What the hell is going on at the NLRB with joint employment?

Photo by Cameron Kirby on Unsplash

If you are a small business owner, pay attention. Today’s update on the issue of joint employment will be one of the most important things you read this year.

Joint employment has been on a bit of a roller coaster ride at the NLRB over the past few months.

Today, I’m going to sort it all out for you, and try to explain where we might be headed next.


What is Joint Employment?

Joint employment is the sharing of control and supervision of an employee’s activity among two or more business entities, such that each is liable for the legal wrongs of the other to its employees (e.g., discrimination, wage and hour, OSHA, unfair labor practices…). It’s what would hold a franchisor liable for the wrongful acts of its franchisee, a contractor for its sub, and a business for its staffing company.

What are the Historic Joint Employment Rules?

For decades prior to August 27, 2015, is was uniformly established that for one entity to be a joint employer with another, it had to exercise direct and actual control over the terms and conditions of the other entities employees. Do they supervise? Are they subject to the same work rules? Can they hire, fire, and discipline? Who pays and how? Who provides benefits? Who assigns schedules and otherwise directs work? If one employer maintains control over these issues, then the other would not have been a joint employer.

Given this strict test, entities such as franchisors and general contractors felt reasonably comfortable that they were not liable for the acts of its franchisees and subs relative to their employees.

What Changed on August 27, 2015? 
Browning-Ferris Industries of Calif. 

In Browning-Ferris, the NLRB ignored and tossed out 40 years of precedent, and expanded the definition of “joint employer” not only to include those that exercise direct and actual control, but also those that exercise indirect control or reserve the potential to exercise control. OSHA and the DOL soon followed suit, and announced similar standards under their respective statutes. Small business owners, as well as other employers, (justifiably) panicked. If a franchisor, for example, is liable for the legal wrongs of its franchisees towards employees that the franchisor does not hire, fire, discipline, pay, or otherwise direct, why franchise at all? Why not just run the businesses, control the liabilities, and cut out the middle man?

December 14, 2017—Meet the New Boss, Same as the Old Boss
Hy-Brand Industrial Contractors

In Hy-Brand, the NLRB expressly overruled Browning-Ferris and restored direct and actual control as the lone test for joint employment:

[W]e overrule Browning-Ferris and restore the joint-employer standard that existed prior to the Browning-Ferris decision. Thus, a finding of joint-employer status requires proof that the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control), the control must be “direct and immediate” (rather than indirect), and joint-employer status will not result from control that is “limited and routine.”

Bravo. Employers rejoiced.


The Celebration was Short Lived

On February 26, 2018, the NLRB vacated Hy-Brand, restoring Browning-Ferris (and its potential/indirect control tests) as the law of the NLRA on joint employment. Why? Because current NLRB board member Bill Emanuel, one of the three votes in Hy-Brand in favor of overturning Browning-Ferris, was a partner at the law firm that represented Browning-Ferris in 2015. This decision followed the report of NLRB inspector general David Berry earlier this month, which concluded that Emanuel should have recused himself from Hy-Brand, not because Emanuel engaged in anything improper, but because the appearance of a potential conflict should have caused his recusal.


What now?

For now, Browning-Ferris remains the law on joint employment under the NLRA. And, it likely will continue as such, as without Emanuel, the highly politicized NLRB will almost certainly split 2-2 on any rehearing of Hy-Brand.

Browing-Ferris had been pending on appeal and awaiting decision. The D.C. Circuit Court of Appeals, however, dismissed the appeal and remanded the case back the NLRB for disposition consistent with Hy-Brand. You should now expect more litigation over that issue in the D.C. Circuit.

As you can see, this issue is a bit of a muddled mess.

One easy solution is the federal (and bipartisan) Save Local Business Act. It expressly defines a “joint employer” under the NLRA and FLSA as one that—

directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over essential terms and conditions of employment, such as hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, or administering employee discipline.

It passed the House last November, and now awaits action in the Senate.

This past summer, I asked if joint employment was the issue to unite our divided country. For the sake of America’s small business owner, I certainly hope it does. If you are concerned about this issue (and you should be), call or email your Senator and Congressperson to urge their support of the Save Local Business Act.