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.
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.
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.