The US National Labor Relations Board announced on Thursday that it would publish a Notice of Proposed Rulemaking in the Federal Register today proposing a new version of the rule governing joint employer liability under the National Labor Relations Act:
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. Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship.
As explained in the Notice, rulemaking in this important area of the law would foster predictability, consistency and stability in the determination of joint-employer status. The proposed rule reflects the Board majority’s initial view, subject to potential revision in response to public comments, that the National Labor Relations Act’s intent is best supported by a joint-employer doctrine that does not draw third parties, who have not played an active role in deciding wages, benefits, or other essential terms and conditions of employment, into a collective-bargaining relationship for another employer’s employees.
Since regaining a Republican majority under President Donald Trump, the NLRB has sought to overturn a decision made during the Obama administration in 2015 that defined “joint employer” to include entities with which a business has indirect control, or a “horizontal” relationship, making them responsible for franchisees’ or contractors’ compliance with the Fair Labor Standards Act and other employee protection laws. Previously, organizations were only considered joint employers in the case of a “vertical” relationship, wherein an organization exerted direct control over its subordinate entity’s employees or the terms of their employment. Critics of the expanded definition say it creates too much uncertainty for businesses involved in subcontracting and franchise relationships about their employment liability.
The US National Labor Relations Board intends to take the first step toward creating a new regulation regarding the definition of “joint employers” for federal regulatory purposes by the end of this summer, NLRB Chairman John F. Ring wrote in a letter to three Senators this week. The letter to Democrats Elizabeth Warren and Kirsten Gillibrand, and Independent Senator Bernie Sanders, was in response to a letter the legislators had sent to the board chairman expressing their concerns about the board’s intent to introduce a new joint employer standard through the federal rulemaking process.
“A majority of the Board is committed to engage in rulemaking,” Ring wrote in the letter dated June 5, “and the NLRB will do so. Internal preparations are underway, and we are working toward issuance of a Notice of Proposed Rulemaking (NPRM) as soon as possible, but certainly by this summer.”
The joint employer standard, which refers to an organization’s liability for the work conditions of individuals employed by its contractors or subcontractors, was expanded considerably during the Obama administration, when the NLRB ruled in a 2015 case called Browning-Ferris that a company was to be considered a joint employer if it had “indirect” control over the subcontractor’s terms and conditions of employment or “reserved authority” to exercise such control. The board reversed that decision in the Hy-Brand case decided late last year, but vacated its Hy-Brand ruling in February after one member of the board who participated in that decision, William Emanuel, was found to have a conflict of interest.
The US Department of Labor under President Donald Trump and Secretary Alexander Acosta has been working over the past year to undo the regulations implemented by the Obama administration regarding the definition of “joint employers.” Acosta, like many employers and business associations, considers the previous administration’s standard too broad.
Now, the National Labor Relations Board is weighing a rulemaking process to update the standard, the board announced on Wednesday:
“Whether one business is the joint employer of another business’s employees is one of the most critical issues in labor law today,” says NLRB Chairman John F. Ring. “The current uncertainty over the standard to be applied in determining joint-employer status under the Act undermines employers’ willingness to create jobs and expand business opportunities. In my view, notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the standard ought to be.”
Acosta’s Labor Department rescinded Obama-era guidelines on the joint employer standard last June, while the National Labor Relations Board’s regional directors were instructed in December to slow enforcement of the Obama administration’s standard. Shortly thereafter, the NLRB overturned its ruling in the landmark Browning-Ferris case, in which it had considered a company to be a joint employer with a subcontractor if it exercised “indirect” control over the terms and conditions of employment or had the “reserved authority to do so.”
McDonald’s and the National Labor Relations Bureau have reached a settlement in a dispute over whether the fast-food chain was liable as a “joint employer” for unfair labor practices allegedly committed by some of its franchisees, Nation’s Restaurant News reported on Monday:
” The settlement allows our franchisees and their employees to move forward, and resolves all matters without any admission of wrongdoing,” McDonald’s told Nation’s Restaurant News in a statement released Monday. “Additionally, current and former franchisee employees involved in the proceedings are receiving long overdue satisfaction of their claims.”
Attorneys for the employees say they are not satisfied, however:
Micah Wissinger, an attorney for Fight for $15, said the labor advocacy group opposes the settlement. The group maintains that McDonald’s should take responsibility for the firing of employees who fought for higher wages during organized protests dating back to 2012.
The McDonald’s case is one of several high-profile complaints brought by labor activists against major chains asserting that they were responsible for the labor practices of their franchisees. These cases concern whether franchisors count as “joint employers” for the purposes of labor law; in the 2015 Browning-Ferris case, the NLRB expanded the definition of this term to include entities with which a business has a “horizontal” relationship, exercising indirect control over their practices, as well as those with “vertical” relationships that manage employees more directly.
The National Labor Relations Board has vacated a recent decision to limit the liability of companies for labor violations by their franchisees and contractors under the “joint employer doctrine,” after one member of the board who participated in that decision was found to have a conflict of interest, the New York Times reports:
A report released in early February by the agency’s inspector general found that the member, William J. Emanuel, should have recused himself when the case came before the board in December, shortly after the Republicans gained control. That would have left it split at two votes apiece and preserved the status quo.
On Monday, three other board members, including its Republican chairman, Marvin E. Kaplan, voted to vacate the December decision, citing a determination that Mr. Emanuel “is, and should have been, disqualified from participating in this proceeding” because his former law firm had handled a related case. That opens the door for the more expansive, Obama-era standard to remain in place for several more months, perhaps even years.
The December ruling overturned a decision made by the board under the Obama administration in 2015 that defined “joint employer” to include entities with which a business has indirect control, or a “horizontal” relationship, making them responsible for franchisees’ or contractors’ compliance with the Fair Labor Standards Act and other employee protection laws. Previously, organizations were only considered joint employers in the case of a “vertical” relationship, wherein an organization exerted direct control over its subordinate entity’s employees or the terms of their employment. The Labor Department also adopted an expansive view of joint employer doctrine under the Obama administration, which current Labor Secretary Alexander Acosta rescinded last June.
Just days after the National Labor Relations Board’s general counsel sent a memo to the US agency’s regional directors advising them to pull back on the controversial “joint employer” standard adopted by the Obama administration, the board’s new Republican majority overturned the ruling on which that standard was based, the Hill reported late on Thursday:
In a 3-2 decision, the Republican-controlled board overruled the board’s previous 2015 decision in a case, known as Browning-Ferris, which found a company to be considered a joint-employer with a subcontractor if it has “indirect” control over the terms and conditions of employment or has the “reserved authority to do so.”
In a statement, NLRB said in all future and pending cases two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised direct and immediate control over essential employment terms of another entity’s employees.
Restricting the joint employer standard was high on the policy wishlists of several employer groups, particularly the National Restaurant Association, which said it harmed the franchise model. The Trump administration was expected to act on this soon after the new Republican members of the board were seated in August and September. Labor Secretary Alexander Acosta, a longstanding critic of the Obama administration’s expanded definition of joint employers, rescinded Obama-era guidance on joint employer liability in June. Legislation has also been introduced in Congress to write the narrower definition into the National Labor Relations Act.
Peter Robb, who was confirmed as the new general counsel of the National Labor Relations Board last month, advised the board’s regional directors in a recent memo to submit any cases based on the Obama administration’s controversial expansion of the “joint employer” standard for liability to the Board’s Advice Division in Washington for analysis, the Washington Examiner reported late last week:
Robb cautioned the directors against issuing complaints based on the controversial standard adopted during the Obama administration and instead told them to seek advice from the Washington headquarters.
“Examples of board decisions that might support issuance of complaint but where we also might want to provide them with an alternative analysis include … Finding joint employer status based on evidence of indirect or potential control over the working conditions of an employer’s employees,” Robb said in a memorandum dated Dec. 1 to all regional directors.
In order to avoid delays, Robb also wrote in the memo that his office would not be offering new views on cases already pending in courts.
The NLRB’s Browning-Ferris decision in 2015 established a precedent for “joint employer” to include entities with which a business has indirect control, or a horizontal relationship, making them responsible for franchisees’ or contractors’ compliance with the Fair Labor Standards Act and other employee protection laws. Previously, a company was only liable for those under its direct control.