On May 9, the National Labor Relations Board (NLRB) announced its intention to clarify the joint employer standard by issuing a new rule. John Ring, the chairman of the NLRB, doubled down on June 5, saying the NLRB would take the first step toward issuing that rule – publishing a notice of proposed rulemaking (NPRM) – this summer. Franchises, construction companies and organizations that use temporary or contract labor eagerly await the notice and the rule, which could essentially reinstate the pre-Browning-Ferris joint employer standard.
How we got here
Prior to Browning-Ferris Industries, the NLRB relied on decades of legal precedent to set the joint employer standard. But in 2015, the NLRB switched course, and in Browning-Ferris Industries, declared direct and indirect control could be evidence of a joint employer relationship. Furthermore, the Board said a joint employment relationship could exist if one entity merely reserved the right to exercise control, instead of actually doing it.
In December 2017, to attempt to rein in what it perceived as a broad, vague standard, the NLRB essentially reestablished the pre-Browning-Ferris standard in Hy-Brand Industrial Contractors Ltd and Brandt Construction Co. However, in February 2018, due to an alleged conflict of interest, the Board reversed Hy-Brand, making Browning-Ferris the standard for joint employment once again.
But according to Ring, that will change soon.
A tale of two standards
To understand that change requires understanding the differences between the two standards: pre-Browning-Ferris and Browning-Ferris itself.
Pre-Browning-Ferris
According to the pre-Browning-Ferris joint employment standard, to be considered a joint employer, two entities must exercise immediate and direct control over essential matters of employment that are not routine or limited. For companies that use third party employers to supplement their workforce, that means you couldn’t directly send an employee who was not following safety protocol home, but you could ask the staffing agency or other third party employer to do it. You also could reserve the right to make drug testing part of your hiring requirements.
The pre-Browning-Ferris standard also held that limited and routine supervision was not enough to establish a joint employment relationship. So maintaining certain levels of productivity among contract laborers also could be possible without converting the company into a joint employer.
Browning-Ferris
On the other hand, the Browning-Ferris standard established that a joint employment relationship could exist if one entity actually exercised, or reserved the right to exercise, direct or indirect control.
If you had a policy on your books that allowed you to send any worker – including contract workers – home for any reason, it could be argued that is an example of reserving the right to exercise control. Under Browning-Ferris, that could be considered evidence of a joint employment relationship, even if you never actually sent a worker home.
Now, for example, say you are a franchisee and need advice from your franchisor on the best skills and competencies needed to find the right employees. Your franchisor’s feedback could be considered indirect control over an essential matter of employment – hiring – and as a result, evidence of a joint employment relationship.
What the new rule could look like
Based on the actions of the NLRB, it’s likely the rule will be practically identical to the pre-Browning-Ferris standard. The Save the Local Business Act provides another clue. On July 27, 2018, House Republicans introduced a bill that would amend the definition of “employer” used in labor law to essentially restore the pre-Browning-Ferris standard.
What that could mean for your business
If the new rule is identical to the pre-Browning-Ferris standard, franchisors and other organizations that have an indirect relationship with or that rely on third-party labor can breathe a little easier. It also could restore business’ ability to:
- allow some supervision of contracted or third party workers
- ask staffing companies to remove workers who are unqualified or won’t follow basic procedure
- set some hiring standards, like drug testing
- ask third party workers to comply with safety training
- share tools, insight and advice
What’s next
The NPRM should be published any day now. Once that happens, the NLRB will give the public time (usually 30, 60 or 120 days) to comment on the proposed rule. The NLRB may then take those comments into consideration to refine the rule. Once the NLRB has done that, the final rule will be published in the Federal Register.
Ultimately, it’s tough to tell when that process will begin or how long it will take once it’s started. But one thing is for certain: If the NLRB’s rule is identical to the pre-Browning-Ferris standard, businesses will have a little more leeway to manage anyone who works within their organization. And franchisors can provide more robust support for their franchisees.
Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.
