Joint employment under the NLRA has a tortured history over the past seven years.
Yesterday, the NLRB released a Notice of Proposed Rulemaking (NPRM) to rewrite the standard for determining joint-employer status under the National Labor Relations Act.
Under the current joint employer standard — to which the NLRB adhered until the Browning-Ferris decision in Aug. 2015, and to which it formally reverted in Apr. 2020 — one employer is only a joint employer with another employer if it possesses and exercises "substantial direct and immediate control" over the terms and conditions of employment of another employer's employees.
Joint employment matters … a lot … because if you're a joint employer over the employees of another employer you are jointly and severally liable for the legal wrongs committed by the primary employer. Under the NLRA you also would share collective bargaining responsibility.
- Two or more employers of the same employees are joint employers if the employers directly or indirectly possess the authority to control, or exercise the power to control, employees' essential terms and conditions of employment. Merely possessing the authority to control would be enough, regardless of whether that authority is ever exercised.
- "Essential terms and conditions of employment" include, but are not limited to: wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.
NLRB Chairperson Lauren McFerran says that the Board is merely "bring[ing] clarity and certainty to these significant questions" by "providing a clear standard for defining joint employment that is consistent with controlling law."
I say, "Poppycock!"
This change has nothing to do with clarity or certainty. Instead, it's all about maximizing the ability and opportunity for employees to recover damages from employers. Further, there is nothing "clear" or "certain" about injecting nebulous and subjective standards such as "indirect control" into this important legal calculus. To the contrary, it will merely serve to create more uncertainty and confusion for employers.
If this "new" standard takes effect in 60 days as proposed, and if applied as liberally as it appears to be written, it could prove disastrous for small businesses. Any entity who contracts with another entity for labor (franchisors, general contractors, and staffing agencies, e.g.) needs to pay very careful attention to this change, as do the primary employers (franchisees, subcontractors, and businesses using temporary labor). And don't think for a second that this expansion of joint employment liability will end with the NLRA. As was the case after Browning-Ferris, we should expect the DOL to follow suit under the FLSA, FMLA, and OSHA, and the EEOC to follow suit under the various EEO laws.
If I'm McDonald's Corp., for example, and I'm going to be liable for the sins of my franchisees just because I've reserved some indirect control in my franchise agreement, I'm giving serious thought as to whether franchises still make sense as a business model. I'd rather own the restaurants, directly employ the labor, and appropriately manage risk. This result, however, will put franchisees (all of which are small business owners) out of business. How would this be a good result for anyone?