Department of Labor aligns with NLRB in proposed joint employer rule.

The U.S. Department of Labor on Monday issued a proposed rule on the definition of joint employment that closely resembles one set forth by the National Labor Relations Board.

The decision is the latest in a series of steps to walk back an Obama-era effort to expand liability for companies for how contractors are treated, along with labor practices in franchises.

"This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections," Secretary of Labor Alexander Acosta said.

The proposed rule lays out four factors for determining employer control: hiring or firing, employment conditions such as scheduling, rate of pay, and maintenance of employee records.

Monday's decision was met with approval by attorneys who defend employers in worker actions.

Ron Holland of McDermott Will & Emery said the rule could bring much-needed clarity.

"If you're an employee you should know who your employer is, and if you're an employer you should know who your employees are," he said.

"Practically speaking, what it means is a lot of arrangements that could have been interpreted as joint employment now are not. This is clearly a narrower standard," said John Polson of Fisher & Phillips LLP.

Holland, Polson, and others added that attorneys and courts could cite the rule outside of Fair Labor Standards Act litigation. Examples provided by the department provide further clarity, and cover many of the big permutations of the issue, Polson said.

The department's rule mirrors one proposed last May by the National Labor Relations Board and it is just the latest in a turbulent recent history of the joint employment legal standard that has involved both agencies, Congress, NLRB Chairman John F. Ring and two U.S. circuit courts.

The Department of Labor stepping in, according to Daniel H. Handman of Hirschfeld Kraemer LLP, is notable.

"What they do is more quantitative," he said, "Changing the minimum wage or the salary minimum for overtime exemption is one thing. This is a much bigger deal. It means they're trying to change the way they do business in response to years of employer groups pushing for these types of changes."

The department's rule, like the National Labor Relations Board's, contravenes the Browning-Ferris standard, named for one of the companies involved in the 2015 board case that established it. That standard allowed reserved, unexercised control and indirect control to determine joint employment.

The Browning-Ferris standard was overturned in December 2017 under President Donald J. Trump's conservative board via another decision, reverting to one requiring exercised direct control. An internal investigation vacated that ruling in 2018, after which Ring announced a rule codifying the defunct decision, now closely echoed by Acosta's department.

Meanwhile, the original Browning-Ferris case worked its way up to the U.S. Court of Appeals for the District of Columbia Circuit, where it was upheld in December 2018 along with the test using indirect control. The decision warned the board "must color within the common law lines identified by the judiciary," drawing a defiant response from Ring, who asserted the court could only bind his agency on that specific case.

Two months later, the 9th U.S. Circuit Court of Appeals cited to the D.C. Circuit opinion in a similarly reasoned decision.

The fact the Department of Labor cited a 9th Circuit case for its four-factor test is no coincidence, Handman said.

"Routinely, the 9th Circuit is the most employee friendly circuit court in the U.S. They're sending a message that [the 9th Circuit] should be very cautious before trying to invalidate this test. I think this was a deliberate move," he said.

The department and the board took incongruent views of indirect control, however.

"The Department of Labor acknowledges that indirect action can still lead to joint employer findings, where the NLRB is nixing that analysis entirely," Holland said, and posited that the board's harder line could come from the greater deference it enjoys from the courts.

Polson said that while the department allowed for indirect control to play a part, the examples it laid out and the four-factor test effectively translate to requiring direct control.