NLRB Proposes Re-Broadening Co-Employer Standard | Ogletree, Deakins, Nash, Smoak & Stewart, CP

On September 6, 2022, the National Labor Relations Board (NLRB) unveiled a draft Notice of Proposed Rulemaking (NPRM) to replace its current rule, which clearly defines when two separate entities can be considered joint employers in under the National Labor Relations Act (NLRA), with the short-lived and much-criticized standard she articulated in her 2015 Browning Ferris Industries decision. Although the current Commission rule was adopted in 2020, it codified and clarified the law of the Commission which, for decades before Browning Ferris, co-employer status limited to entities that effectively exercised direct and immediate control over the employment conditions of employees of another entity. Browning Ferris removed the requirement for effective direct and immediate control and held that indirect control of a key condition of employment of employees of another entity – or even the mere potential or reserved ability to control a key condition of employment – was sufficient to convert an independent entity into a joint employer under the NLRA. The Council’s current NPRM seeks to resuscitate and codify this unfortunate Browning Ferris standard, nullifying not only the standard set out in the current rule, but the one that had been the NLRB standard for over 30 years prior Browning Ferris.

The proposed rule would replace the certainty that the current rule provides with generalities and ambiguity. The current rule provides clarity by including detailed examples of what constitutes the actual exercise of direct and immediate substantial control. In its place, the proposed rule generally refers to centuries of common law principles of agency, with no indication of how the common law of agency helps answer the entirely different question of whether the employee of an entity could also be considered an employee of another. In addition, the current rule provides clarity by including an exhaustive list of essential employment conditions; if the period of employment is not on the list, it cannot be an essential period of employment. Rather, the proposed rule provides an illustrative but not exhaustive list of essential employment conditions. What else might be an essential employment term is anyone’s guess, and answers will be provided sporadically and only after years of costly litigation with the NLRB.

Comments on the proposed rule will be accepted until November 7, 2022, with responses to comments being accepted until November 21, 2022.

NLRB members John Ring and Marvin Kaplan opposed the NPRM. In their disagreement, they explained why the current rule is correct and the proposed rule is both fatally flawed and inconsistent with established law and the goals of the NLRA. They also pointed out that the majority of the Council had not identified any significant changes that would justify the Council not only reviewing but reversing the current regulations which it had adopted just two years earlier following comments and extensive public scrutiny.

Key points to remember

The proposed rule demonstrates the NLRB’s current push to facilitate union organizing by resurrecting new positions that Obama’s NLRB had taken but were short-lived, as they were reversed during the next term of the Board. The proposed rule, like its previous iteration in Browning Ferris, was defended and widely supported by the union constituents of the Commission. This dramatically increases the number of companies that will be considered co-employers, and it increases even more dramatically the number of entities that are likely to be considered co-employers due to the uncertainty it creates. All business entities may need to carefully assess these risks, as being considered a joint employer with a third-party company entails substantial obligations and, perhaps more importantly for businesses in our economy, may impose long-term relationships with companies they rightfully consider. as independent third-party companies whose contracts could be terminated according to their terms. No such freedom exists for an entity once it is considered a joint employer under the NLRA.

Employers can express their views to the NLRB on the proposed rule during the 60-day comment period. This time frame also provides employers with the opportunity to assess their risks by reviewing their operations and contracts and, where possible, modifying them to eliminate procedures and provisions that reflect reserved and potential control over company employees. another entity. Employers may also want to take the time to educate their management teams to ensure that they avoid taking actions that could be considered direct or indirect supervision and control of employees of other entities.

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