The National Labor Relations Board is looking to restore its traditional joint employer standard — and with a method that might make it last.
On Sept. 14, the NLRB proposed a rule that would undo its Obama-era decision in Browning-Ferris Industries, which expanded its definition of joint employers. Under the rule, the NLRB would once again find an entity to be a co-employer of another’s workers if it actually exerts control over the hiring, firing, discipline and other “essential terms and conditions” of their employment. The reinstated joint employer standard, if finalized, would be difficult to undo in the future, providing more predictability for employers on a legal issue that’s spent years in flux.
The proposed rule contains some extra verbiage that appears to narrow the joint employer definition even further than the pre-Browning Ferris era. If finalized, the rule could lead other federal agencies to tighten their joint employer interpretations in kind, going beyond just the NLRB and labor relations issues.
In 2015, the NLRB under President Obama broadened the definition of joint employers for the purpose of determining liability in labor issues. In the landmark Browning-Ferris decision, the board held that an entity could be a joint employer of another entity’s workforce if it merely reserved the right to control the essential terms and conditions of those workers’ employment. But contrary to the NLRB’s pre-Browning Ferris standard, the employer wouldn’t have to actually exercise that right to control in order to be deemed a joint employer — and therefore on the hook for unfair labor charges and collective bargaining that the other entities workers bring.
For franchisors, as well as employers that hired independent contractors and staffing agencies, Browning-Ferris exposed them to a world of liability. In what is perhaps the most massive example of post-Browning-Ferris litigation, the NLRB issued unfair labor practice charges against McDonalds that normally would have been limited to just its franchisees in six different cities. The fast food giant and the NLRB reached a settlement in March, but the administrative law judge rejected it in June, citing “conflicting statements” made by McDonalds in the negotiations.
Mark Nelson, vice chair of Polsinelli’s traditional labor relations practice in Denver, said that joint employer issues are a big deal in the construction industry also. General contractors often establish the work conditions of the site for subcontractors, including when they must show up and where to park. But under Browning-Ferris, general contractors are more likely to get pulled into UFL complaints and collective bargaining by its subcontractor’s employees, which for them introduces new concerns. “The general contractor doesn’t want to worry about the minutiae and the employment matters of the sub and its employees,” Nelson said.
Since 2015, congressional Republicans responded with bills to nullify Browning-Ferris and re-install the NLRB’s old joint employer standard. Most notably, the conservative NLRB under President Trump made an ill-fated attempt to reverse the Obama-era standard in decision it handed down at the end of 2017 in Hy-Brand Industrial Contractors. But in February, the board vacated that decision citing that one of its board members had a possible conflict of interest in hearing the case. The Browning-Ferris standard remains the NLRB’s law of the land.
But the new rule, if finalized, could change back the joint employer standard and with greater permanency than a board decision. The NLRB would consider an entity to be a joint employer “only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment [of the other entity’s workers] and has done so in a manner that is not limited and routine.”
“The board is saying that … ‘We’re expecting to see proof that a company that is hiring a contractor is actually getting involved in the day-to-day HR of the contractor,’” said Bill Berger, who practices labor and employment law from his solo Denver firm, LS2 Legal.
What is significant about the NLRB using the rulemaking process to attack Browning-Ferris is that if the rule goes through, it would likely require another rulemaking process, and not just another NLRB decision, to undo it, Berger said.
The rule itself is limited to matters related to the National Labor Relations Act, but based on the common law tradition, employers could see other federal agencies adopting the NLRB’s stricter interpretation of joint employers, Berger said. “When you have one of the agencies or courts come out with a proclamation like this … it has potential for a ripple effect.”
After Browning-Ferris, several agencies including the Equal Employment Opportunity Commission and the Occupational Health and Safety Administration have considered a broader definition of joint employer liability when enforcing their respective statutes. The ripple effect could move in the reverse after the NLRB rule ,with agencies led by a Trump-appointed official most likely to follow suit with a new directive, Berger said. “I think the Department of Labor and OSHA are right at the top of the list of agencies that are going to get told this is the new approach.” The EEOC, however, might be less likely to move back with the NLRB, he added.
Notably, the proposed rule contains language to suggest that the NLRB is seeking a joint employer standard that’s a bit tighter than the standard before Browning-Ferris. According to the rule, the NLRB wouldn’t find a joint employer relationship “where the degree of a putative joint employer’s control is too limited in scope (perhaps affecting a single essential working condition and/or exercised rarely during the putative joint employer’s relationship with the undisputed employer).”
Also, the rule qualifies that in order to be a joint employer, the entity has to exercise control over the other’s workers “in a manner that is not limited and routine.” Citing its decision in Flagstaff Medical Center, the rule’s supplementary information mentions that the board “generally found supervision to be limited and routine where a supervisor’s instructions consisted mostly of directing another business’s employees what work to perform, or where and when to perform the work, but not how to perform it.”
Nelson expects that even once the language gets ironed out in the rulemaking process, “the law will revert at least to what it was before Browning-Ferris.” Noting the proposed rule’s more restrictive phrasings, Nelson added that the NLRB might be trying to negotiate from a position of power by proposing a stricter joint employer standard than what preceded Browning-Ferris. That language might likely end up softened. “It would surprise me … to learn that the final rule is going to end up looking very close to what they published in rulemaking,” Nelson said.
The NLRB is now accepting public comments until Nov. 13.
— Doug Chartier