Audit, Compliance and Risk Blog

When someone receives occupational direction and/or compensation from more than one entity, who’s the boss? Sometimes it’s obviously one or the other, sometimes it’s not clear which one is, and sometimes the answer may be “both.” The answer has important implications, not just for who writes a paycheck but for who is subject to legal requirements and prohibitions under applicable laws.

The National Labor Relations Board (NLRB) has addressed joint employment many times since 1949, and its approach has evolved – gradually since 1982 as the contours of the approach set by a federal court decision changed through application in new factual situations litigated before NLRB, and abruptly since 2015 as the political and policy positions of the board’s majority have cycled. Now, NLRB has proposed to codify the present majority’s preferred approach in a new NLRB regulation that requires each employer to exert actual control over the employee.

What’s NLRB’s Present Approach?

The term “joint employer” might apply to:

• Franchisers and their franchisees.

• Temporary employment agencies and their client companies.

• Prime contractors and their subcontractors.

The National Labor Relations Act (NLRA) does not include a statutory definition of “joint employer” (or even “employer”, for that matter, other than to clarify that “any person acting as an agent of an employer” is also considered an employer (29 USC § 152(2))). Absent a statutory definition, NLRB has looked to other labor laws and the “common law” when considering whether an employer-employee relationship exists. In general, NLRB’s joint-employer decisions have focused on whether one or more entities – the possible employers -- “share or co-determine” the right to control employees’ work and their terms of employment. NLRB generally has not required that this right be direct, that it actually be exercised, or that it be exercised in any particular manner.

Between 1982 and 2015 NLRB decisions slowly tightened up on the applicability of this standard. In 2015, however, a 3-member majority of the NLRB cut back most of these accumulated qualifiers, and in the Browning-Ferris Industries of California case decided to “restate” the agency’s standard for joint employment, as:

“… the Board may find that two or more statutory employers are joint employers of the same statutory employees if they ‘share or codetermine those matters governing the essential terms and conditions of employment.’ … We will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry.” [emphasis added]

The majority found that an employer could qualify as a joint employer if it exerted control indirectly through a second employer, and even if it retained the ability to exert control (e.g., through contractual agreement with the second employer). Two members dissented vociferously, arguing that the correct standard was actual control not potential control, and that the majority was abandoning the common law approaches it claimed to follow. Although this decision was tied up in BFI’s appeal to federal court, and never took effect, it became NLRB’s policy.

While the BFI decision appeal awaited decision, the partisan balance of NLRB’s members shifted, with a Republican majority effective in September 2017 with approval of President Trump’s second nominee. In mid-December, the reconstituted NLRB issued a new decision (Hy-Brand Industrial Contractors, Ltd), to reverse BFI and establish a narrow definition of joint employers that “… [requires] direct control over one or more essential terms and conditions of employment to constitute an entity the joint employer of another entity’s employees.”The majority decision provided extensive review of pre-BFI cases to argue that the BFI decision was an aberration. (I wrote about this decision here) Embarrassingly, however, NLRB was forced to vacate this decision after one of the 3 supporting members was disqualified after it was found that his former law firm had represented one of the parties. BFI was reinstated, returning the NLRB’s formal policy to a position repudiated by 3 of its members.

What is NLRB Now Proposing?

Over 70 years after enactment of the NLRA, and 3 years after the BFI decision, the NLRB has proposed to adopt a regulation defining “joint employers.” Two employers would be “joint”:

“only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.” [emphasis added]

NLRB published this proposal on September 14 with a call for comments. On November 5 NLRB extended the deadline for comments until December 20, 2018.

Self-Assessment Checklist

Does the organization conduct activities in concert with other entities, under which any personnel are subject to actual or potential direction from more than one entity?

Does the organization provide personnel to other entities, where those personnel are subject to direction from the host entity?

Does any other entity provide personnel to the organization, who become subject to direction from the organization?

Does the organization represent individuals (e.g., as a labor union) who may qualify as employees of joint employers?

Did the organization comment on NLRB’s proposal?

Where Do I Go For More Information?

● NLRB proposed 29 CFR sec. 103.40 (9/14/18 Federal Register) 

● NLRB’s extension of comment period (11/5/18) 

● NLRB’s Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. case docket with decision (12/14/17; Case 25-CA-163189)

● NLRB’s Browning-Ferris Industries case docket with decision (8/27/15; Case 32– RC–109684)

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About the Author

Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 25 years. 

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at: tei@ix.netcom.com