NLRB Reverts Back to Unworkable Joint-Employer Test

Guest Blog By Steven Loewengart, Managing Partner, Fisher Phillips

Earlier this week, in what employers hope is just a temporary – but stinging – setback, the National Labor Relations Board (NLRB) vacated its December ruling that freed employers from having to deal with an unworkable and expansive legal test for determining whether an entity is considered a “joint employer.”

Brought about by allegations that one of the NLRB’s three-member majority was ethically compromised due to his former law firm’s involvement in a related case, this decision brings the joint-employer test back into play – at least for now.

A History of the Joint-Employer Test

For 30 years, the NLRB held that two companies could only be considered joint employers if they shared or codetermined matters governing the essential terms and conditions of employment. Under this standard, an employer was held to be jointly employing workers only if it actually exercised the right to control. Moreover, the exercise of such control must have been direct, immediate, and not limited or routine.

However, the NLRB scrapped this standard in a controversial August 2015 ruling against Browning-Ferris Industries that no longer required an employer to actually exercise control. Instead, the NLRB decided that, in order to be considered a joint employer, a business must only retain the contractual right to control – even if it has never exercised it. Further, it held that indirect control, such as through an intermediary, would instead be sufficient to find joint employment.

Back to Square One

Late last year, the NLRB effectively overturned Browning-Ferris in the Hy-Brand Industrial Contractors, Ltd. case, reverting to the old standard for determining joint-employer status – but, unfortunately, this win for employers was short-lived.

One of the NLRB’s three-member majority, William Emanuel, was alleged to have been ethically compromised due to his former law firm’s involvement in the pivotal Browning-Ferris case from 2015. As a result, the NLRB has since been pressured to take action and wipe the Hy-Brand decision from the books.

Earlier this week, the NLRB vacated that decision, concluding that the legal standard re-adopted by the Hy-Brand case is now without force or effect – meaning the Browning-Ferris criteria for determining joint-employer status is once again law of the land.

What This Means for Employers

Under this new standard, an employer does not need to actually exercise control over third-party employees in order to be considered a joint-employer. Instead, a business must only retain the contractual right to control – even if it never exercises it. Moreover, even indirect control, such as through an intermediary, is now sufficient to find joint employment. This resurrected standard also includes control over any term or condition of employment, and is not limited to an exclusive list of factors.

As a result, any employer retaining the right to impose even indirect control over the working conditions of temporarily placed employees runs the risk of being deemed their joint employer – not only for bargaining purposes, but potentially even for unfair labor practice liability. It’s also likely unions will consider targeting temporary employees with promises of “regular” status and all the perceived perks that come with it in an effort to secure their signatures – and, ultimately, their votes – for organizing benefits.

It’s hard to say how long this will last. The NLRB will likely regain a five-member panel in the near future, as the Senate is currently scheduled to vote on Trump nominee John Ring on March 7. If confirmed, the NLRB would once again have a three-member majority and be free to continue its efforts of restoring balance to the nation’s labor law.

Most likely, the NLRB will attempt to identify a new joint-employment case that serves as a vehicle to scrap the unworkable joint-employer test. Other possibilities are that Emanuel’s name could be cleared by the pending investigation into his role in the case, or a federal appeals court could take matters into its own hands by overturning the Browning-Ferris case. If either occurs, the Hy-Brand standard would be effectively restored.

As it stands, employers and temporary service providers will need to once again scrutinize the parameters within their written service agreements, as well as their underlying practices, for any reference to right to control. This includes an analysis of pre-employment qualification and hiring standards, assignment and retention of individual temporary employees, shift schedules, workload and pace of work, and wages and benefits.

Although the total elimination of many of these factors may be impractical, employers can at least develop and preserve viable arguments against imposition of joint-employer status by minimizing their presence to the extent possible.

Steven Loewengart is regional managing partner at the Columbus office of Fisher Phillips, a national management-side labor and employment law firm.