National Labor Relations Board Issues Proposed Rule to Limit Joint Employer Liability

On September 14, 2018, the federal agency that oversees labor practices nationwide, the National Labor Relations Board (“NLRB”), proposed a new rule that would redefine the standard for determining whether a company is considered a joint employer of its franchisees’ or another company’s employees.

The proposed rule reverses a 2015 NLRB ruling in a case known as Browning-Ferris Industries, that changed the standard for determining who was a joint employer. Before the 2015 Browning-Ferris Industries decision, to be considered a joint employer, a company was generally required to exercise direct and immediate control over the other company’s employees. In Browning-Ferris Industries, the NLRB ruled that a company could be considered a joint employer even if it controlled the other company’s employees indirectly, or if it had a right to control the employees’ working conditions but didn’t use that right.

This decision made it easier to impose liability on franchisors or other outside companies for labor and employment violations which occurred at a franchisee’s or partner company’s location. This helped workers challenge the labor practices of large chain companies, such as McDonald’s, rather than simply the owner of one McDonald’s franchise where the employee worked. It also made it easier for workers at franchises to unionize, because the franchisor company could be held liable for firing workers who attempted to unionize.

The proposed NLRB rule not only returns to the pre-2015 status quo, but goes further. The NLRB states that under the proposed rule, “an employer may be found to be a joint-employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine.” The addition of the word “substantial” creates a stronger test for joint employership than simply “direct and immediate control,” as was required pre-Browning-Ferris Industries.

The public has 60 days from the proposed rule’s publication on September 14, 2018 to submit comments on the rule to www.regulations.gov, or to Roxanne Rothschild, Deputy Executive Secretary, National Labor Relations Board, 1015 Half Street S.E., Washington, D.C. 20570-0001.