The National Labor Relations Board (the NLRB or Board) has issued a proposed rule revising the test for whether two employers are considered “joint employers” under the National Labor Relations Act (NLRA).  The proposed rule, scheduled to be published in the Federal Register on September 14, 2018, is open for public comment through November 13, 2018. Comments can be submitted via hard copy or electronic filing at www.regulations.gov.

This proposed rule would make clear that an employer will be considered a joint employer of a separate company’s employees only where that employer possesses and exercises “substantial direct and immediate control” over the essential terms and conditions of employment (such as hiring, firing, discipline, supervision, and direction) of the second company’s employees.  Even where an employer exercises direct control over another employer’s workers, it will not be held to be a joint employer if such control is “limited and routine.”

Joint-employer status can be significant for an employer.  A joint employer may be required to bargain with a union representing jointly employed workers; can be subject to joint and several liability for unfair labor practices committed by the other employer; and may be subject to labor picketing that would otherwise be unlawful.

The proposed rule would reverse the NLRB’s 2015 Browning-Ferris Industries of California, Inc. decision, which dramatically expanded the definition of joint employer and categorized many more independent companies as joint employers, upending years of precedent.  Under Browning-Ferris, two entities are deemed joint employers based on the mere existence of reserved joint control, indirect control, or control that is limited and routine.  This contrasts starkly with the prior standard, which required the putative joint employer to exercise actual control over essential employment terms, with such control being “direct and immediate.”  The Browning-Ferris decision drastically increased the universe of potential joint employers and was the subject of intense negative scrutiny, including congressional hearings geared toward overturning the decision.  The validity of the Browning-Ferris standard is currently being litigated before the U.S. Circuit Court of Appeals for the District of Columbia.

In the proposed rule, the Board explained its view that setting a standard via rulemaking (rather than via case-by-case adjudication) is desirable.  As the Board explained, the rulemaking process allows interested parties with experience in a wide range of complex employment relationships to have input on proposed changes, allows the NLRB to clarify what constitutes joint-employer status under various hypothetical scenarios, and allows employers, unions and employees to structure their businesses free of legal uncertainty and the possibility of sudden change through the adjudicative process.

In 2017, the Board reversed Browning Ferris in the case of Hy-Brand Industrial Contractors, Ltd., but that decision was subsequently withdrawn for reasons unrelated to the substance of the joint-employer issue.

Three of the four current members of the Board have approved the proposed rule.  Board Member Lauren McFerran, who joined the majority ruling in Browning-Ferris and is presently the lone Democrat on the Board, dissented.  McFerran stated, “[t]here is no good reason to revisit Browning-Ferris, much less to propose replacing its joint-employer standard with a test that fails the threshold test of consistency and that defies the stated goal of the National Labor Relations Act: ‘encouraging the practice and procedure of collective bargaining.’”

Starting September 14, 2018, the Board will accept comments from any parties wishing to opine on the propriety of the proposed rule.  The comment period will be open for 60 days.  The Board will also permit parties to submit replies to comments provided that such replies are lodged with the NLRB within seven days after the expiration of the 60-day comment period, or by November 20, 2018.

After the Board receives and reviews the comments and replies submitted, it will issue a final rule regarding the joint employer standard that addresses main arguments and issues raised in the comments and replies.  In most instances, final rules become effective within 30 days after publication of the final rule in the Federal Register.