On September 6, 2022, the National Labor Relations Board announced its intention to rescind and revise its joint-employer standard. In doing so, the Board has laid the groundwork for labor unions to more easily target employers that have a business association with another employer, but do not otherwise substantially direct or control their employees.

The Board’s current joint-employer standard was issued via rulemaking in February 2022. Under this standard, the Board may view one business as a joint employer of another business’ employees “only if the two employers share or codetermine the employees’ essential terms and conditions of employment.” To do that, the putative joint employer must “possess and exercise such substantial direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees.” The essential terms and conditions of an employees’ employment include their wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction. In essence, the Board abandoned its subjective and clumsy method from Browning-Ferris Industries, in favor of a more predictable and levelheaded approach.

Now, the Board once again seeks to expand its reach by backpedaling towards Browning-Ferris. In its proposed rule, the Board would find a joint employer when the employer “possess[es] the authority to control (whether directly, indirectly, or both) or to exercise the power to control (whether directly, indirectly, or both), one or more of the employees’ essential terms and conditions of employment.” Further, the Board’s proposed rule states that “[p]ossessing the authority to control is sufficient to establish status as a joint employer, regardless of whether control is exercised,” and “[c]ontrol exercised through an intermediary person or entity is sufficient to establish status as a joint employer.”

The Board’s proposed change greatly expands the joint-employer classification. For example, pursuant to its proposed rule, the Board could now impute an employer with joint liability without evidence that it actually exercised control over employees’ essential terms and conditions of employment.

The Board claims that its proposed joint-employer rule adequately provides employers with relevant guidance and is “consistent with common law.” Its expansive proposal does neither. As the Board’s dissenting members Marvin Kaplan and John Ring argue, the proposed rule “radically expands the circumstances in which joint employer status can be found.” Noting the complexity and nuance of the proposed new test, Kaplan and Ring warn that “unions, employers, and employees would find no guidance in the rule itself.”

Although the Board couches its notice of proposed rulemaking as a solicitation for public comment, the thrust of its proposal is clear. The Board will push to classify a larger number of employers as jointly responsible for collective bargaining with labor unions and jointly liable for alleged unfair labor practices. The Board will likely issue its final rule after the public comment period ends on November 6, 2022.

In the meantime, prudent employers will be mindful of the Board’s proposed joint-employer rule and review any ramifications of its issuance with their labor counsel.

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