Yesterday, the National Labor Relations Board (NLRB or Board) announced a much-anticipated proposed regulation to establish a rule-driven standard for determining joint-employer status under the National Labor Relations Act (NLRA).
The Board’s proposed rule represents a return to a more common-law-centered understanding of joint-employer relationships, establishing joint employer status based on the exercise of substantial direct and immediate control. The Board’s announcement explained that its proposed rule, which is subject to revision after public comment, best serves the NLRA’s purposes by imposing bargaining obligations only on those employers that actually play an active role in establishing essential terms and conditions of employment. In other words, a related business partner not actively participating in employment decisions (such as setting employee wages, benefits, and other essential terms and conditions of employment) ought not be drawn into the collective bargaining process. The Board stated:
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, 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 proposed rule also includes 12 examples to illustrate what constitutes direct and immediate control over essential terms and conditions of employment.
The Board’s rulemaking announcement marks the most recent chapter in a flurry of changes to the joint-employer standard. In 2015, a divided Board issued its Browning-Ferris decision overruling longstanding precedent and relaxing the evidentiary requirement for finding a joint-employer relationship with the mere right to control, including indirect control. After confirmation of two Trump administration appointments that reconstituted the Board, the new Board majority overruled Browning-Ferris only to reinstate it shortly thereafter in February 2018. A challenge to Browning-Ferris is currently pending before the United States Court of Appeals for the D.C. Circuit.
Recognizing the business disruption inevitable in this “oscillation” on the joint-employment standard, the Board announced that it had decided to use the agency rulemaking process, rather than case adjudication, to set the applicable standard. The Board noted that the NLRA’s failure to define the term “joint employer” leaves a gap requiring interpretation and the rulemaking process both allows for public comment on the proposed rule and for the Board to provide greater certainty to business and unions by providing hypothetical examples that go beyond the facts of any particular case. It also means that future changes must be made through the rulemaking process, with notice, opportunity for comment, and time to comply.
The Board’s announcement was not without a dissent from its members. NLRB member Lauren McFerran strongly dissented stating that there was no good reason to revisit Browning-Ferris, a Board ruling she joined, and that utilizing the rulemaking process instead of case adjudication was ill advised. McFerran also argued that the Board’s proposed rule was inconsistent with the common law and goals of the NLRA, would result in fewer joint-employer findings, and could even lead to a new wave of nationwide strikes.
The Board’s proposed rule was published in the Federal Register today, September 14, 2018, and is now open for a 60-day public comment period through November 13, 2018. The Board has specifically invited comment as to:
- Experiences with labor disputes and how the extent of control possessed or exercised by the employers affected those disputes and their resolution.
- Experiences organizing and representing such workplaces for the purpose of collective bargaining and how the extent of control possessed or exercised by the employers affected organizing and representational activities.
- Experiences managing such workplaces, including how legal requirements affect business practices and contractual arrangements.
Employers may consider submitting public comment in these or other areas of the proposed rule, including the proposed examples. For more information on developments in this area, please contact Betty Graumlich at firstname.lastname@example.org, Karl Fritton at email@example.com, or the Reed Smith lawyer with whom you normally work.