On Friday, September 14, 2018, the National Labor Relations Board (NLRB) published a proposed regulation. The regulation aims to establish the standard for determining whether two employers are joint employers of a group of employees under the National Labor Relations Act. The NLRB’s proposed rule will affect many businesses that operate under a franchise model, including but not limited to the fast food industry.
Under the current standard, as set out by the Board in its 2015 Browning-Ferris decision, two affiliated businesses are joint employers even when one of the two only has “indirect control” over the other’s employees. Although the Board appeared to overturn Browning-Ferris in its 2017 Hy-Brand Industrial decision, the Board subsequently vacated that decision and now relies on its rulemaking authority to establish a new standard and, in effect, overturn Browning-Ferris.
In explaining why it turned to its rulemaking authority, the Board first reasoned that given the affect and import of the joint employer determination, the Board “would be well served by public comment on the issue.” Using a rule to clarify what constitutes joint employer status will, according to the Board, “provide unions and employers” greater certainty and alleviate fear that their conduct later may be labeled an unfair labor practice. Additionally, the Board noted that establishing the joint employer standard in its rules and regulations fosters predictability because, as a rule, the standard would not be as easily subject to change “on a moment’s notice . . . through the adjudication process.”
As for the proposed rule, which we stress is only a proposal at this time, it provides that an employer will be treated as a joint employer only if the employer possesses and actually exercises control over “employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction.” This control must be “direct and immediate” and not “limited and routine.” While not yet the rule, the Board’s proposal is an important step to resolving the controversy surrounding joint employer status.