NLRB to Promulgate Joint Employer Rule

Employment Law


The National Labor Relations Board (NLRB or the Board) released its rulemaking priorities for the coming months and put joint employer status under the National Labor Relations Act (NLRA) at the top of the list.

For several years, the Board’s standard for joint employers has been in flux. After many decades of following a single standard in evaluating the scope of joint employer liability, the NLRB adopted a controversial new standard in the 2015 decision Browning-Ferris Industries of California, Inc.

In that case, the Board held that even when two entities have never exercised joint control over the essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be joint employers based on the existence of “reserved” joint control or based on indirect control that is “limited and routine.” The Board found that Browning-Ferris, Inc. (BFI) had reserved joint control over workers because of the terms of the agreement with another company, Leadpoint. Although that agreement defined Leadpoint as the sole employer, it also required that all workers satisfy BFI screening processes (including drug testing), enabled BFI to recommend dismissal of any worker, required workers to comply with BFI’s safety policies, and reserved to BFI the right to approve the workers’ time records and wages.

The situation became more complicated when, in Hy-Brand Industrial Contractors, Ltd. & Brandt Construction Co. (2018), an administrative law judge applied Browning-Ferris to find that two entities were joint employers. When the employers appealed to the NLRB, the Board—with new members courtesy of the change from a Democratic to a Republican administration—took the opportunity to throw out Browning-Ferris and establish a new test.

In 2018, the NLRB decided formal rulemaking would be the best path forward and published a Notice of Proposed Rulemaking (NPRM) to establish a new joint employer standard.

Pursuant to the proposal, an employer may be found to be a joint employer 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, the NLRB said.

The process stalled as almost 29,000 comments were submitted in response to the NPRM.

Now the Board is taking another stab at the issue. While it did not detail a timeline, the NLRB announced that it will “engage in rulemaking on the standard for determining whether two employers, as defined in section 2(2) of the [NLRA,] are a joint employer under the Act.”

The NLRB isn’t the only agency struggling with the joint employer standard. The Department of Labor (DOL) finalized an updated rule in January 2020—marking the agency’s first meaningful revision to its joint employer standard under the Fair Labor Standards Act (FLSA) in more than 60 years—but immediately faced multiple legal challenges.

A New York federal court struck down the employer-friendly rule in late 2020. Under the Biden administration, the DOL announced it was reconsidering the rule and rescinded the 2020 version as of September 28, 2021.

To read the NLRB’s notice, click here.

Why it matters: Given the DOL’s employer-friendly joint employer rule was rescinded and a new rule from the NLRB is likely to be in favor of employees, employers should prepare themselves for increased enforcement.

manatt-black

ATTORNEY ADVERTISING

pursuant to New York DR 2-101(f)

© 2022 Manatt, Phelps & Phillips, LLP.

All rights reserved