Leslie Johnson

Lisa Gingeleskie, a partner in Lindabury, McCormick, Estabrook & Cooper, P.C. (Westfield, NJ), provided insight into the National Labor Relations Board’s proposed rulemaking for determining joint-employer status. Ms. Gingeleskie is a member of Lindabury’s Labor, Employment & Employee Benefits group, where she focuses on labor and employment law, including ERISA and employee benefits.

On September 6, 2022, the National Labor Relations Board (NLRB) released a Notice of Proposed Rulemaking (NPRM) addressing the standard for determining joint-employer status under the National Labor Relations Act. Under the proposed rule, two or more employers would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment.” If finalized, the rule would explicitly rescind the NLRB’s most recent overhaul of the joint employer standard that raised the bar to attain joint employer status and will undoubtedly result in many more joint employer situations.

Over the past decade, joint employer status has gone back and forth dramatically as the composition and political control of the Board has shifted.

In 2015, under the Obama Administration, the NLRB in Browning-Ferris Industries of California, Inc., 362 NRLB 1599 (2015), dramatically expanded the definition of joint employer, finding that two entities were deemed joint employers based on the mere existence of reserved joint control, indirect control, or control that was limited and routine. This standard shifted from its predecessor which required the putative joint employer to exercise actual control over essential employment terms.

In 2018, the U.S. Court of Appeals for the District of Columbia Circuit reviewed and modified Browning-Ferris, finding that the concept of “indirect control” should only include those factors directly related to the terms and conditions of employment. In reaching this conclusion, the court found that by “failing to distinguish evidence of indirect control that bears on workers’ essential terms and conditions from evidence that simply documents the routine parameters of company-to-company contracting,” the Board had overstepped its authority.

Two years later, under the Trump Administration, the Board essentially rejected the Browning-Ferris standard altogether and issued a final rule requiring that joint-employer status may only be established where a company exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employees. The rule, which became effective in April 2020, continues to be the controlling standard to date.

The NLRB’s new proposed rule essentially restores the original Browning-Ferris “indirect, reserved” control standard. The proposed rule provides that two or more employers will be deemed joint employers where either employer “share(s) or codetermine(s) those matters governing employees’ essential terms and conditions of employment.” The Board defines “share or codetermine” to mean “possess the authority to control (whether directly, indirectly, or both) or to exercise the power to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” The proposed rule also broadens what is considered an “essential term and condition of employment” – formerly limited to wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction – to include other compensation, scheduling, workplace health and safety, assignment, and work rules and directions governing the manner, means, or methods of work performance.

The bottom line is that the Board’s proposed rule will likely result in many more joint employer situations, particularly where staffing companies are used side-by-side with regular employees. The abandonment of the actual control requirement raises the specter of joint employer status if the employer has any input whatsoever in the day-to-day functions of any worker in the workplace. Businesses that lease or otherwise share employees or have shared human resources functions should be aware of this impending shift. Finally, businesses that are unionized should also pay close attention to the final rule, as joint employers are potentially liable for unfair labor practices committed by the other, and both are subject to union pressure if there is a labor dispute. Comments on the proposed rule may be filed on or before November 7, 2022.