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NLRB Opens Joint Employer Rule-making

Sept. 21, 2018
Procedure gets around allegations of a conflict of interest by a board member.

The National Labor Relations Board has opened a formal rule-making to change an Obama-era ruling on joint employer status that would allow independent contractors, leased and temporary employees to vote alongside the regular workforce on unionization.

The previous Democrat-dominated board reversed decades of policy holding the opposite in 2015, ruling that two companies can be considered joint employers if one has indirect control or rights of control over the other firm’s employees, even if those rights are never exercised. Typically, this involves staff leasing companies and franchisees.

The change was seen as an attempt by the board to give a leg up to ongoing union organizing campaigns targeting large-scale franchisors, such as McDonald’s. Industry associations and other employer groups strongly objected to the change, and the ruling was challenged in court in a case that is still ongoing.

The rule-making proceeding opened by the Republican board on September 14 proposes that an employer be considered a joint employer of a separate employer’s employees only if the two employers share or co-determine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision and direction.

More specifically, to be deemed a joint employer under the proposed regulation, an employer must possess and actually exercise substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine, the board said.

It added, “The board believes that this rule-making will foster predictability and consistency regarding determinations of joint-employer status in a variety of business relationships, thereby promoting labor-management stability, one of the principal purposes of the [National Labor Relations] Act.”

The rule-making proposal drew immediate praise from the National Retail Federation. “The broad and vague joint employer standard put in place during the previous administration made it harder to do business and discouraged entrepreneurship,” said David French, NRF’s senior vice president of government affairs. “When one business can be held liable for the actions of another independent company, the result is limitless liability and weaker job creation. It should be crystal clear what it means to be an employer, and that’s what this proposed rule will achieve. We are pleased the NLRB is working to clear up the confusion surrounding basic, business-to-business relationships and provide retailers large and small the certainty they need.”

For the most part, the NLRB makes policy by ruling on cases involving individual employers or small groups of employers facing the same issue. Current NLRB chairman John Ring, a Trump appointee, announced earlier this year that the board intended to open a rule-making to get around allegations of a conflict of interest that arose when the new board changed the Obama-era policy last December by voting on a case involving a different set of employers.

Alerted by union-friendly members of Congress (who most likely had been clued in by unions), NLRB Inspector General David P. Berry, a holdover from the Obama years, announced that Republican member William J. Emanuel should have recused himself from voting on the December ruling because his former law firm had represented one of the companies involved in the original 2015 case—not any of the firms involved in the December decision he voted on.

Emmanuel’s recusal meant the board was mired in a tie of two Republicans and two Democrat when it came to voting on this issue. The board then withdrew its December decision and Ring announced the board would take the rule-making approach.

The need for all of this has been questioned. Former Obama-era board member Craig Becker stubbornly refused to recuse himself from cases involving the Service Employees International Union (SEIU), where he had served as associate general counsel, even rebuffing repeated demands that he do so.

It also has not gone without notice that IG Berry remained silent regarding multiple accusations pointing out Becker’s ongoing conflicts, as were the members of Congress who complained so loudly about Emanuel, including Senators Bernie Sanders (I-VT), Kirsten Gillibrand (D-NY) Patty Murray (D-Wash.) and Elizabeth Warren (D-Mass.).

In May, the senators wrote to Ring that, “While it is hard to see how such an actiofn could reduce uncertainty, it is very easy to understand how it appeases corporate interests desperately seeking to escape liability under [the 2015 decision] and suppress their workers’ efforts to organize.”

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