?

In explaining its decision to issue the Request, the Board majority has made clear that it is seeking the views of all interested parties, including labor and management, those in government and the Board’s General Counsel.  It has also made clear that while it is possible that it may engage in rulemaking to further amend the election rules and procedures, it may maintain the 2014 Election Rules without change, noting that “the Board merely poses three questions, two of which contemplate the possible retention of the 2014 Election Rule.”

The National Labor Relations Board (NLRB or Board), which continues to apply an ever expanding standard for determining whether a company that contracts with another business to supply contract labor or services in support of its operations should be treated as a joint employer of the supplier or contractor’s employees, is now considering whether a company’s requirement that its suppliers and contractors comply with its Corporate Social Responsibility (CSR) Policy, which includes minimum standards for the contractor or supplier’s practices with its own employees can support a claim that the customer is a joint employer.

Unions are Pursuing Joint Employer Claims Based On CSR Policies

My colleague Dan Green and I recently examined a case  in an article published in Epstein Becker Green’s most recent Take Five in which the Temporary Workers Of America, (TWOA) argued just that, seeking to require the client of the Lionbridge Technologies, the company that actually employs the workers it represents, to participate in negotiations for an initial collective bargaining agreement after the TWOA was certified by the NLRB as the representative of a unit of agency temporaries. Notably, TWOA describes itself as “a start up union devoted to defend and promote the interests of workers classified as ‘temporary.’” Notably, when the TWOA filed its petition for a representation election, it did not claim at that time that the temporary employer’s client was a joint employer with it and only did so after it won the election and was certified.

When the client declined the union’s request to participate because it was not an employer, the TWOA filed unfair labor practice (ULP) charges alleging that the client was unlawfully refusing to bargain. The Board has been aggressively investigating that assertion, including issuing investigative subpoenas to the alleged joint employer demanding extensive documentation and information from it concerning its business relationship with its supplier.

The NLRB Is Aggressively Using Its Subpoena Power to Investigate Joint Employer Allegations

While the customer moved to revoke the investigative subpoenas, the Board denied its motion to revoke the investigative subpoena, noting its “broad investigative authority, which extends not only to substantive allegations of a charge, but to ‘any matter under investigation or in question’ in the proceeding.” (emphasis in original).  Referring to its broad investigative powers, Members Hirozawa and McFarren went on to say that nothing in the Board’s Rules “can be read to impose a requirement that the Regional Director articulate ‘an objective factual basis’ in order to compel the production of information that is necessary to investigate” a pending ULP charge.

Dissenting, Member Miscimarra challenged the use of investigative subpoenas by the Regional Director to pursue the TWOA’s bare faced assertion that the contractor-employer’s client was a joint employer of its personnel. “I believe that a subpoena seeking documents pertaining to an alleged joint-employer and/or single employer status of a charged party requires ‘more . . . .than merely stating the name of a possible single or joint employer on the face of the charge,’” and that, as Section 10054.4 of the Board’s own Casehandling Manual holds, documentary evidence such as that which the Board’s subpoena called for should only be pursued if “consideration of the charging party’s evidence and the preliminary information from the charged party suggests a prima facie case.” (emphasis in original).  Here Member Miscimarra points out the TWOA merely claimed Lionbridge Technologies and its client were a “’joint employer’ without additional factual information about the joint employer allegation.”

What This Means For Employers Now

Since the Board issued its decision in Browning Ferris Industries last August, lowering the threshold for finding a joint employer relationship, it has continued to open the gates for increased organizing and union activity, including announcing it will hold elections and certify unions to represent units made up of both directly employed and secondarily employed employees in its Miller & Anderson, Inc. decision this past June.

As with the TWOA and its pursuit of Lionbridge and its client as joint employers, unions are now taking advantage of these opportunities in a number of ways, both in representation cases and by demanding that putative joint employers come to the table for bargaining.

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

The National Labor Relations Board (“NLRB” or “Board”) has issued its long-anticipated  decision in Browning-Ferris Industries, 362 NLRB No. 186 (pdf), establishing a new test for determining joint-employer status under the National Labor Relations Act (“NLRA” or the “Act”).  Because this revised standard will resonate with businesses relying on contractors and staffing firms throughout the economy and across industry lines, employers should be wary of its potential impact upon relationships with service providers that are supportive of, or critical to, their enterprise.

By fashioning a new standard in Browning-Ferris, the Board springs open new questions of which legally distinct entities will bear responsibility in NLRB cases addressing union recognition and bargaining obligations, as well as for any unfair labor practices that may follow.  Given the Board’s lead in fashioning a new standard, described as based on common law principles, it is likely to be relevant as well to other agencies, such as the Equal Employment Opportunity Commission and Department of Labor.

The majority opinion in this 3-2 decision makes clear that its objectives are far reaching: to address “the diversity of work­place arrangements in today’s economy,” including the increase in “[t]he procurement of employees through staffing and subcontracting arrangements, or contingent employment,” and fulfill a “primary function and responsibility.”

A New Standard for a Different Economy

Under the new standard enunciated by the majority, “[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.” Browning-Ferris jettisons the long standing requirement that not only must a party have the means to influence such matters, but it must also have exercised that right in a meaningful way.  If the decision is upheld and followed, no longer will the Board need to find that an employer retains and exercises direct control over another employer’s employees to be liable as a joint employer of those employees.

In the decision and press release, the Board suggests that “the current economic landscape”, which includes some 2.87 million people employed by temporary agencies, warrants a “refined” standard for assessing joint-employer status. As the majority puts it: “If the current joint-employer standard is narrower than statutorily necessary, and if joint-employment arrangements are increasing, the risk is increased that the Board is failing what the Supreme Court has described as the Board’s ‘responsibility to adapt the Act to the changing patterns of industrial life.’”

What Is the New Test for Finding Joint Employer?

So what exactly is changed? Previously, an employer had to exercise direct and immediate control over the terms and conditions of employment to be found to be a joint-employer. Under the new standard, what matters is whether the purported joint-employer possesses the authority to control the terms and conditions of employment, either directly or indirectly. In other words, the actual or potential ability to exercise control, regardless of whether the company has in fact exercised such authority, is the focus of the Board’s inquiry.  As the Board puts it, “reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry.” (emphasis added).

The Board’s decision also extends joint-employer status to employers that only exercise a degree of indirect control over the work performed by the employees of another. By way of example, in support of its holding that Browning-Ferris Industries (“BFI”) was a joint-employer of the employees of its contractor, Leadpoint Inc., a supplier of temporary labor, the Board emphasized that BFI had “communicated precise directives regarding employee work performance” to Leadpoint supervisors.

Why This Matters

As former NLRB Chair Wilma Liebman told Noam Scheiber of The New York Times, the Board’s decision changes the critical fact of which company is required to negotiate when employees unionize: “This is about, if employees decide they want to bargain collectively, who can be required to come to the bargaining table to have negotiations that are meaningful,”

One significant indicator of how broadly the Browning-Ferris decision will be applied may be seen when the decisions issue in the pending unfair labor practice charges in which McDonald’s is alleged to be a joint-employer of the employees of various franchisees. While the full import of Browning-Ferris may unfold over years of administrative litigation and court review, we know that the obvious (and intended) effect of the decision is to permit the Board to find joint-employer status where it did not previously exist. Indeed, the Board majority notes that extending joint-employer status is necessary to “encompass the full range of employment relationships wherein meaningful collective bargaining is … possible.” Notwithstanding the arrangements employers and contractors have made in years past to guard against joint-employer exposure, unions will be at the ready with unfair labor practice charges and representation petitions as vehicles for the Board to apply its new standard and examine or reexamine relationships forged before the pronouncements of Browning-Ferris. Thus, employers should anticipate a role in newly filed proceedings alleging joint-employer status – even as they contemplate reforming or redefining terms by which they engage with contractors and other providers of services supportive of their business.

Especially troubling is the prospect that the Board, in its zeal to create new applications for its joint-employer criteria, will ignore existing facts showing no actual exercise of control by one employer over employee relations of another, and instead look for control that potentially could be exercised in an ordinary arm’s length business relationship.

Given these circumstances, even those employers who do not exercise any direct or indirect control over the employees of their contractors should review carefully the terms of such arrangements, keeping in mind the Board’s stated intention of expanding joint-employer status.

What to Do Now

It is not an exaggeration to say that the new standard for determining joint-employer status will impact employers in almost every industry across the country.  As a first step, employers will want to closely examine their relationships with those who provide them with temporaries and other contingent workers, and their contracts and relationships with those other businesses that provide integral services and support, to assess whether there is a vulnerability to findings of joint-employer status.

On December 19, 2014, the National Labor Relations Board published a public notice stating that the NLRB General Counsel has issued 13 unfair labor practice complaints against McDonald’s USA, LLC, and McDonald’s franchisees alleging that McDonald’s and the franchisees are joint-employers, and as such, are jointly  responsible for alleged violations of the National Labor Relations Act. What’s at stake in these cases is not only shared responsibility for these alleged violations of the Act, but possibly also shared responsibility in collective bargaining should those unions organize the franchisors’ workers.

In addition to the public notice, the Board has also created a separate webpage on its website with the header “Organizations of Interest” specifically addressing these complaints. The 13 complaints arise out of 291 charges filed since November 2012. Though the actual complaints have not yet been made public, the Board hinted that they involve claims that unlawful “statements and taking actions against”  workers who participated “in nationwide fast food worker protests … during the past two years” including alleged “discriminatory discipline, reductions in hours, discharges, and other coercive conduct directed at employees in response to union and protected concerted activity, including threats, surveillance, interrogations, promises of benefit, and overbroad restrictions on communicating with union representatives or with other employees about unions and the employees’ terms and conditions of employment.”

While the General Counsel’s actions are alarming, particularly for businesses that rely upon a franchise model, the issuance of these complaints comes as little surprise because, as we reported in July of this year, the General Counsel had previously announced the decision to take this action and pursue claims of joint-employer liability. What is somewhat surprising about the announcement is its timing because the Board has not yet issued its decision in Browning-Ferris, 32-RC-109684, where the Board invited interested parties to opine in amici briefs on the benefits and drawbacks of the current standard relied upon by the Board to determine if two employers are a joint-employer and to propose a new standard and factors the Board should consider in such cases. Similar to its recent repudiation of Register Guard, the Board may use Browning-Ferris to moot the thirty years of joint-employer case law that followed TLI, Inc. 271 NLRB 798 (1984).

While the General Counsel issued the complaints based on charges filed in 13 Regional Offices  across the country, including, among others, Region 2 (Manhattan), Region 10 (Atlanta), Region 13 (Chicago) and Region 31 (Los Angeles), the Board has agreed to consolidate the hearings at six Regional Offices, with the first scheduled to commence, absent settlement, on March 30, 2015.

Stay tuned.

On October 24, 2019, Senator Mike Lee (R-UT) introduced the Protecting American Jobs Act.  The bill, cosponsored by Senators Tom Cotton (R-AR), Rand Paul (R-KY), Marsha Blackburn (R-TN), Ted Cruz (R-TX), and Marco Rubio (R-FL), would significantly amend the National Labor Relations Act (“NLRA”) by removing much of the authority currently held by the National Labor Relations Board (“NLRB” or “Board”).

Under the NLRA, the Board’s General Counsel is responsible for investigating unfair labor practice (“ULP”) charges, issuing complaints regarding ULP charges, and prosecuting those ULP complaints before NLRB administrative law judges.  Senator Lee’s bill would strip the Board of the authority to prosecute and adjudicate labor disputes, and limit the NLRB to investigating such disputes.  Instead of prosecution and adjudication by the NLRB, Senator Lee’s bill would provide individuals with the right to bring civil actions in the United States district court where the labor violation occurred or, at the parties’ option, the United States District Court for the District of Columbia.  The authority to adjudicate labor disputes would remain with the district courts.

The Protecting American Jobs Act would also significantly curb the NLRB’s rulemaking authority concerning matters other than the internal functions of the Board.  Senator Lee’s bill would prohibit the NLRB from promulgating “rules or regulations that affect the substantive or procedural rights of any person, employer, employee, or labor organization, including rules and regulations concerning unfair labor practices and representation elections.”  The bill would implement conforming amendments to the NLRA and require the NLRB to rescind or revise its regulations as necessary to conform with the amendments.

The Protecting American Jobs Act was referred to the Committee on Health, Education, Labor, and Pensions, which is where similar bills Senator Lee introduced in 2014 and 2015 also landed.  Neither of the previous versions of the bill ever proceeded beyond committee assignment.

“For far too long the NLRB has acted as judge, jury, and executioner, for labor disputes in this country, Senator Lee commented after introducing the bill.  “The havoc they have wrought by upsetting decades of established labor law has cost countless jobs.  This common sense legislation would finally restore fairness and accountability to our nation’s labor laws.”

Passage of the Protecting American Jobs Act would significantly alter the role of the NLRB and the adjudication of labor disputes.  Without significant Republican gains in the 2020 elections, however, the prospect of Senator Lee’s bill ever becoming law is remote.  While such a sea change is unlikely, the labor landscape continues to shift under the current Board.

As covered in previous blog posts, the NLRB is engaged in, or planning to initiate, rulemaking on a number of issues, including the standard for determining joint-employer status, whether students fall within the definition of “employee” under Section 2(3) of the NLRA, and election protection rules concerning the Board’s blocking charge policy, voluntary recognition bar, and Section 9(a) recognition in the construction industry.

At the same time, the Board continues to issue decisions concerning a number of important labor law issues. (See our previous posts: January 28, June 18, October 8, October 15).  In the last year alone, NLRB decisions have resulted in significant changes to the legality of work rules, employers’ ability to implement unilateral changes, union solicitation on employer property, and the status of independent contractors.  If anything can be predicted, it’s that change at the Board is nearly certain to continue through the 2020 elections.