By: Annie McEnaney

Two weeks ago, the National Labor Relations Board (“NLRB” or “Board”) released a Notice of Proposed Rulemaking (“NPRM”) addressing the standard for determining an employer’s joint employer status under the National Labor Relations Act (“NLRA”).[1] The NPRM purports to replace the old, “direct and immediate control” rule that took effect on April 27, 2020.[2] Having updated the rule four times in the past seven years, the NLRB leaves courts and employers alike reeling in understanding employers’ status as a joint employer.[3]

Joint employment is a doctrine of liability that applies where two or more employers share control over an employee.[4] Typically, joint employment may exist where one “direct” business hires, schedules, and pays an employee while the “secondary” business indirectly benefits from the employee’s services.[5] Common examples of joint employers include franchise operations, subcontractors, and temp service agencies.[6]

From the all-encompassing Third Circuit decision in NLRB v. Browning-Ferris Indus. of Pennsylvania, Inc., (“Browning-Ferris”) to the more business-friendly “direct and immediate control” rule, the NLRB has proposed many standards over the years to determine when businesses are joint employers under the NLRA.[7] In 2015, after years of narrowing the standard, the Board returned to its previous, much more broadly applicable, standard established in Browning-Ferris.[8] Under Browning-Ferris, the Board held that two or more employers are joint employers “if they share or codetermine those matters governing the essential terms and conditions of employment.”[9]

Before the Board could explain how to apply the Browning-Ferris decision, it adopted a new standard in 2020 in Browning-Ferris Indus. of California, Inc., (“Browning-Ferris II”).[10] Intending to “put an end to years of litigation at the NLRB and in federal courts” over who is a joint employer under the NLRA, the Board ruled that, to be a joint employer, a business must “possess and actually exercise substantial, direct, and immediate control over [the] essential terms and conditions of employment.”[11]

The NLRB’s newly proposed rule, however, marks a return to the original Brown-Ferris decision, holding that “two or more employers would be considered joint employers if they ‘share or codetermine those matters governing employee’s essential terms and conditions of employment such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules.”[12] The proposed rule will serve to grant workers, greater protection, simultaneously posing greater liability risks to businesses.[13] Namely, companies that previously were not considered joint employers who may be so considered under this new rule, if so considered, would potentially be liable for labor violations committed by its “secondary” business and would be required to engage in collective bargaining with unions.[14]

Ultimately, this new rule further confuses an already fraught area of law. If enacted, the proposed rule would restrict the freedom of many small business owners, potentially having the effect of “taking away employment decisions from small independent franchisees and putting those decisions into the hands of large corporations.”[15] The Board will accept public comments on its proposed rule until November 7, 2022.[16] While the degree of control necessary to constitute joint employment status under the Board’s proposed rule is ambiguous at best, employers who utilize secondary companies should reevaluate their contracts with those secondary employees and assess the degree of control they exercise over the essential terms and conditions of employment for those employees in preparation for the application of the new rule.[17]

[1] NLRB Issues Notice of Proposed Rulemaking on Joint-Employer Standard, Nat’l Labor relations bd. (Sept. 6, 2022), https://www.nlrb.gov/news-outreach/news-story/nlrb-issues-notice-of-proposed-rulemaking-on-joint-employer-standard#:~:text=Under%20the%20proposed%20rule%2C%20two,discharge%2C%20discipline%2C%20workplace%20health%20and.

[2] See Allen Smith, Proposed Joint Employer Rule May Increase Employer Liability, SHRM (Sept. 6, 2022), https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/nlrb-joint-employer-proposed-rule-2022.aspx.

[3] Fourth Time’s the Charm? NLRB Now Set to Change Joint-Employer Standard After Federal Appeals Court Punts Case Back to the Board, Fisher Phillips (Aug. 10, 2022), https://www.fisherphillips.com/news-insights/nlrb-joint-employer-standard-after-federal-appeals-court.html [hereinafter Fourth Time’s the Charm?].

[4] See Five Things You Should Know About Joint Employment, BakerHostetler, https://www.bakerlaw.com/webfiles/Employment/2019/Alerts/Five-Things-You-Need-to-Know-About-Joint-Employment.pdf.

[5] See id.

[6] See id.

[7] See Daniel Wiessner, U.S. labor board to expand companies’ ‘joint employer’ liability, Reuters (Sept. 6, 2022, 4:42 PM), https://www.reuters.com/legal/us-labor-board-expand-companies-joint-employer-liability-2022-09-06/; see also Smith, supra note 2.

[8] See NLRB v. Browning-Ferris Indus. of Pennsylvania, Inc.,691 F.2d 1117, 1117 (3d Cir. 1982); see also Nat’l Emp. Law Project, The NLRB’s Browning-Ferris Decision Explained: Myths and Realities for Workers and Small Business Owners (Sept. 2015), https://www.nelp.org/wp-content/uploads/NLRB-Browning-Ferris-Decision-Explained.pdf.

[9] See Fourth Time’s the Charm, supra note 3 (explaining that, under Browning-Ferris, employers “need only the contractual right to control an employee’s working conditions” for a joint-employment relationship to exist).

[10] See id.

[11] See 5 Things You Need To Know About The Labor Board’s New Joint Employment Rule, Fisher Phillips (Feb. 25, 2020), https://www.fisherphillips.com/news-insights/5-things-you-need-to-know-about-the-labor-board-s-new-joint-employment-rule.html.

[12] See NLRB Issues Notice of Proposed Rulemaking on Joint-Employer Standard, supra note 1.

[13] See Wiessner, supra note 7.

[14] See id.; see also Carson McQuillian, NLRB’s Joint Employment Decision:What Franchisees Need to Know, (Feb. 1, 2021), https://1851franchise.com/nlrbs-joint-employment-decision-what-franchisees-need-to-know-2714866#stories.

[15] See id.

[16] Meryl Cowan, National Labor Relations Board’s Notice of Proposed Rulemaking – Potential Change in the Standard for Determining “Joint-Employer” Status, J.D. Supra (Sept. 15, 2022), https://www.jdsupra.com/legalnews/national-labor-relations-board-s-notice-1684223/.

[17] See id.; see also Smith, supra note 2.