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NLRB Proposes Rule to Limit Joint-Employer Status

    Client Alerts
  • September 17, 2018

As widely expected, on Friday, the National Labor Relations Board issued proposed regulations intended to reverse an Obama-era board decision that greatly expanded the definition of joint-employers subject to NLRB jurisdiction. That 2015 decision, Browning-Ferris, considered franchisors and other entities to be the statutory employers of another company’s employees if they either exercised control over the terms and conditions of employment, or if they had the potential to do so based on the business relationship between the two companies. For franchisors, any franchise agreement that sets forth standards for employee training or performance would therefore potentially make that franchisor liable for the franchisee’s labor violations.
Republicans made reversing Browning-Ferris a top priority once they gained control of a majority of NLRB seats. The board quickly moved to reinstate the prior standard in last year’s Hy-Brand Industrial Contractors Ltd. decision. However, this decision was vacated based on potential conflicts of interest with one board member’s prior representation in private practice. With reversing Browning-Ferris through case law blocked, the NLRB turned to a rulemaking procedure to achieve the same result.
Under the proposed rule, a company would only be deemed a joint-employer if it actively exercises direct control over decisions that affect substantial terms and conditions of the employees’ employment, such as wages, benefits, working hours, etc. The mere ability to influence such decisions would not be enough to create joint-employer status. The company would actually have to exercise such control, and the potential for such control under a franchise or other agreement would not create a joint-employer relationship.
The dissenting board member objected to the use of a rulemaking procedure to overturn established case law. He also commented that the joint-employer standard proposed in the rule is actually more limited than that in place before Browning-Ferris. The NLRB will accept comments on the proposed rule through November 13.