Franchise companies and businesses that rely on outsourced labor are keeping a close eye on the National Labor Relations Board’s proposal to broaden its legal test for determining whether one company jointly employs another’s workers.
The Democratic majority of the five-member NLRB issued a plan this week that would expand what factors can trigger a joint-employer finding beyond one business exerting direct and immediate control over another company’s employees. The new test would also take into account indirect and unexercised control.
The proposed rule would eliminate the stricter joint employment standard that an all-Republican NLRB issued in 2020. The two GOP members on the current board dissented from the proposal, saying it’s unnecessary to change the existing framework.
1. What is joint employment?
A business-to-business relationship that’s determined to be joint employment means that the companies involved share legal liability related to employees. Workplace laws for topics like wages, workplace safety, and anti-discrimination protections have their own tests for joint employment.
The NLRB administers the National Labor Relations Act, a New Deal-era law that governs labor-management relations in the private sector. Joint employers share liability for unfair labor practices as well as union bargaining obligations.
A looser legal test for joint employment is necessary to address the realities of the modern workplace, in which many companies use staffing agency workers and other contracted labor to perform various business functions, according to unions and worker advocates.
But industry groups warn that an overly broad standard can disrupt the business-to-business relationships on which those companies rely. The International Franchise Association has been especially critical of expanding the NLRB’s joint employer standard, calling the board’s latest proposal “yet another example of government officials stacking the deck against franchising, with small business owners and their employees paying the price.”
2. How does the NLRB enforce its joint employment standard?
The NLRB looks at the level of control that the putative joint employer has over the workers’ essential terms and conditions of employment, such as wages, benefits, scheduling, hiring, and discipline.
Although the board’s joint employment standard has been bitterly contested in recent years, the issue hasn’t been heavily litigated in individual cases. The NLRB has yet to apply the test it minted in February 2020.
The Obama-era NLRB general counsel’s office took a major swing with its sprawling joint employment case against
College sports could be the next major joint-employment battleground. NLRB General Counsel Jennifer Abruzzo has said she’ll explore issuing complaints against athletic conferences and colleges as potential joint employers.
3. Will the standard face legal challenges?
Board decisions applying the standard are subject to review by federal appeals courts, and the standard itself is likely to face a direct challenge.
The NLRB’s 2015 expansion of the joint employer test via its decision in Browning-Ferris Industries mostly survived a challenge at the US Court of Appeals for the District of Columbia Circuit. The Service Employees International Union sued to block the board’s narrowed 2020 standard, but that case was paused in light of the board’s ongoing rulemaking.
The NLRB cited elements of the DC Circuit’s Browning-Ferris decision to back its proposal to broaden the standard. But the dissenting Republican board members argued that it goes beyond the common-law principles for employment and runs afoul of the Administrative Procedure Act’s requirements for rulemaking.
4. What’s next for the NLRB’s proposal?
The NLRB traditionally sets labor law policy through decisions in individual cases. But the Trump-era board used the regulatory process to set a new joint employment standard, so the current board must also engage in rulemaking to change that legal framework.
Industry groups, unions, and other members of the public can file comments on the board’s proposal until Nov. 7. The board received nearly 29,000 comments as part of its last joint employer rulemaking, according to Regulations.gov.
The NLRB must review the input and address criticism in the preamble to its final rule. While it’s a time-consuming process—the board took more than a year to publish its last joint employer rule after receiving comments in 2018—failure to respond to comments can leave the agency more vulnerable to a legal challenge for acting too hastily.
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