NLRB proposes rule to set joint-employer standard

The National Labor Relations Board, now dominated by Republicans, aims to resolve a three-year saga over the determination of joint-employer status with a proposed rule codifying a higher standard after multiple flip-flops between it and an Obama-era standard.

The board announced on Thursday it had approved a proposed rule that employers may be found to have joint status only if they possess and exercise control over a worker's regular terms of employment. Previously, the standard could be met by just the reservation of control over employment, exercised or not.

The latter standard was established in 2015 and called the Browning-Ferris standard, named for one of the companies involved in the case. In December 2017, that decision was overturned in Hy-Brand Industrial Contractors Ltd. And Brandt Construction Co., 365 NLRB No. 156 (2017), returning to the pre-Browning-Ferris standard for joint employers which is now a proposed rule.

"I think the question has been whether [the board] would address it in a decision or through rulemaking, because there have been signs pointing both ways," said Shannon D. Farmer of Ballard Spahr LLP. "This rule brings it more in line with what you would expect with joint employment, which looks factually at what you are doing rather than a theoretical."

In the Hy-Brand decision, the board called the Browning-Ferris standard a "distortion of common law," "contrary to the [National Labor Relations] Act," and "ill-advised as a matter of policy."

However, in February, the board vacated the Hy-Brand decision after finding William J. Emanuel, the tie-breaking voter, was conflicted and should have recused himself.

On May 9, Chairman John F. Ring announced his intent to settle the question via rulemaking.

Emanuel joined Chairman Ring and Board Member Marvin E. Kaplan in proposing the new rule. Board Member Lauren McFerran dissented.

While attorneys agree the rule's disposal of Browning-Ferris is unsurprising, their reactions to the decision vary.

"I think it was expected that this was going to occur. Once [Hy-Brand] got vacated, the thought was that ultimately, given the construction of the board, we're going to get back to this place that's consistent with that ruling through rulemaking," said Dana A. Kravetz of Michelman & Robinson LLP.

Employer-side attorneys welcome the clarity the rule provides and say the Browning-Ferris standard was too subjective. Worker advocates argue it allowed for the flexibility to hold joint employers responsible for wrongful practices.

"I don't think the proposed rule advances the purposes of the NLRA," said Melissa Grant of Capstone Law APC. "When a company effectively controls the working conditions and rules under which another's employees work, that company should be held accountable as their joint employer regardless of whether it exercises 'direct and immediate control' over the other's employees."

"I think that the changes that were made under Browning-Ferris made things a little bit difficult to interpret and understand because I think it was extremely expansive, and you had potential for liability for an employer who didn't really know what was going on," she said.

"Setting basic standards of employment opened you to joint employment," Farmer said.

Farmer brought up an example where an employer will no longer trigger joint liability for exercising non-regular control in cases of catastrophic job failure by a subcontractor.

"You don't make law out of the worst case scenario," Grant said, disagreeing with the rationale.

Ron Holland of McDermott Will & Emery said the ruling is worker- and employer-positive.

"The direct control standard brings back predictability. It gives employers control over whether they are employers, and it's good for workers because it protects them by making sure companies know who is responsible for what. Shouldn't you know who your employer is?" he said.

Attorneys on both sides agreed that the rule is a pendulum swing typical of the shifting political makeup of the board.

"This is the way the pendulum swings, depending on what administration is in power," Holland said.

Kravetz said because of the political divisions surrounding the issue, employers need to stay on their toes regardless of the immediate relief the new rule may provide them.

"You've got an Obama-era ruling that now, with the Trump administration, is going to fall by the wayside. I don't think employers should ever relax on issues like this, just as a function of the way it operates. You're always going to have these tensions," he said.