NLRB Issues Proposed Rule on Joint Employer Status

The National Labor Relations Board has been on a seesaw as to the standard to be used in determining joint employer status. In 2015, the board expanded the definition of a joint employer in the Browning-Ferris Industries of California decision (Browning-Ferris). Under Browning-Ferris, two entities would be deemed joint employers if one entity reserved the right to exercise control over essential terms of another entity’s employees. On Dec. 14, 2017, in Hy-Brand Industrial Contractors, Ltd. and Brand Construction Co. (Hy-Brand) the NLRB reversed Browning-Ferris. In that decision, the board held that two entities can be held to be joint employers if both employers have exercised joint control over employment terms and conditions rather than having reserved the right to control such terms and conditions.

On Feb. 26, 2018, the board vacated Hy-Brand after an NLRB Inspector General’s report found that a board member should not have participated in the decision because his former law firm represented one of the parties in Browning-Ferris. Therefore, the applicable standard was that described in the Browning-Ferris case.

The Republican-majority board has now decided to use rulemaking rather than caselaw to determine the joint employment standard. In the Notice of Proposed Rulemaking, the board stated that the proposed rules represent its “preliminary view” subject to revision based upon comments submitted in response to the proposed rules. The proposed rule provides that “there must exist evidence of direct and immediate control before a joint employer relationship can be found.” It is insufficient to find joint employer status where the alleged joint employer’s control is limited in scope and/or exercised rarely.

The proposed rule provides a dozen examples to illustrate when a joint employer relationship would or would not be found under the proposed rules. A few of these examples are:

• Company A supplies labor to Company B. The contract between Company A and Company B is a “cost plus” arrangement that establishes a maximum reimbursable labor expense while leaving Company A free to set the wages and benefits of its employees as it sees fit. Company B does not possess and has not exercised direct and immediate control over the employees’ wage rates and benefits and therefore there is not a joint employer.
   
• Company A supplies employees and supervisors to Company B at B’s manufacturing plant. Onsite managers employed by Company B regularly complain to A’s supervisors about defective products coming off the assembly line. In response to these complaints and to remedy the deficiencies, Company A’s supervisors decide to reassign employees and switch the order in which several tasks are performed. Company B has not exercised direct and immediate control over Company A’s employees’ essential terms and conditions of employment and no joint employer status exists.
   
• Company A supplies employees and supervisors to Company B at B’s manufacturing plant. Company B also employs supervisors onsite who regularly require the Company A supervisors to relay detailed supervisory instructions regarding how employees are to perform their work. Company B possesses and exercises direct and immediate control over Company A’s employees. The fact that Company B conveys its supervisory commands through Company A’s supervisors rather than directly to Company A’s employees fails to negate the direct and immediate supervisory control.
   
• Temporary Staffing Agency supplies nurses to Hospital to cover a temporary shortfall in staffing. Hospital manager reviewed resumes identified by Agency, participated in interviews of those candidates, and together with Agency managers selected the best eight candidates for hire. Hospital has exercised direct and immediate control over temporary nurses’ essential terms and conditions of employment.
   
• Under the terms of a franchise agreement, Franchisor requires Franchisee to operate Franchisee’s store between the hours of 6:00 a.m. and 11:00 p.m. Franchisor does not participate in individual scheduling assignments or preclude Franchisee from selecting shift durations. Franchisor has not exercised direct and immediate control over essential terms and conditions of employment of Franchisee’s employees.
   
• Under the terms of a franchise agreement, Franchisor and Franchisee agree to the particular health insurance plan and 401(K) plan that the Franchisee must make available to its workers. Franchisor has exercised direct and immediate control over essential employment terms and conditions of Franchisee’s employees.

Comments on the proposed rule must be received by the board on or before Nov. 13. After review and consideration of comments received from the public, the board will issue a final rule.