NLRB's Proposed New Rule Would Limit Joint-Employer Status

Notice of the National Labor Relations Board’s (NLRB) highly anticipated proposed new rule on establishing joint-employer status under the National Labor Relations Act (NLRA) was published in the Federal Register on September 14, 2018 (and is available here).

The proposed new rule — an expected result of President Trump’s appointment of John Ring as NLRB chair — is widely considered “employer-friendly,” as it makes it more difficult to establish joint-employer status than the current Browning-Ferris standard.

Under the proposed rule, an employer may be found to be a joint-employer only if it “possess[es] and actually exercise[s] substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.” Indirect influence and contractual reservations of authority would be insufficient to establish a joint-employer relationship. The proposed rule includes examples of what would constitute direct and immediate control over essential terms and conditions of employment.

The NLRB expressed that its preliminary view is that:

• The proposed rule is consistent with the “Act’s purposes of promoting collective bargaining and minimizing industrial strife” by imposing “bargaining obligations on putative joint employers that have actually played an active role in establishing essential terms and conditions of employment”;
• The “Act’s purposes would not be furthered by drawing into an employer’s collective-bargaining relationship, or exposing to joint-and-several liability, a business partner of the employer that does not actively participate in decisions setting unit employees’ wages, benefits, and other essential terms and conditions of employment”;
• “Absent a requirement of proof of some ‘direct and immediate’ control to find a joint-employment relationship, it will be extremely difficult for the Board to accurately police the line between independent commercial contractors and genuine joint employers.”
• “The proposed rule will provide greater clarity to joint-employer determinations without leaving out parties necessary to meaningful collective bargaining.”

The NLRB also asserts that the proposed rule is consistent with the common law of joint-employer relationships.

The NLRB’s joint-employer standard has been in flux ever since the 2015 Browning-Ferris decision reversed longstanding precedent and set forth a lower standard for establishing joint-employer status. Under Browning-Ferris, joint-employer status may be found where a putative joint employer has reserved authority to exercise direct or even indirect control over the primary employer’s employees, but has never actually exercised such authority. 

In 2017, the NLRB in Hy-Brand Industrial Contractors, Ltd had overruled the Browning-Ferris Industries decision by a vote of 3-2, but the Hy-Brand decision was subsequently reversed and vacated after a finding that a potential conflict of interest by one of the NLRB members had tainted the vote.

Under Hy-Brand, a finding of joint-employer status required proof that the putative joint employer have actually exercised joint control over essential employment terms, and the control must be “direct and immediate.” Accordingly, the proposed new rule is aligned with the Hy-Brand standard.

Member Lauren McFerran who was in the majority of Browning-Ferris and in the dissent in the first Hy-Brand decision, wrote a dissenting opinion.

Public comments may be submitted within 60 days of the notice’s publication (i.e. November 13, 2018). 

To learn more about the NLRB’s proposed new rule, please contact:

• Joanne J. Romero
• Kristin Klein Wheaton
• Peter J. Woo
• Caroline J. Berdzik
• Or another member of the Goldberg Segalla Employment and Labor Practice Group