NLRB proposes rule to establish joint-employer standard

The National Labor Relations Board (NLRB) on Thursday released a proposed rule that would establish a standard for determining when companies can be held liable for labor law violations committed by subcontractors.

Under the proposal, a company would have to possess and exercise “substantial, direct and immediate control” over the hiring, firing, discipline, supervision and direction of another firm’s employees to be considered a joint-employer. The rule further states that control can’t be limited or routine.

{mosads}When a company is found to be in a joint-employer relationship, it can be forced to bargain with the jointly employed workers and sued for any unfair labor practices committed by the other employer, NLRB said.

The fight over joint-employer liabilities dates back to 2015 when the board, controlled by Obama administration appointees, overturned the previous standard in a case involving Browning-Ferris Industries Inc.

In that case, the board issued a more relaxed standard, finding that a company could  be considered a joint-employer if it has “indirect” control over the terms and conditions of another employer’s employees or has the “reserved authority to do so.”

From there, the rulings went back and forth.

When President Trump took office, he immediately appointed two members to the five-member NLRB to give it a 3-2 majority. The board then vacated the 2015 ruling in a case involving Hy-Brand Industrial Contractors Ltd. and resurrected the old standard, which required proof that an employer exercised “direct and immediate control” over another company’s workers.

But NLRB was forced to toss out the 2017 ruling a year later when the board’s ethics official determined that Trump appointee William Emanuel should have been disqualified from participating in the case.    

NLRB said Thursday’s rulemaking aims to create more certainty and consistency when determining the status of joint employer businesses. A standard issued through rulemaking is considered stronger than a standard established by case ruling since those rulings can easily be overturned when the NLRB majority flips during the presidency of the opposing party.

Thursday’s proposal was met with praise from business groups and employer advocates like the International Franchise Association (IFA) that have been fighting the Browning-Ferris standard.

IFA has long argued that the Browning-Ferris ruling would make franchisors joint-employers with their franchisees. A case against McDonald’s over whether it can be held liable for the labor law violations of its franchisees is still being litigated. An NLRB administrative law judge rejected a proposed settlement from McDonald’s that would have allowed it to avoid the joint-employer designation in July, Reuters reported.

In a statement Thursday, Alfredo Ortiz, president and CEO Job Creators Network, said the new NLRB rule will “clear up” confusion when the joint-employer standard was turned upside down earlier this year.

“The proposed rule should be adopted as soon as possible to protect small businesses from lawsuits brought by workers over whom they have no direct control,” Ortiz said.

But some employees rights groups say the new rule looks even narrower than the standard NLRB tried to set in 2017.

“It worries us,” said Catherine Ruckelshaus, general counsel at the National Employment Law Project. “It even feels like it’s going to be narrower than the statute would require. We’re going to look at that very closely.”

Ruckelshaus said she was also concerned that the proposed rule refers to the joint-employer standard as one of the “most important issues in labor law today.”

“I think that’s a broad overstatement since there are so few cases,” she said. “It’s clearly an important issue for some employment groups, but not a broad problem in labor law now.”

Ruckelshaus said NELP is still reviewing the rule.

NLRB Chairman John Ring was joined by fellow Trump appointees Marvin Kaplan and William Emanuel in proposing the new standard. Board Member Lauren McFerran, who was appointed by former President Obama, dissented. The board has one vacancy.

The rule will be open for public comment for 60 days.