The NLRB’s Proposed Joint Employer Rule – A Direct, Indirect, Could Have, Could Have Type of Test, Even If You Don’t Actually Do It For Joint Employment | Bradley Arant Boult Cummings LLP

Last Tuesday, the National Labor Relations Board (NLRB) released a proposed early rule on joint employer status. The proposed rule, which is designed to apply for all purposes under the National Labor Relations Act (NLRA), including both union representation and unfair labor practice contexts, is important for businesses that depend on labor provided by a third party, including contractors, temporary worker agencies and employee leasing agencies, as well as franchise relationships. If passed, the proposed rule could have a particular impact on sectors such as healthcare, restaurants and suppliers.

The proposed rule states that “common law agency principles” will govern whether two employers jointly employ a worker or group of workers. Unfortunately, this provides little clarity or direction for businesses. The rest of the rule suggests that almost any work-sharing agreement can now be construed as joint employment. Some of the highlights of the proposed rule:

  • Entities will be considered co-employers if they “share or co-determine” matters governing the “essential terms and conditions of employment” of workers.
  • “Sharing or co-determination” is defined as directly or indirectly exercising control over, or having the power to control (even if not exercised), one or more terms and conditions of employment.
  • “Terms and conditions of employment” are broadly defined to include, but are not limited to, “wages, benefits and other compensation; working hours and schedule; hiring and firing; discipline; health and security at work; surveillance; assignment; and work rules and guidelines governing the manner, means or methods of work performance.

What does this mean for employers?

The text of the proposed rule is very broad and appears designed to encompass most labor agreements with third parties, opening companies up to union organizing or accusations of unfair labor practices from workers suspected of being employed by third parties. The proposed rule suggests that businesses using third-party labor should examine not only their actual day-to-day control over any aspect of third-party employees, but also the underlying contractual language that governs their relationships with third parties. For example, on a strict reading of the Proposed Rule, any contractual language that provides or suggests the direct or indirect ability to determine hours of work, schedules, placement, security, assignments, or work rules for employees of a third party, even if it is not actually exercised, it could result in the recognition of joint employment. Removing all of these potential control elements may not be practical, feasible or even advisable (for example, it may be necessary to maintain a safe workplace to retain the power to dismiss an employee of a contractor who adopts unsafe work behavior or breaking employer rules) . However, even in such circumstances, companies should review their contractual arrangements taking into account the allocation of risk or indemnification in relation to this retained authority.

The proposed rule is likely a signal of what to expect from other agencies under the current administration. If this proposed rule becomes the final rule, it may also influence some tribunals’ interpretations of joint employment in other contexts, such as anti-discrimination and wrongful dismissal laws. This could impact the “common law agency principles” that the DOL proposes as the basis for the proposed rule.

The proposed rule is open for public comment and is not final. If your company uses third-party labor, you must submit a comment. While the current NLRB final rule is unlikely to deviate significantly from the proposed rule, you never know unless you try.

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