NLRB Begins Rulemaking on Joint Employer Standard

The National Labor Relation Board (NLRB) is beginning a rulemaking clarifying the standard for joint employer liability under the National Labor Relations Act (NLRA). On June 9, the Office of Information and Regulatory Affairs (OIRA) published the Board’s intent to address the standard.

“Whether one business is the joint employer of another business’s employees is one of the most critical issues in labor law today,” said NLRB Chairman John 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. “

An announcement follows months of confusion concerning the current definition of joint employer liability. Chairman Ring has stated that a rulemaking will provide more certainty regarding the standard and eliminate any concerns about ethical restrictions on pending cases.

The inclusion of the proposal in the regulatory agenda does not reflect the participation of new NLRB Members Mark Gaston Pearce and Lauren McFerran. Any proposed rule would require approval by a majority of the five-member Board, and the next step would be the issuance of a Notice of Proposed Rulemaking.

Deviating from the long-held standard for joint employer liability, in 2015, the NLRB under President Obama broadened the definition of what constitutes a joint employment relationship. In the case involving Browning-Ferris Industries (Browning-Ferris), the Board decided that a joint employment relationship could exist even when companies have “indirect or unexercised control” over workers.

In December 2017, the Board voted three to two to return to the traditional “joint employer” standard, which requires a business to have a direct and immediate connection to the employees in question to be held jointly liable for labor violations. The case involved Hy-Brand Industrial Contractors (Hy-Brand).

However, the decision in Hy-Brand was later vacated in February 2018 following a memo issued by the NLRB Inspector General stating that Board member William Emanuel should have recused himself from the case involving due to a potential conflict of interest.

In Hy-Brand, Emanuel voted with the majority in returning to the traditional standard for a joint employment relationship. Emanuel, prior to joining the Board, worked at the law firm of Littler Mendelson, which represented Browning-Ferris Industries in the 2015 case that moved to a non-traditional standard for joint employer liability.

On April 5, NLRB General Counsel Peter Robb filed a response disapproving of the Board’s decision to exclude Emanuel from deliberations in vacating the Hy-Brand case, claiming the Board ignored precedent and may even have broken the law in doing so.

Adding to the flurry of activity, on April 12, John Ring was sworn in as the new NLRB Chairman. Republican members continue to have a 3-2 majority on the five-member board. While there is now a Republican majority at NLRB, it does not resolve William Emmanuel’s involvement in the Hy-Brand case that would return to a traditional standard for joint employer liability. As such, the NLRB has chosen to address the issue through a rulemaking.

The Board prefers to rely on adjudication rather than rulemaking for setting policy. However, given the ethical cloud hanging over William Emanuel on joint employer liability, a rulemaking appears to be the most straightforward path.

A rulemaking provides the most transparent means for changing a regulation. The process requires advance notice of changes and gives the public, including groups like BSCAI, the opportunity to comment.

Over a dozen trade associations representing employers in wide variety of industries, have filed a petition with the NLRB seeking a rulemaking to remedy the confusion caused by previous changes to the joint employer standard.

In the petition, it states, “While the uncertainty created by the BFI standard negatively impacts companies of all sizes across many industries, it is particularly damaging for small and local businesses. The standard encourages larger companies to limit the number of entities with whom they contract, which stifles opportunities for small businesses and startups.”

Joint employer liability has particular relevance for the building services industry. First, joint employer liability can apply in instances between contractors and subcontractors. Second, joint employer liability can apply when companies use temporary workers from a staffing agency.

BSCAI members should be aware that despite the enforcement climate under the Trump Administration, the broader standard for joint employer liability remains in place. BSCAI plans to submit comments once a formal proposal is issued by the NLRB.