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Joint Employer Standard Shifts Again

On September 13, 2018, the National Labor Relations Board (NLRB) published a proposed rule regarding its joint-employer standard.  Under the proposed rule, an employer may be found to be a joint-employer of another employer’s employee only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment.  The purpose of the proposed rule is to roll back the Browning-Ferris Industries decision which will be discussed below.

Why is the proposed rule so important for employers?  If an employer is found to be a “joint employer”, it may become liable under various laws such as the National Labor Relations Act (NLRA), the Fair Labor Standards Act (FLSA), the Occupational Safety and Health Act (OSHA), state-specific employment laws such as workers’ and unemployment compensation, and Title VII of the Civil Rights Act.  In recent years, both state and federal agencies have attempted to broaden the joint employer relationship.

For decades, the joint employer standard required that two employers were joint employers only if they shared and exercised the ability to control or co-determine matters governing the essential terms and conditions of employment, such as hiring, firing, discipline, wages, supervision and direction of work activities.  The control had to be “actual, direct, and substantial”, not merely possible.  But in September of 2014, the National Labor Relations Board issued a decision in the Browning-Ferris Industries case stating that two companies are joint employers if there is an employment relationship with the employees in question (such as temporary employees) and the alleged or putative joint employer possessed “reserved authority” to control the terms and conditions of employment.  In other words, the employer did not have to actually exercise control over the terms and conditions of employment but merely retaining authority to do so found in a contract, or through a third party, was sufficient.  The immediate impact on the parties in the Browning-Ferris was that the temporary employees could unionize.  However, the broader impact of the expansion of the Browning-Ferris liberal joint employment standard meant that an employer could be held liable for violation of various employment laws and incur significant risk of liability even if it did not actually exercise any control over the employment activity.

The proposed rule would roll back the Browning-Ferris and return the definition of joint employment to the prior standard.  This proposed rule, if adopted, will foster predictability, consistency, and stability in the determination of joint-employer status.  The National Labor Relations Board will accept public comment on the proposed rule until November 13, 2018.  Electronic comments may be submitted at http://www.regulations.gov.

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