December 15, 2022 NLRB Proposes New Joint-Employer Standard

Joint-employer status may expand to more workers (individuals working via a staffing agency) affecting both union and union-free workplaces.

By Meryl Cowan & Joe Barnello

The National Labor Relations Board (“Board”) has proposed a rule that will potentially expand joint-employer status to many workers, for example, those working at manufacturing facilities via a staffing agency. This proposed rule is a potential development both unionized and union-free workplace should closely monitor, especially as many in the manufacturing sector increasingly rely on third-parties to address ongoing labor shortages.

Joint-Employer Doctrine under the National Labor Relations Act (“NLRA”)

Under the joint-employer doctrine, an individual may be considered an employee of an entity that is not the individual’s formal employer. If a company is a joint employer under the NLRA, then it could be (1) held liable for the unfair labor practices of the other joint employer; (2) required to collectively bargain about the terms and conditions of employment it jointly controls; and (3) more likely subject to lawful picketing. Thus, the question becomes: when do multiple employers become “joint employers” under the NLRA?

Recent Shifts

The joint-employer standard under the Act has changed multiple times over the past seven years. The recent shifts began with the Board’s decision in Browning-Ferris Industries of California, Inc., d/b/a BFI v. Newby Island Recyclery, 362 NLRB 1599 (2015) (“BFI”), which revised the traditional rule cemented in the 1980s. In BFI, the Board replaced the requirement that an entity actually exercise “direct and immediate control” over essential terms and conditions of employment. Instead, under the BFI standard, reserved authority and indirect control over essential terms and conditions were sufficient to create a joint-employer relationship.

In 2018, the Board reversed course and proposed a rule that rejected the principles expressed in BFI. That proposal — which essentially returned the standard to the traditional rule cemented in the 1980s — was promulgated by the Board on February 26, 2020, became effective on April 27, 2020, and remains the current standard for determining joint-employer status. To be a joint employer under the current rule, an entity must possess and actually exercise substantial direct and immediate control over essential terms and conditions of employment. Further, the current rule provides an exhaustive list of “essential terms and conditions of employment” that the Board analyzes: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

Proposed Changes

On September 6, 2022, over the dissent of two members, the Board issued a notice of proposed rulemaking (“NPRM”) that again seeks to change the joint-employer standard and in effect revert to the BFI standard. For instance, the proposed rule would merely require authority to control one or more essential term and condition of employment (also referred to as reserved control), in contrast to actually exercising that authority. The proposed rule would also elevate indirect control over essential terms and conditions of employment from being probative (and merely supplemental to direct and immediate control) to sufficient for establishing a joint-employer relationship.

Additionally, the proposed rule expands the categories of essential terms and conditions of employment. The proposed rule lists: wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rule and directions governing the manner, means, or methods of work performance. Notably, under the proposed rule, this list of categories is non-exhaustive. In other words, the Board could add categories on a case-by-case basis.

Take Action

The Board is seeking public comment on all aspects of the NPRM, which can be found in the Federal Register published on September 7, 2022. The Board has extended the public comment period to December 7, 2022.

Employers should prepare for the NPRM to take effect. This preparation includes reviewing contracts with staffing agencies and other entities, as well as your company’s policies and practices for individuals that work at your facilities but are not your employees. Even if you never actually exercise control over an essential term and condition of employment, if your contract with a staffing company merely reserves the right to control one of those non-exhaustive categories (i.e., wages, work schedule, discharge, discipline, health and safety, supervision, assignment, and rules regarding work performance), then you may be deemed a joint employer of that individual. Additionally, if a company’s goal is to avoid joint-employer status, then it should consider updated training for supervisors and management on their relationship with individuals from staffing agencies.

Now is also a good time to assess whether your company wants to be able to reserve control over certain employment decisions, potentially be liable for a joint employer’s unfair labor practices under the NLRA or be required to collectively bargain regarding the terms and conditions you jointly control.

Meryl Cowan is an attorney at Burr & Forman LLP, where she practices in the Labor & Employment practice group. She may be reached at mcowan@burr.com.

Joe Barnello is an attorney at Burr & Forman LLP, where he practices in the Labor & Employment practice group. He may be reached at jbarnello@burr.com.

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