Recently, the National Labor Relations Board (NLRB) issued a Notice of Proposed Rulemaking which is intended to roll back a controversial 2015 decision that loosened the board’s test for determining whether businesses like franchisors and franchisees are joint employers under the National Labor Relations Act.
The proposed rule states that entities will be considered joint employers “only if the two employers share or codetermine the employee’s essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction.” The Board will only find a business jointly employs another company’s workers if it has “direct and immediate” control over these “essential terms and conditions,” rather than “limited and routine” control.
This rule would overturn a test previously established in the NLRB’s 2015 Browning-Ferris Industries of California, Inc. decision which broadened the scope of joint employment to situations where a company only has to have “indirect” control over another company’s workers. In doing so, the NLRB overturned decades of precedent previously requiring “direct and immediate control.”
With the Browning-Ferris standard, the focus was not on whether a presumed joint employer actually exercised sufficient control over terms and conditions of employment, only if they could exercise said control. This raised much concern in the franchise industry.
In December 2017, the NLRB’s Republican majority overturned the Browning-Ferris decision in a case involving Hy-Brand Industrial Contractors Ltd. and returned the joint employer standard to “direct and immediate control.” However, this ruling was then overturned just months later when ethics officials ruled that one of the NLRB members should have recused himself because his participation in Hy-Brand violated a bar on board members deciding “particular matters” they or their prior law firms worked on. Accordingly, the Browning-Ferris decision was reinstated.
With this new Notice of Proposed Rulemaking, the NLRB is attempting to provide clarity on the joint employer standard and return it to the original precedent pre-Browning-Ferris. The federal rulemaking process does require regulators to respond to the substance of every comment they receive, which will most likely be a daunting task given the existing controversy. However, it is a welcome sign of movement into a move favorable direction for those in the franchise industry.
Anyone wishing to provide comments on the proposed rule must submit their comments so that they are received by November 13, 2018.
