NLRB begins rulemaking process to consider controversial joint-employer standard

The National Labor Relations Board (the “NLRB”) issued a statement on May 9, 2018, noting that it was beginning to consider a rulemaking to address the “joint employer” standard – the standard that determines whether one company is a joint employer of another company’s employees due to certain factors. As we previously reported, the NLRB has made headlines a number of times over the past few months – first, by overruling its own, Obama-era “joint employer” standard that was issued in  Browning-Ferris Industries of California through a December 2017 opinion in Hy-Brand Industrial Contractors, Inc., and then vacating that same Hy-Brand opinion in a dramatic reversal due to a conflict of interest in March 2018. The Browning-Ferris Industries opinion originally held that two entities could be found to be joint employers if one entity merely reserved the right to exercise control over another company’s employees, or indirectly exercised such control. The Hy-Brand decision reversed this standard, finding that a “joint employer” qualification actually required a relationship of direct control between businesses. Because of these decisions, the joint employer standard appears to be in a state of flux, creating a sense of confusion in the franchise community and many other businesses that may deal with possible joint employer issues.

However, President Trump recently gained a Republican majority on the five-member NLRB board, and the current NLRB issued the recent statement disclosing that it has begun an internal process to consider rulemaking on the joint employer standard (instead of addressing it through opinions such as Browning-Ferris and Hy-Brand). While this is just the beginning of the process, businesses that deal with possible joint employer issues are considering it a step in the right direction. If the process moves forward, it will include a notice and comment period, and any proposed rule will need to obtain a majority vote of the NLRB to be finalized. The current NLRB has already shown an inclination toward significantly changing, or at least clarifying, the joint employer standard articulated in Browning-Ferris, and a NLRB rulemaking could bring finality to the joint employer issue for franchisees, franchisors, and other businesses that frequently use the same employees throughout the labor market. While the Congress had been working on its own attempt to address the joint employer standard through legislation in the Save Local Business Act, which was proposed and passed in the House in November 2017, the bill has not made progress in the Senate. At this point, regulatory action by the NLRB seems to be the path to the most clarity on the issue, and the NLRB recognizes the need to act; as John F. Ring, the Chairman of the NLRB, stated last week, “Whether one business is the joint employer of another business’s employees is one of the most important issues in labor law today.” Hopefully, the NLRB will take action on this critical issue during 2018.