On September 6, 2022, the National Labor Relations Board (NLRB) proposed a rule on joint-employment that entities would be joint employers if they “share or co-determine” essential job terms, i.e., wages, benefits, and other compensation, even if one party wields only “reserved” or “indirect” control. This proposed rule would replace the April 27, 2020 rule, which required proof of “direct and immediate” control over workers for an entity to be considered an employer.
The NLRB’s proposed rule reportedly has the goal of easing organizing and collective bargaining agreements for staff, franchising, and other workers with ties to multiple employers. However, there could be significant downsides for employers. If two entitles are joint employers under the National Labor Relations Act, both must bargain with unions that represent jointly employed workers, which means both entities are subject to the pressures of union disputes, and both are potentially liable for unfair labor practice charges committed by the other. This standard reverts to the expansive definition of joint employer discussed under Browning-Ferris Industries of California, Inc., 362 NLRB 1599 (2015).
When a company contracts with a business and retains an ability to exercise even a marginal level of oversight in administering the services of the work of that business’s employees under the contract, the company would be subject to joint employer status under the NLRB’s proposed rule. For example, the NLRB proposed rule describes “evidence that a putative joint employer communicates work assignments and directives to another entity’s managers or exercises ongoing oversight to ensure that job tasks are performed properly” as the type of indirect control over terms and conditions of employment that may constitute joint employer status under its new standard. See Proposed Rule § 103.40(e), 87 Fed. Reg. 54,650.
Even though the proposed rule states that “common law” principles of agency will be relied on to determine if a joint employer relationship exists between two employers, the lack of guidance on the NLRB’s intended application of such principles should be concerning to all businesses who regularly engage vendors for contracted services. Rather, the NLRB’s current proposal demonstrates the agency’s intent is to shift its focus onto an analysis that turns on whether a business contracting for services has any reserved power or rights of oversight relative to the vendor’s employees performing those services.
While this is only a proposed rule currently, companies with a regular practice of contracting for services as part of their day-to-day business should familiarize themselves with how a change back to a broader definition of joint employment under Browning-Ferris Industries (2015) would affect their operations and business model. We encourage businesses with concerns over this proposed rule to submit comments to the NLRB with well supported examples of how the proposal would impact business operations if adopted, which would show the overbreadth of the NLRB’s joint employment proposal. Such suggestions could assist in mitigating the effect of the NLRB’s final rule by establishing what are “routine components” of service contracts and not material to determining whether an employment relationship exists under common-law agency principles. See 87 Fed. Reg. 54,651. Comments to the NLRB’s proposed rule on joint employment are due by November 7, 2022, with subsequent reply comments due by November 21, 2022.
Should you have any questions about evaluating what the NLRB’s proposed rule means for your business or how you can submit comments to the proposed rule, please contact our office.
