NLRB proposes rule to establish joint-employer standard

Blog PostSeptember 13, 2018

The National Labor Relations Board (NLRB) on Thursday released a proposed rule that would establish a standard for determining when companies can be held liable for labor law violations committed by subcontractors.

Under the proposal, a company would have to possess and exercise “substantial, direct and immediate control” over the hiring, firing, discipline, supervision and direction of another firm’s employees to be considered a joint-employer.

When a company is found to be in a joint-employer relationship, it can be forced to bargain with the jointly employed workers and sued for any unfair labor practices committed by the other employer, NLRB said.

The fight over joint-employer liabilities dates back to 2015 when the board, controlled by Obama administration appointees, overturned the previous standard in a case involving Browning-Ferris Industries Inc.

In that case, the board issued a more relaxed standard, finding that a company could  be considered a joint-employer if it has “indirect” control over the terms and conditions of another employer’s employees or has the “reserved authority to do so.”

From there, the rulings went back and forth.

When President Trump took office, he immediately appointed two members to the five-member NLRB to give it a 3-2 majority. The board then vacated the 2015 ruling in a case involving Hy-Brand Industrial Contractors Ltd. and resurrected the old standard, which required proof that an employer exercised “direct and immediate control” over another company’s workers.

But NLRB was forced to toss out the 2017 ruling a year later when the board’s ethics official determined that Trump appointee William Emanuel should have been disqualified from participating in the case.

NLRB said Thursday’s rulemaking aims to create more certainty and consistency when determining the status of joint employer businesses. A standard issued through rulemaking is considered stronger than a standard established by case ruling since those rulings can easily be overturned when the NLRB majority flips during the presidency of the opposing party.

Thursday’s proposal was met with praise from business groups and employer advocates.

“We applaud the NLRB chairman for working to clear up the confusion after the issue was turned upside earlier this year,” Alfredo Ortiz, president and CEO Job Creators Network, said in a statement. “The proposed rule should be adopted as soon as possible to protect small businesses from lawsuits brought by workers over whom they have no direct control.”

NLRB Chairman John Ring was joined by fellow Trump appointees Marvin Kaplan and William Emanuel in proposing the new standard. Board Member Lauren McFerran, who was appointed by former President Obama, dissented.

The rule will be open for public comment for 60 days.