Yesterday, the National Labor Relations Board (NLRB) issued new proposed rulemaking that eliminates the “direct and immediate” control specification in the 2020 rules and adopts a broader rule that finds joint employment if the employers “share or co-determine” essential job terms and conditions. The rule proposal was passed with two board members dissenting.
To state this another way, under the previous rule, joint employment between a staffing agency and its client would be found if the client exercised direct and immediate control over the temporary staff they engaged to work. Previously the “direct and immediate” test would maintain the staffing agency employer status while arguably recognizing the client as a third party as opposed to a joint employer.
The NLRB’s new rule broadens the definition of employers to cover both the vendor and client per the example above because they both “share or co-determine” the employee’s wages, benefits, and conditions such as safety and health rules while working at the client’s location.
This rule would also apply to franchisor-franchisee relationships. Where, for example, McDonalds holds its franchisees to certain employment related rules and guidelines. Previously under the “direct and immediate” rule, McDonald’s Corporation, the parent, would not be deemed a joint or co-employer with its franchisee operator because they would not exercise enough direct and immediate control over the franchisee’s employees in day-to-day operations. Under the proposed NLRB rules, the fact that McDonalds Corporation issues guidelines for jobs and employment policies to its franchisee would be sufficient to change the relationship with the parent-franchisor to one of joint employer. This sharing or co-determination of essential job terms would create the nexus for joint employment going forward. Both McDonald's Corporation and the franchise operator would be the employers.
This new rule significantly shifts the joint employment standard that will be used by the NLRB for organizing and defining who an employee is for protection under the NLRA. Independent contractor status is now open to question. The “gig” economy work where people come and go from delivery or transportation service sharing now will become a question of whether a company such as Uber, Lyft, or Door Dash are just putting parties together for a service or are they in fact employers.
To get to these new regulations, the NLRB’ rationales relied heavily upon already established common law agency principles as well as Court precedent on that common law on agency. It did attempt to establish that it was following the law previous to the passage of the National Labor Relations Act (NLRA) in 1938. The dissenting board members took issue with the majorities’ reasoning.
One important distinction is the NLRB majority sees these agency principles in play whether the parent company/primary employer exercises them or not. And further, “without regard to whether any exercise of such control is direct or indirect, such as through an intermediary (e.g., staffing agency).
This proposed regulatory scope of coverage extends the NLRB’s oversite franchises, supplier staffing, and the now called “gig” economy.
Who has the burden of proof when questions of regulatory coverage exist? The regulations confirm it is the party that is asserting joint employment that must establish that relationship by a preponderance of the evidence.
The NLRB requests comments on the proposed rule changes by November 7, 2022.
Source: NLRB 29 CFR Part 103 Notice of proposed rulemaking; request for comments.