The National Labor Relations Board (“NLRB”), the federal agency that enforces the National Labor Relations Act (“NLRA”), has proposed a change to the Trump-era joint employer standard currently applied by the NLRB. The change to the joint employer standard, if adopted, would have a significant impact on all employers as the NLRA is applicable to both unionized and non-unionized businesses. Here are the details.
The Old Rule
As we explained in a previous blog post, the NLRB had long held that in order for an organization to be considered a joint employer with another entity of a worker or group of workers, the organization had to actually exercise regular control over important aspects of the workers’ wages and working conditions. In 2015, the Obama-era NLRB reversed that decades-long precedent in its Browning-Ferris Industries decision. In Browning-Ferris Industries, a temporary agency provided in-house sorters and cleaners to a recycling facility. The temporary agency employed supervisors to oversee these workers, had the sole authority to discipline and hire these workers, and set their wages. The recycling facility, however, required that the temporary agency workers pass a drug test and reserved the right to reject any worker provided by the temporary agency. Despite this diminished power and lack of direct control, the Board held that the recycling facility was a joint employer of the employees because it merely possessed the authority to control employees’ terms and conditions of employment, either directly or indirectly, even if they did not choose to exercise that authority. Thus, the Board held that even though an organization may not have actually exercised any direct control over another entity’s employees, it could still be a joint employer if it had the authority to do so, such as under the terms of a contract with a temporary agency, as was the case in Browning-Ferris Industries.
As we wrote back in 2018, The Trump-era NLRB proposed a rule that later took effect (and is currently in effect) to change the joint employer standard back to the pre-Browning days; specifically, that to be a joint employer, an entity must possess and exercise substantial direct and immediate control over one or more essential terms or conditions of employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees. In short, authority to exert direct control standing alone was not enough to prove a joint employer relationship after the Trump-era NLRB rule took effect. This rule change meant that entities were less likely to be joint employers of employees under the NLRA.
The Proposed Rule
The Trump-era joint employer standard could be short lived, as the NLRB under the Biden administration has proposed a new rule. The NLRB’s new proposed rule would return the joint employer standard to the standard articulated in Browning. According to the proposed rule:
“Whether an employer possesses the authority to control or exercises the power to control one or more of the employees’ terms and conditions of employment is determined under common-law agency principles. Possessing the authority to control is sufficient to establish status as a joint employer, regardless of whether control is exercised. Exercising the power to control indirectly is sufficient to establish status as a joint employer, regardless of whether the power is exercised directly. Control exercised through an intermediary person or entity is sufficient to establish status as a joint employer.”
In other words, if the rule is codified, the mere option to exercise control, even if it is never exercised, is enough to find that an organization is a joint employer of another entity’s employees under the NLRA.
Takeaways
The NLRB’s proposed rule would make it easier for employees (and the NLRB) to establish a joint employer relationship between two entities. This is concerning for a number of reasons. A joint employer of employees in a union must participate in collective bargaining over their terms and conditions of employment. If it is questionable whether an entity is a joint employer of union employees, it will make it dangerous for that entity to not participate in collective bargaining, or face action before the NLRB for not participating in the collective bargaining process. Secondly, picketing by union employees directed at a joint employer that would otherwise be unlawful if the entity was not a joint employer, would now be lawful. Finally, the NLRB may find each business comprising a joint employer jointly and severally liable for the other’s unfair labor practices. This would mean that an unwitting employer could suddenly be subject to another employer’s unfair labor practices, subject to legal picketing and to a collective bargaining obligation.
The proposed rule is not yet final. The NLRB is seeking public comment on the proposed rule. Comments may be submitted online through http://www. regulations.gov or by mail or hand delivery to: Roxanne Rothschild, Associate Executive Secretary, National Labor Relations Board, 1015 Half Street SE, Washington, DC 20570-0001. All comments must be received by the NLRB by November 7, 2022 and comments replying to comments submitted during the initial comment period ending November 7, 2022 must be received by the NLRB on or before November 21, 2022.