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.

Steven M. Swirsky

The National Labor Relations Board (NLRB or Board) invited interested parties to submit amicus briefs in Miller & Anderson, Inc. in connection with the Board’s reexamination of critical issues affecting the ability of unions to organize employees employed by temporary and staffing agencies (“temporary employees”) in the same bargaining units as employees of an employer that supplements its direct workforce with temporary employees.

Elections Involving Joint-Employers

Under the existing law, the Board will only conduct an election and certify a unit that includes employees of joint employers if both of the joint employers agree to such an arrangement.  The Board’s grant of the petitioning union’s request for review of a regional director’s dismissal of petition for an election because one of the joint employers did not agree, appears to telegraph the Board’s intention to abandon that requirement.

Easing the Test for Finding a Joint-Employer Relationship

The NLRB has previously suggested when it invited amicus briefs in imminently in Browning-Ferris that it is about to adopt a new test, based on what it calls “economic realities,” for deciding whether a business is a joint employer with another entity such as a temporary agency or employee leasing service, of the personnel that the agency supplies to work for its client.

More Elections and Unions Representing Temps

If it does so, and then decides in Miller & Associates to create an easier pathway for temporary employees, part-time employees and other contingent workers” to obtain union representation, and be included in bargaining units alongside “regular employees” employed by the principal employer, could radically change the landscape and lead to organizing and bargaining over terms and conditions for temporaries and other contingent workers.  The bargaining obligation would apply not only to the staffing agency that writes a temporary worker’s paycheck, but also to the temporary agency’s client for whom the temporary worker does work.

Under the Board’s 2014 decision in Oakwood Care Center a bargaining unit composed of both “solely employed employees” and jointly-employed employees would only be found to be an appropriate unit for bargaining and the Board would only direct an election in a unit of jointly and solely employed employees if both of the employers (i.e. the principal employer and the temporary or staffing agency supplying personnel to work with the principal employer’s employees) consented to such an arrangement.  Not surprisingly, few, if any, employers agreed to this.

Why Is the Board Doing This Now?

What the Board has indicated in its July 6, 2015 Notice and Invitation to File Briefs is that it is, at a minimum, looking at abandoning the requirement of consent of both employers and returning to the legal standards that preceded Oakwood, which standard was adopted by the Board in 2000, during the Clinton Administration in M.B. Sturgis which had permitted the Board to direct an election in a unit included both solely employed and jointly employed employees without the need for the consent of the two employers.

The fact that the Board has now, after three years, granted the union’s 2012 request for review of a Regional Director’s decision in Miller & Anderson stating that the union’s appeal of the dismissal of its election petition  “raises substantial issues warranting review with respect to the applicability of Oakwood Care Center,” strongly suggests that the Board intends to eliminate the requirement that when a union seeks an election in a unit including  employees the Board finds to be employed by joint-employers, that both employers must consent for an election to take place.

What To Expect

Given the expectation that the Board will shortly announce a much relaxed standard for finding employers to be joint-employers, this is not surprising.  However, what it also likely presages is a continuation of the union campaigns, such as those in the realm of franchisor-franchisee relationships in fast food and elsewhere and the Board’s movement towards more findings of joint employer status.