On September 6, 2022, the U.S. National Labor Relations Board (the “Board”) said “Happy Labor Day” to employers with a proposal to revive the employee-friendly, Obama-era standard of joint employment under the National Labor Relations Act (the “NLRA”). Under the proposed standard, one company may be deemed a joint employer of a second company’s employees where it exercises – or reserves – even indirect control over the employees’ “essential terms and conditions of employment.”

Background

The joint-employer standard has been one of the most contested topics addressed by the Board, with the Board’s interpretation shifting every few years based on its political composition.

In 2015, the Board issued Browning-Ferris Industries of California, Inc., which evaluated joint-employer status based on whether the entities “share or codetermine those matters governing essential terms and conditions of employment.” 362 NLRB 1599 (2015) (hereinafter “BFI”). Under the BFI standard, joint employers may include entities who indirectly affected employees’ terms and conditions of employment or those employers who reserved the right to control – but did not actually exercise that right.  Before BFI, the putative joint employer had to exercise actual, direct and immediate control over essential employment terms.

In February 2020, the Board issued a “final” rule reinstating the previous standard. As of February 2020, employers needed only to fear joint-employer status where the company exercised substantial direct and immediate control over the essential terms and conditions of another company’s employees. The rule became effective in April 2020, and remains the controlling legal standard.

The Proposed Rule

The Board’s proposed rule seeks to reinstate the BFI “indirect, reserved” control standard and “rescind errors made in the 2020 final rule.” The proposed rule provides that two or more employers will be considered joint employers where either employer “share(s) or codetermine(s) those matters governing employees essential terms and conditions of employment.” The Board defines “share or codetermine” as “possess[ing] the authority to control (whether directly, indirectly, or both) or to exercise the power of control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.”

Under the proposed rule, essential terms of employment “generally include, but are not limited to: wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.”  This substantially expands on the existing rule’s exhaustive list, which includes only wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”

A party asserting that a company is a joint employer over specific employees will have the burden of establishing this relationship by a preponderance of the evidence. A party seeking to prove a joint-employer claim, under the proposed rule, will need to show that the employer has “authority” or “power to control one or more” of an employee’s essential terms and conditions of employment.

Impact

If the proposed rule is adopted, it creates a significant risk that benign commercial interactions can be interpreted as direct or indirect control over “essential terms and conditions of employment.” If the Board determines that two employers are in fact joint employers under the NLRA, then those employers both must participate in bargaining with a union representing workers. Moreover, one joint employer may be subject to liability for unfair labor practices committed by the other joint employer.

Public comments on the proposed rule must be received by the Board on or before November 7, 2022, and the proposed rule may be modified before becoming final. We will continue to monitor any updates from the NLRB.