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NEWS | NLRB Proposing Rule to Expand Joint-Employer Statuses

The joint-employer standard has oscillated back and forth since 2015.


The National Labor Relations Board (NLRB) has proposed a new rule to expand the joint-employer standard under the National Labor Relations Act (NLRA).


On March 9, 2021, Democrats in the U.S. House of Representatives passed the Protecting the Right to Organize (PRO) Act (H.R. 842, S. 420), which includes a provision that dramatically expands the joint-employer standard.


On Sept. 7 this year, the NLRB issued a new notice of proposed rulemaking that pushes the standard beyond anything we’ve seen previously.

The joint-employer standard under the NLRA is used to determine when two or more entities are jointly responsible for the terms and conditions of employment over the same group of employees. These terms and conditions include, but are not limited to, having the ability to hire, fire, discipline, supervise, or direct employees.


Joint employers are responsible for bargaining with any union representing the joint employees and are mutually liable for any NLRA violations either entity commits with respect to those employees. Joint-employer status, therefore, results in significant changes to an employer’s liabilities and responsibilities under the law.


Under the traditional, decades-old standard, entities can only be joint-employers if they exercised direct and immediate control over the essential terms and conditions of employment. This standard provided clarity for businesses and protected them from unnecessary involvement in labor negotiations and disputes involving workplaces over which they do not have such control. This is especially necessary in today’s world, where large and small businesses alike have contractual relationships with dozens, hundreds, or even thousands of franchisees, vendors, and contractors.


Under the PRO Act and the new proposed rulemaking, however, the joint-employer standard would include situations where companies shared only indirect or even just reserved, unexercised control over the terms and conditions of employment. This standard was originally conceived by the Obama-era NLRB in its 2015 Browning-Ferris Industries (BFI) decision.


Under the PRO Act and new proposed rulemaking, nearly every contractual relationship could trigger joint-employer status, from the franchise model to relationships between contractors and subcontractors and suppliers and vendors, needlessly exposing vastly more businesses to unwarranted joint-employer liability. The proposed rulemaking goes further than both the PRO Act and BFI standard in that it would require a joint employer determination based on reserved or unexercised control in certain circumstances.


The traditional standard allowed larger businesses to rely on goods and services provided by local businesses without facing uncertainty around joint-employer liability. Under the PRO Act and proposed rulemaking, however, larger companies would be more likely to subsume local small businesses rather than work with individually owned enterprises, stifling entrepreneurship, business innovation and flexibility. The expanded standard also hampers businesses’ efforts to encourage “corporate responsibility” among franchisees, contractors, and vendors to the detriment of workers, consumers, and their communities.


According to the NLRB, the small businesses or entities most likely to be impacted by this proposal are: contractors/subcontractors, temporary help service suppliers, and users, franchisees, and labor unions, and the move to rescind the previous standard is one to ease the legal standard for deciding when one company jointly employs another firm’s workers.


Relatedly, the U.S. Department of Labor (DOL) is exploring a proposal to a similar rule under the Fair Labor Standards Act (FLSA), which would change the rules for classifying workers as employees or independent contractors. While the two proposals are independent and target different changes, having multiple agencies consecutively offering rulemaking on employer-employee relations only expands the already cumbersome regulatory environment that often hits small businesses hardest.


On Oct. 20, the NLRB and the Office of Advocacy of the U.S. Small Business Administration (SBA) are hosting a virtual roundtable to discuss the proposed changes to the NLRA and its effects.


The virtual event is scheduled from 1:00-2:30 p.m. EDT with a purpose of gathering “specific small entity input and presentation on the proposed rule.” RSVPs should be sent to Janis.Reyes@sba.gov, and roundtable participation details will be provided upon receipt.


Click here to read the NLRB’s press release on its proposal, and keep up with NSBA for opportunities to make your small business voice heard on this proposed regulation.


Members of the public can file comments on the NLRB’s proposed rule until November 7.


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