Executive Summary: On September 14, 2018, the National Labor Relations Board (NLRB) published a proposed new regulation to establish the standard for determining when two businesses are joint employers of a group of employees. The proposed rule, if adopted, would make it more difficult for businesses to be found to be joint employers under the National Labor Relations Act (NLRA).
Over the past several years the standard for determining when a joint-employer relationship exists has been like a game of ping-pong. One minute the decision favors employees and the next minute it favors employers. In Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015), the NLRB overruled longstanding precedent and allowed findings of joint employment where a company only had indirect control over another company’s employees. In December 2017, a different Board restored the prior standard; however, in February 2018 the Board vacated the December 2017 decision and returned to the “indirect control” test set forth in 2015. In promulgating the new rule, the Board is hoping to foster predictability and consistency in decisions concerning joint-employer status in business relationships.
The new proposed rule provides that an employer may be considered a joint employer of a separate employer’s employees “only if the two employers share or codetermine the employees’ essential terms and conditions of employment” in a manner “that is not limited and routine.” The essential terms and conditions include, but are not limited to, hiring, firing, discipline, supervision and direction. In essence, an employer must possess and actually exercise “substantial direct and immediate control over” the essential terms and conditions of employment of another employer’s employees for the relationship to be deemed a joint- employer relationship.
The term “joint employer” is never mentioned in the NLRA. However, there is a 30-year history of cases holding that two employers will be considered a joint employer if they share matters governing the essential terms and conditions of an employee’s employment. Indirect control was never sufficient to tie two employers together as joint employers. In fact, in Flagstaff Medical Center, Inc., 357 NLRB 659 (2011), direct and immediate supervision that was limited and routine was not even sufficient to establish a joint- employer relationship. Browning-Ferris veered away from this standard and relaxed it considerably by determining that even indirect control that was limited and routine would be enough to establish joint employment. The majority in the Browning-Ferris decision found that the 30 years of precedent unreasonably narrowed the Board’s joint-employer standard at a time when temporary, staffing and contingent worker relationships were on the rise. According to the majority, the common-law concept of the “right to control” eliminated any requirement that a business exercise direct or immediate control of the worker when determining if a joint-employer scenario existed.
There are myriad reasons why it is important for employers to have a standard they can rely on and more certainly predict the outcome of a situation in which there is a possible joint-employer relationship. If a joint-employer relationship is established, both employers can be compelled to collectively bargain with the union representing the group of jointly-employed employees; unfair labor practice charges can be filed against one company for the alleged misdeeds of the other; wage and hour liability could extend to both employers even if one is not responsible for the payment of wages to the employees; and claims of employment discrimination could be brought against both companies even if one had no knowledge or control over the employee alleging the discrimination.
Effect on Employers
Until public comments close, a final rule is promulgated, and the rule is submitted to the Senate, House and Comptroller General, there is no real change or effect on how the joint-employer issue will be determined. We will closely monitor this proposed rule and bring you updates. In the meantime if you are so inclined you can submit comments electronically via http://www.regulations.gov, or via U.S. Mail to Roxanne Rothschild, Associate Executive Secretary, National Labor Relations Board, 1015 Half Street S.E., Washington, D.C., 20570-0001.
If you have any questions regarding this or other labor or employment related issues, please feel free to contact the author of this Alert, Michelle Harkavy, a partner in our New York City office, at mharkavy@fordharrison.com. You may also contact the FordHarrison attorney with whom you usually work.