The National Labor Relations Board published a Notice of Proposed Rulemaking last week in the Federal Register regarding its joint-employer standard.
At issue is an NLRB decision back in 2015 that expanded the definition of joint employer. Then, the NLRB ruled that a staffing firms’ workers at Browning-Ferris Industries’ recycling facility in Milpitas, Calif., were joint employees of both BFI and the staffing firm. The NLRB tried to change that decision last December in a test case, but that ruling was overturned after it was found one board member should have recused himself.
To be a joint employer under the new rule, a company must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine. The essential terms of employment include hiring, firing, discipline, supervision and direction.
“Joint-employer status can be significant for an employer,” according to a news analysis by law firm Little Mendelson. “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.”
Bloomberg Law reported the proposal by the NLRB would largely return to the definition before the 2015 President Obama-era decision and mean fewer businesses would be tagged as joint employers.
“The NLRB’s proposed rule seeks to restore longstanding principles on what establishes a joint employer relationship, which rightly center around direct and substantive control over work conditions of another business,” said Trey Kovacs, a labor policy analyst with the Competitive Enterprise Institute. “The proposed new standard will create greater certainty for businesses, which will allow employers to plan for the future and be confident in knowing what kinds of business-to-business arrangements will establish a joint employer relationship.”
Examples of how the new rule would operate are included in the federal notice.
In one, “Company A supplies labor to Company B. The business contract between Company A and Company B is a ‘cost plus’ arrangement that establishes a maximum reimbursable labor expense while leaving Company A free to set the wages and benefits of its employees as it sees fit.” Under this scenario, a staff buyer has not exercised immediate control over the employees’ wages and benefits.
However, in another case, “Company A supplies labor to Company B. The business contract between Company A and Company B establishes the wage rate that Company A must pay to its employees, leaving A without discretion to depart from the contractual rate.” In this instance, Company B has possessed direct control over wages.”