NLRB Proposes New Joint Employer Standard

On September 6, 2022, the National Labor Relations Board (NLRB) issued a notice of proposed rulemaking, alerting the public of its newly proposed standard for determining joint-employer status.

Joint-employer status, for purposes of the National Labor Relations Act (NLRA), occurs when two employers share some level of control over the essential terms and conditions of an employee’s employment. Over the years, the joint-employer standard has been hotly debated, and the level of control required to satisfy the joint-employer rule has changed frequently. Although the standard is constantly changing, employers should be aware of any updates to the joint-employer standard because any entity that is considered to be a joint employer could share liability for violations of the NLRA.

In 2015, an employee-friendly, joint-employer rule took effect. The 2015 Browning-Ferris decision overturned 40 years of labor law precedent and outlined a new joint-employer standard. An employer was considered to be a joint employer if the employer had either a direct or indirect contractual right to control any terms and conditions of an employee’s employment. (See Browning-Ferris Industries of California. Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 (2015) (BFI).

The Board identified a non-exhaustive list of essential terms and conditions of employment that an employer must exert control over to be considered a joint employer. The 2015 standard was so broad that an employer would be considered a joint employer even if they only exercised indirect control over an employee’s working conditions.

In 2020, the Board adopted a more employer-friendly version of the joint-employer standard, replacing the former joint-employer rule and overturning Brown-Ferris. Under the 2020 rule, an employer was considered a joint employer if the employer shared or codetermined the employee’s essential terms and conditions of employment. In contrast to the previous rule, the Board would no longer consider indirect control over an employee’s essential terms and conditions of employment when determining joint-employer status.

Moreover, the list of essential terms and conditions of employment was now an exhaustive list, as opposed to the previous open-ended list. The new list included wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. Under the 2020 test, it was less likely that an employer would be considered a joint employer and held responsible for any violations of the NLRA because the Board required that an employer exercise “substantial direct and immediate control” over the essential terms and conditions of an employee’s employment.

The NLRB’s newly proposed 2022 rule recommends rescinding the 2020 joint-employer rule and replacing it with a less demanding legal standard that reflects common-law agency principles. According to the Board, “[t]he proposed changes are designed to explicitly ground the joint-employer standard in established common-law agency principles and provide relevant guidance to parties covered by the [NLRA] regarding their rights and responsibilities when more than one statutory employer possesses the authority to control particular employees’ essential terms and conditions of employment.”

Under the proposed rule, an employer would be considered a joint employer if the employer “shares or codetermines those matters governing employees’ essential terms and conditions of employment.” The Board defines “share or codetermine” to mean “for an employer to possess the authority to control (whether directly, indirectly, or both), or to exercise the power to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” Thus the “authority to control” – whether indirect or unexercised – would now again be enough to find joint-employer status. 

Among the various pro-employee changes to the proposed rule, the Board would now consider both direct and indirect evidence of an employer’s control, as well as evidence of an employer’s unexercised control over an employee’s essential terms and conditions of their employment.

Furthermore, the non-exhaustive list of essential terms and conditions of employment has been expanded to include, “wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or method of work performance.”

The Board intended the list to be broad enough to cover changing circumstances in the workplace, as well as differences based on industry or an employee’s occupation. For the first time, the list includes workplace health and safety as an essential function.

Although the joint-employer standard is only in the proposal stage, if the rule becomes a final rule, there could be significant consequences for employers. In particular, the proposed standard would affect employers who regularly work with contractors and temporary staffing agencies, as well as employers in the franchising industry.

If the Board considers an employer to be a joint employer under the NLRA, the employer would be required to bargain with any union representing the workers at issue and could be potentially liable for unfair labor practices. Both employers in a unionized setting could face work stoppages, picketing, and other forms of economic pressure from a union in any labor dispute. 

The Board is currently accepting input related to the proposed joint-employer standard from members of the public. Comments must be submitted on or before November 7, 2022.

Calfee, Halter & Griswold LLP, founded in 1903, is a full-service, corporate law firm with attorneys located in Cleveland, Columbus, Cincinnati, Indianapolis, New York, and Washington, D.C. For additional information on this topic, contact the authors listed at the end of the original article on Calfee’s website.