Employer

NLRB’s Proposed New Standard for Co-Employers Warns Employers

The National Labor Relations Board (“NLRB”) has issued a Notice of Proposed Rulemaking, which would significantly change the standard for determining who is a “joint employer” under the National Labor Relations Act (“NLRA”) ). The proposed regulations seek to end what NLRB President Lauren McFerran described in the NLRB report. Press release as “a lot of uncertainty and litigation in recent years” surrounding the joint employer standard, and providing “a clear standard for defining joint employment that is consistent with applicable law”. This decision not only changes the previous understanding of the joint employer standard, but also indicates that the Biden administration is transforming into reality the President’s campaign promises to strengthen worker protections and unions, to reverse previous decisions. of the board and to restore the broad definition of joint employment. We have already discussed other recent actions taken by the NLRB in a previous blog post, which you can find here.

Background

First, it is worth taking a step back to consider how the Council arrived at this most recent version of the joint employer standard. The joint employer standard has generated a lot of interest for most of the past seven years, starting with the Commission’s decision in 2015 in Browning-Ferris Industries of California, Inc.362 NLRB 1599 (2015) (IBF), which held that employers were joint employers if they “shared or co-determined matters governing the essential terms and conditions of employment”, and further held that employers were not required to exercise effective control in order to constitute a joint employer, but only that they possessed the right of control, direct or indirect. The DC Court of Appeals later upheld parts of IBFbut directed the Council to reassess its application of indirect control within the framework of the joint employer investigation.

The Board in 2018 – now a different composition from 2015 – then issued a Notice of Proposed Rulemaking to establish a new co-employer standard, which proposed to revert to a pre-IBF standard requiring the employer to possess and effectively exercise direct and immediate substantial control over the terms and conditions of employment of employees in order to be considered a co-employer. The Board adopted this standard in February 2020, and it remains the standard of review to this day.

This proposed rule would supersede and replace the current co-employer standard, largely bringing the standard back to that set out in IBFand, according to the NLRB, “to base the co-employer standard on established principles of common law agency, consistent with Board precedent and directions the Board has received from the United States Court of Appeals for the DC circuit”.

With this relevant story in mind, we describe the proposed rule below.

The proposed new standard for joint employers

The proposed standard for joint employers would state that: “two or more employers of the same particular employees are the joint employers of those employees whether employers share or co-determine matters governing the basic terms and conditions of employment of employees(emphasis added). This would mark a significant departure from the current standard, which requires an employer to exercise “substantial direct and immediate control over the essential terms and conditions of employment of employees”.

The proposed standard would not require the employer to exercise power or control over the employee, but rather he must own authority control one or more of an employee’s terms of employment – ​​a distinction that illustrates the NLRB’s desire to base this standard on common law principles. Equally important, an employer with either or indirect control over one or more of the employees’ terms of employment could be considered a joint employer under the proposed rule, even if the employer exercises that control through an intermediary person or entity.

This proposal for a general standard includes other aspects that should be further detailed. First, the proposed rule defines “essential terms of employment” as a non-exhaustive list of subjects for negotiation, including, but not limited to: “wages, benefits and other compensation; working hours and schedule; hiring and firing; health and security at work; surveillance; assignment; and work rules and guidelines governing the manner, means or methods of work performance. While the non-exhaustive nature of this list is broader than the Commission’s current list – which includes only “wages, benefits, hours of work, hiring, firing, discipline, supervision and management” – it is unclear whether this proposed change will have a significant impact in practice. Second, and this is no different from the current norm, an employer need only possess the power to control or exercise the power to control “one or more” of these essential conditions of employment. Given the expanded list of terms and the emphasis on applying “common law principles over agency,” entities could be considered joint employers at an increasingly frequent rate.

Take away food

In practice, this rule, if adopted, could increase employers’ potential exposure, even where the link is tenuous, especially if the concept of what constitutes “indirect control” is not further clarified. It also significantly improves the risk profile when an employer enters into relationships with recruitment agencies or other third-party vendors, and in the franchisor-franchisee context.

That said, it is important to note that this is an opinion of offers regulation, which means that this rule is not yet final. We are still in the middle of the comment period where the Board will be receiving significant public comment. Additionally, it should also be noted that even if passed, this rule would only have an immediate impact on the definition of “co-employer” under the NLRA, not any other federal statute, such as the Fair Labor Standard Act or Title VII. Nonetheless, given the potential ramifications of this proposed rule, we will remain aware of any developments that arise during the notice and comment period, and provide updates accordingly.

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