HR Management & Compliance

NLRB Chair Says Rule Defining Joint Employment on the Way

The National Labor Relations Board’s (NLRB) announced intention to issue a proposed rule on joint employment by summer is seen as a way to provide a stable solution to the question of when two or more employers share joint responsibility for the same group of employees.

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In a June 5 letter to Senators Elizabeth Warren, Bernie Sanders, and Kirsten Gillibrand, NLRB Chairman John F. Ring said the Board already has begun the process necessary to issue the proposed rule. The Board first revealed it was considering using rulemaking instead of adjudication to resolve the joint-employment question in an announcement on May 9. The announcement also said the five-member Board’s two Democratic members opposed the idea.

“Candor requires me to inform you that the NLRB is no longer merely considering joint-employer rulemaking,” Ring said in his letter to the senators. “A majority of the Board is committed to engage in rulemaking, and the NLRB will do so. Internal preparations are underway, and we are working toward issuance of a Notice of Proposed Rulemaking (NPRM) as soon as possible, but certainly by this summer.”

Clarity is needed because the standard for determining what puts two or more employers in a joint-employment relationship under the National Labor Relations Act (NLRA) has gone back and forth in recent years. In a 2015 decision in a case involving Browning-Ferris Industries of California, the Board changed previous precedent and created a standard that said an employer can be deemed a joint employer of another employer’s employees if it exercises even indirect control over the workers. That was a much less employer-friendly standard than the standard employers had worked under for decades.

The Board took up joint employment again in December 2017 in a case involving Hy-Brand Industrial Contractors, Ltd., which returned to the previous, more employer-friendly standard. Then in February 2018, the Board vacated its Hy-Brand decision after conflict-of-interest accusations against Board Member William J. Emanuel arose over his former law firm’s involvement in the related Browning-Ferris case.

Impact of Rulemaking

The Board has two ways to make labor law, explains Ryan J. Funk, an editor of Indiana Employment Law Letter and attorney with Faegre Baker Daniels LLP in Indianapolis, Indiana. It can use adjudication, in which it considers a case and issues a decision that may later be overturned when the Board considers another case. Or it can use rulemaking, which allows it to devise a more stable standard.

“The main benefit to rulemaking is that it’s a more permanent process,” Funk says. It’s much easier for a future Board to change the law by reversing prior Board precedent than it is to change a rule that has been through the notice-and-comment process that is part of rulemaking.

Rulemaking is cumbersome, Funk says, but it allows more interaction with the public. When the Board adjudicates an issue, it may consider input from parties that submit briefs, but briefs usually come from large employers, trade groups, and unions. When rulemaking is used, groups and individuals can easily submit comments, and the Board is likely to get thousands of comments to review and consider.

The content of any rule the Board proposes won’t be known until the proposed rule is issued, but “I suspect that it’s going to be more comprehensive than what the Board said in Hy-Brand,” Funk says, “simply because when you do adjudication, you’re working within the facts of one particular case.” The Board won’t be bound by that in rulemaking.

The prospect of a rule on the matter is “good news,” says John Lovett, an editor of Kentucky Employment Law Letter and attorney with Frost Brown Todd LLC in Louisville, Kentucky, because a federal agency rule is harder to reverse “when and if the political winds change.”

Gary S. Fealk, an editor of Michigan Employment Law Letter and attorney with The Murray Law Group in Bingham Farms, Michigan, agrees that changing the standard in a rule would make it more difficult for a future Board to overturn the standard. He also believes the Board is likely to return to the pre-Browning-Ferris standard, which would require proof that an alleged joint employer exercised joint control rather than merely reserving the right to do so.

Possible Legislation

Congress also is considering what standard should determine joint employment. House Resolution 3441 has been introduced to amend the NLRA and the Fair Labor Standards Act (FLSA) to provide that a joint employer is someone who “directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over the essential terms and conditions of employment,” according to a summary of the bill.

The bill’s chances of passing are uncertain, Lovett says, but legislation is, in theory, even more permanent than rulemaking and offers a more practical solution to address the issue. “But labor legislation is notoriously hard to get through Congress,” Lovett says.

Ethics Issue

In his letter to the senators, Ring said the Board “will be announcing in the near future a comprehensive internal ethics and recusal review to ensure that the Agency has appropriate policies and procedures in place to ensure full compliance with all ethical obligations and recusal requirements.” The review is in response to controversy over whether Emanuel should have recused himself from the Hy-Brand case.

“I think the ethics issue that the Board has examined in the past months is the reason why the joint-employer standard hasn’t changed already,” Funk says. “So we wouldn’t be seeing rulemaking right now if it weren’t for that turn of events.”

Many complained that the Board shouldn’t have had to vacate its Hy-Brand decision, arguing that Emanuel had no need to recuse himself just because the large law firm he was a part of before taking the Board seat was involved in a related case. Board watchers pointed out that Board members often come from law firms that represent employers, and others come from union backgrounds.

Board members from both sides “have offered valuable insights” by drawing on their prior experience, Funk says. “The people at the Board will figure out a way to provide some clarity going forward,” he says, so that they can avoid conflicts of interest and still utilize experienced people.