NLRB Proposes Rule Returning to Pre-Browning-Ferris Joint-Employer Test

Last week, the National Labor Relations Board (NLRB) released a notice of proposed rulemaking and request for comments on a rule that would reverse course on a 2015 NLRB decision under the Obama Administration that created an unworkable joint-employer standard. This issue has had a bit of a convoluted history recently but is important for any industry that utilizes staffing agencies, franchise relationships, or other contractual work arrangements. For a complete history, please check out our previous blogs on this issue:

For 30 years, the standard to determine whether two separate entities would be considered joint-employers under the National Labor Relations Act (NLRA) was whether an employer actually exercised control over an employee. Simply retaining a contractual ability to do so was not enough. Further, the control exerted by the employer must be direct, immediate, and not limited and routine over an employee in order to find a joint-employment relationship. In 2015, the NLRB, in the now infamous Browning-Ferris Industries362 NLRB No. 186 (2015), decision, threw out this precedent by ruling that simply retaining a contractual ability to exercise control was sufficient and that indirect control, such as through an intermediary, was sufficient to establish joint employment.

This upended 30 years of established precedent by blurring the lines on when two separate businesses would be deemed joint-employers. This is extremely problematic for businesses utilizing a staffing company or those that use the franchise business model because both parties could be deemed joint employers for the purposes of unionization, collective bargaining, and defense of unfair labor practices. Further, there was some evidence that this standard was bleeding into other areas of the law as some courts and state regulators were looking at the decision for guidance when interpreting other laws.

In December 2017, a newly constituted NLRB under the Trump Administration overruled the Browning-Ferris decision in Hy-Brand Industrial Contractors, 365 NLRB No. 156 (2017), and reverted back to the previous test. This was short lived as the Hy-Brand decision was then vacated in February 2018 due to allegations of ethical issues surrounding one of the NLRB’s three-member majority due to his former law firm’s involvement in the original Browning Ferris case. In the meantime, there have been efforts at both the state level and federal level to pass legislation reinstating the previous joint-employer standard and bringing stability and predictability to this area of the law.

Now, the NLRB has released a draft rule that would finally take the joint-employer test back to the pre-Browning-Ferris decision standard. In order to be considered a joint employer, the draft rule would require that the employer possess and exercise substantial, direct and immediate control over the essential terms and conditions of employment and must do so in a manner that is not limited and routine. The NLRB is seeking comments on the proposed rule. Comments will be accepted until November 13, 2018 and can be submitted electronically by clicking HERE. After the comment period, the NLRB will review the comments and adjust the rule if it deems it necessary based on the comments.

The good news is that it appears employers many finally have some certainty on this issue—at least until a future administration and NLRB decides to change it. Therefore, there still needs to be legislative solutions at both the state and federal level to ensure long-term stability.