United States: The Shifting Sands Of The Joint Employer Test

The National Labor Relations Board is signaling yet another change to the joint employer test in its recent issuance of a new proposed rule. The Board has waffled back and forth on this important issue recently, creating a lot of uncertainty for employers. Here's an explanation of what has been going on and what is likely to come.

Remind Me: What's Been Going On?

Many of you will remember the Board's 2015 decision in Browning-Ferris Industries. That decision rocked the labor world because it held that two or more companies are joint employers of the same employees if they "share or co-determine those matters governing the essential terms and conditions of employment." Our earlier coverage of that decision is here.

That new standard was a significant departure from the Board's earlier, well-established precedent which held that a company must exert direct and immediate control over hiring, firing, discipline, supervision, and direction to be a joint employer. Under Browning-Ferris, indirect control or a reserved—even if unexercised—right to control was sufficient. The Board also expanded the "essential terms" to include scheduling, seniority, overtime, assigning work, and determining the manner and method of work performance.

Employers and management-side labor lawyers were obviously not happy with the Browning-Ferris decision, while employee and union-side folks were pleased. Luckily, however, the decision had a relatively short (initial) lifespan.

The Board overturned Browning-Ferris in December 2017 in its Hy-Brand Contractors Ltd. decision. That case adopted a test more closely resembling the pre-Browning-Ferris joint employer test, requiring proof that: (1) a putative joint employer actually exercised control rather than merely had a (an unexercised) right to do so; (2) the control is direct and immediate (as opposed to indirect); and (3) the joint employer will not result from "limited and routine" control.

It looked like we'd gone back to the old standard and would have some stability on this issue. But then some drama emerged at the Board.

Just a couple of months after the Hy-brand opinion's publication, the Board's Inspector General reported that new Board member William Emanuel should not have participated in the Hy-Brand decision because his former law firm represented one of the two alleged joint employers in the Browning-Ferris case. Based on the report, the other four members of the Board then unanimously vacated Hy-Brand, effectively reinstating the Browning-Ferris standard.

And now there's a new development.

What's Happening Now?

On September 13, 2018, the Board released a draft rule to re-define the joint employer test. Under the proposed rule, a company would only be considered a joint employer if it: "possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine." Further, "[i]ndirect influence and contractual reservations of authority" will not establish a joint employer relationship under the proposed new rule.

The proposed new rule requires a 60-day public comment period. The Board will then consider the public comments prior to publishing a final version of the rule, which we probably won't see until early- to mid-2019.

So, to recap (and to make sure we're all on the same page): Browning-Ferris's broad test is still in place for joint employer liability under current Board law. It will remain that way – until it is either reversed (again) by another decision or a final rule is published by the Board setting a new standard. Employers, therefore, need to continue to use caution when evaluating the extent to which their contractual relationships or actions might be interpreted as giving them indirect control over another company's employees. And, of course, keep paying attention here for the latest updates!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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