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On December 28, a panel of the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit), in a 2-1 decision (Browning-Ferris Indus. of Cal. v. NLRB, No. 16-1028), invalidated the National Labor Relations Board’s (NLRB or Board) controversial joint employer test adopted in Browning-Ferris, 362 NLRB No. 186 (2015) (Browning-Ferris). The Court remanded the case back to the Board for further proceedings consistent with its opinion.

Joint employer status potentially can exist under the National Labor Relations Act (NLRA) — and other employment laws — in a variety of circumstances including labor user-supplier, parent-subsidiary, contractor-subcontractor, franchisor-franchisee, predecessor-successor, creditor-debtor, and contractor-consumer relationships.

The Board’s joint employer doctrine is significant because a unionized joint employer has or shares an obligation to collectively bargain over those employment terms it controls or jointly controls. Similarly, a union or non-union joint employer may be found to have committed unfair labor practices within the scope of its control over the workplace. Additionally, under the NLRA, a union can engage in certain forms of picketing, secondary boycotts, or other economic protest activity against an entity determined to be a joint employer instead of a neutral third party.

In Browning-Ferris, the Board majority (3-2) held that even when two entities never have exercised joint control over essential employment terms, and even when any such joint control is not “direct and immediate,” they still will be joint employers based on the existence of unexercised “reserved” joint control or “indirect” control, including control that is “limited and routine.”

In reviewing Browning-Ferris, the D.C. Circuit majority (i.e., Judges Patricia Millett and Robert Wilkins) held that the NLRB “can” consider indirect control and unexercised reserved control as joint employer factors; and, if so, has flexibility in determining what weight to give those factors. As a result, a future Democratic NLRB will have the ability to recognize at least some concepts of indirect and/or reserved control as relevant to joint employer analysis. However, in invalidating the Browning-Ferris formulation, the Court found that the Board’s current test failed to adequately distinguish between indirect control over employment terms and influence or control over “routine” matters related to the formation and maintenance of contractor arrangements. The D.C. Circuit identified cost-plus billing, cost containment measures, providing an “advance description of tasks,” setting basic parameters of performance, and developing contractor “objectives” and “expectations” as examples of actions which — although they may indirectly control or influence a putative contractor’s employees — are not pertinent to a joint employer assessment. The Court sent the case back to the Board to “erect some legal scaffolding that keeps the inquiry within traditional common law bounds.”

The D.C. Circuit also concluded that a remand to the Board was required because the Browning-Ferris decision did not delineate what constitutes “meaningful” collective bargaining — either in general, or with respect to Browning-Ferris’ particular circumstances. In other words, the Court found that the NLRB had not sufficiently explained what employment terms Browning-Ferris co-controlled which made “meaningful” bargaining possible. The Court also appeared to be indicating that the Board needed to address the parameters of any bargaining related to the contours of a joint employer relationship itself, e.g., allocation or reallocation of bargaining obligations between the joint employers.

Although the Court rejected the argument that substantial direct control is the most important factor in any joint employer analysis, the Court found that Browning-Ferris did not present facts as to whether reserved (or indirect) control apart from any actual control alone could result in a joint employer finding. As a result, that question seemingly remains open and unresolved.

In dissent, Judge A. Raymond Randolph criticized the majority for issuing its decision given that the NLRB is presently undertaking joint employer rulemaking. Judge Randolph also considered the majority to have misconstrued the governing common law control concepts.

The D.C, Circuit’s decision will be far from the last word in the joint employer controversy. Apart from the NLRB having been ordered to reformulate the Browning-Ferris test for application to, at least, Browning-Ferris, the Board is engaged in comprehensive joint employer rulemaking which could supersede any test to be developed through case adjudication.

If you would like further information, please contact Seyfarth Shaw at seyfarthshaw@seyfarth.com.

By: Monica Rodriguez, Esq.

Seyfarth Synopsis: In September 2018, the NLRB released its new proposed rule regarding the joint employer standard. The NLRB extended the comment period twice since the release of the new proposed rule. Comments are now due on or before January 14, 2019.

Individuals waiting on pins and needles in anticipation of the outcome of the new proposed joint employer rule will have to wait a bit longer.

On September 14, 2018, the NLRB published its new proposed rule, which Seyfarth discussed here and here. The new proposed rule attempts reverse the joint employer rule created by the Obama Board in 2015. Under the proposed rule, for another employer to be a joint employer, the other employer must possess and exercise substantial, direct and immediate control over the essential terms and conditions of employment in a manner that is more than merely “limited and routine.” Indirect influence of the terms and conditions, contractual reservations of authority never invoked, and mere “limited and routine” authority are insufficient.

Since publishing the rule for comment, the NLRB has twice extended the deadline to submit comments. The new deadline to submit comments is January 14, 2019. The deadline to reply to comments submitted is January 22, 2019. The number of comments submitted is 25,543 and counting.

If you would like to submit a comment or have a comment drafted and submitted on your behalf, please contact your Seyfarth attorney.

 By: Monica Rodriguez, Esq.

Seyfarth Synopsis: The NLRB suspends its request for briefing regarding potential changes to the construction industry bargaining relationship in light of Charging Party Union’s withdrawal of the underlying charge.

The review of whether to make changes to construction industry bargaining relationship has been put on hold. As Seyfarth reported, the NLRB had issued a request for amicus briefs on what the standard should be to determine the majority status of construction unions that have entered into pre-hire agreements, which are permitted under the Act.

Because the Charging Party Union requested a withdrawal of the underlying charge, the NLRB suspended the request for additional briefs on October 15, 2018, pending the Board’s decision on the request for withdrawal. So, employers and unions alike will have to wait and see before we receive additional clarity regarding pre-hire agreements.

  By: Ashley Laken, Esq.

Seyfarth Synopsis: Millennials are an ever-growing portion of the workforce, and they generally have favorable views toward labor unions.  Employers would be well-advised to be attuned to this reality and they may want to consider developing and implementing strategies aimed at heading off union organizing before it starts.

According to a Pew Research Center analysis earlier this year, Millennials now make up more than 35% of the U.S. labor force, making them the largest generation currently in the workforce.  Their numbers are continuing to grow, and it’s estimated that they will make up 75% of the labor force by 2025.

At the same time, according to an analysis by the Economic Policy Institute, the number of union members in the U.S. grew by 262,000 in 2017, and 76% of that increase was comprised of workers under age 35.  Many believe that one reason younger workers are joining labor unions is because they are concerned about workforce trends that are increasing work insecurity, including the rise of automation and companies’ increased use of independent contractors.

Millennials are also generally known to have favorable views toward labor unions.  A 2017 report published by the Pew Research Center showed that adults younger than age 30 view unions more favorably than corporations.  According to that report, 75% of adults aged 18 to 29 said they have a favorable opinion of unions, while only 55% said they have a favorable view toward corporations.  And in late summer of this year, the National Opinion Research Center at the University of Chicago found that 48% of all nonunionized workers would join a union if given the opportunity to do so.

Millennials have also demonstrated an interest in social activism.  Many younger workers perceive unionization as potentially combating those aspects of jobs that they view as suboptimal, including perceived racial and gender discrimination and a lack of advancement opportunities.  Union organizers are increasingly recognizing that younger workers place a lot of importance on equitable treatment, upward mobility, fair wages, and work/life balance.  Unions are also using new and often informal methods to recruit employees, including social media and text messaging, effectively “speaking the language” of Millennials.

Indeed, the last few years have seen union organizing in industries that traditionally haven’t been unionized, including digital media, nonprofits, and coffee shops.  It almost goes without saying that employees in these industries are often predominantly comprised of Millennials.

And the recent walkout by thousands of non-unionized Google employees at offices around the world was the first protest of its kind by well-compensated tech employees, many of whom are Millennials.  The stated demands of the brief walkout, which were posted on an Instagram page, included an end to forced arbitration in cases of harassment and discrimination, a commitment to “end pay and opportunity inequity,” to “promote the chief diversity officer to answer directly to the CEO,” and to have a “clear, uniform, globally inclusive process for reporting sexual misconduct safely and anonymously.”

Although demands such as these fall outside the scope of what the National Labor Relations Board considers to be mandatory subjects of bargaining between employers and labor unions, they shed light on some of the concerns held by the modern workforce.  On this point, in a recent national survey conducted by MIT, a majority of workers said they don’t have as much of a voice as they believe they should on issues ranging from compensation and benefits to protection against harassment.  These sorts of sentiments can provide fertile feeding ground for union organizers.

Even though many employers recognize some of the negative aspects that can come along with union representation, many employees (including managers and supervisors) might not.  For example, union representation can and often does result in a loss of flexibility in addressing employee issues, and it also results in the insertion of an outside third party between management and employees, which can create a counterproductive “us versus them” attitude.

Employers would therefore be well-advised to train their managers and supervisors on these topics, and also to be on the lookout for union organizing activity among their employees.  Employers should also consider providing positive employee relations training for their managers and supervisors, which could head off union organizing activity before it starts.

 

By:  Alison C. Loomis

Seyfarth Synopsis:  Employers may challenge whether unions still have majority support between the date that agreement on a collective bargaining agreement was reached and the date that the agreement becomes effective.

The Board’s contract-bar doctrine limits the circumstances under which an election petition is processed if the petition is filed during the term of a collective bargaining agreement.  In other words, employers (or rival unions) are “barred” from filing an election petition during the “contract” period.  In Silvan Industries, the Board held that employers are not barred from filing a petition if it is in the time period after an agreement has been reached but before that agreement’s effective date.

On October 13, 2016, the employer and union reached tentative agreement on a contract, which was set to go into effect on November 7, 2016.  On October 15th, the union notified the employer that the bargaining unit employees had ratified the contact, and the parties agreed to meet in person on October 25th to execute the contract.

On October 25th, an employee gave the employer a petition which expressed opposition to the union.  Later that day, the employer filed an RM petition with the NLRB regional office seeking to challenge whether the union still had majority support of the bargaining unit.  Also on that day, as previously planned, the parties executed the contract.

The Regional Director dismissed the petition without a hearing, on the ground that it was filed after the union accepted the employer’s contract offer.

In a 3-1 decision, the Board majority granted the employer’s request for review of the dismissal, agreeing with the employer that the parties’ agreement cannot bar an election petition which was filed prior to the agreement’s effective date.  In so finding, the majority stated that “the Employer filed its [election] petition at a time when there was no contract in effect, which means there was no contract to bar the Employer’s petition.  Accordingly, the Board is required to process the petition, thereby giving employees the election that Congress contemplated when it provided for Board-conducted elections to resolve questions concerning representation.”

The majority noted that the employer filed the petition at a time when it could not have lawfully withdrawn recognition of the union.  Filing the petition in response to its employees’ notification of opposition to the union was good-faith bargaining, “as required by the Act.”

Although the particular timeframe presented in Silvan may be unique, it provides employers with a strategic consideration when approaching the effective date of a collective bargaining agreement.

 

By: Tiffany Tran, Esq.

Seyfarth Synopsis: In another signal that the Board may overturn the Obama Board’s decision in Purple Communications allowing employees to use their employer’s email systems to communicate about wages, hours, working conditions and union issues, the Board recently published a letter reiterating its decision to reconsider Purple Communications and invited comment from the public on the standard the Board should apply in these cases.

Under Purple Communications, 361 NLRB 1050 (2014), employees who have access to their employer’s email system for work-related purposes have a presumptive right to use that system for Section 7 protected communications regarding wages, hours, working conditions and union issues on nonworking time. Purple Communications overturned the Board’s decision in Register Guard, 351 NLRB 1110 (2007), holding that employers may lawfully impose neutral restrictions on employees’ non-work-related uses of their email systems, even if those restrictions have the effect of limiting the use of those systems for communications regarding union or other protected concerted activity.

In December 2017, the newly appointed NLRB General Counsel Peter Robb issued a memo containing a broad overview of his initial agenda as General Counsel. The memo cited Purple Communications as one of the cases the GC “might want to provide the Board with alternative analysis.” We previously blogged about the GC’s memo on this issue here.

Less than one year later, in August 2018, the Board announced, and Seyfarth blogged about it here, that it would invite briefing on whether it should “adhere to, modify, or overrule Purple Communications.” The Board made this announcement in Caesars Entertainment Corporation d/b/a Rio All-Suites Hotel and Casino, a pending case before the board that directly applied Purple Communications. In Caesars Entertainment Corporation d/b/a Rio All-Suites Hotel and Casino, the Administrative Law Judge had found that the employer’s policy prohibiting the use of its email systems to send non-business communications violated Section 8(a)(1) of the NLRA under Purple Communications. The employer excepted to the decision and asked the Board to overrule Purple Communications. Rather than immediately issue a decision, the Board invited the public to comment on this issue.

After extending the deadline to file briefs until October 5, 2018, nineteen amicus briefs were filed from various unions, senators, and interested groups on both sides of the issues. Notably, the GC submitted a brief urging the Board to overrule Purple Communications and return to the holding of Register Guard. The GC further urged that exceptions should be made on a case-by-case basis where the Board determines that employees are unable to communicate in any way other than through the employer’s email system. Finally, the GC argued that Register Guard should apply to other employer-owned computer resources not made available by the employer to the public.

And while five Democrat Senators recently sent a letter to NLRB Chairman John Ring expressing concern over the Board’s invitation to file briefing on the Purple Communications standard, Chairman Ring’s response letter reaffirmed the Board’s decision to reconsider Purple Communications and stated “the Board requested briefing from all interested parties to ensure we are fully informed of the arguments on all sides.”

Although the Board has yet to issue its decision, the Board’s and GC’s actions appear to signal that employers may continue to have hope about winning this battle.

By: Christopher W. Kelleher and John T. Ayers-Mann

Seyfarth Synopsis: Though the NLRA provides robust protections for striking employees, the Board’s decision in Consolidated Communications demonstrates some of the limits of those protections. On October 2, 2018, the NLRB held that inherently dangerous acts calculated to intimidate do not fall within the broad scope of the NLRA’s protections.

The National Labor Relations Board, in a recent decision, has provided further guidance on the limits of protections for strike-related activities.  In Consolidated Communications, Cases 14-CA-094626, 14-CA-101495 (NLRB Oct. 2, 2018), the Board found that striking employees’ use of vehicles to intentionally obstruct non-striking employees traveling on the road was an “inherently dangerous” activity calculated to intimidate non-strikers, and thus forfeited the National Labor Relations Act’s protections.

The facts underlying the case arose while the company was engaged in a contentious strike with its union, IBEW Local 702.  During the course of the strike, two striking employees, Hudson and Weaver, were traveling on a highway when they spotted and approached a company vehicle driven by two managers.  The striking employees drove alongside each other in front of the company truck in order to prevent it from passing.  After some time, a queue of vehicles grew behind one of the blocking employees, who then decided to transition into the lane in front of the company truck to allow cars to pass.  The company truck attempted to pass as well, but Hudson returned to the left lane to intentionally block its path.  As a result, one of the managers driving the truck filed a complaint and Hudson was fired for her actions.

Initially, the Board adopted the Administrative Law Judge’s determination that Hudson’s activities were protected by Section 8(a)(3) of the Act, focusing on the fact that her actions were nonviolent. The D.C. Circuit reversed the Board’s decision, explaining that while the absence of violence was relevant, the Board failed to focus on the central legal question of whether the strikers’ actions may reasonably tend to coerce or intimidate.  The D.C. Circuit remanded the case to the Board for further proceedings.

On remand, the Board held in a 2-1 decision that Hudson’s actions were unprotected under the Act.  The Board found that Hudson and Weaver sent a clear message to the managers that they were intentionally using their vehicles to obstruct or impede passage.  From those acts, the Board reasoned, Hudson and Weaver’s actions were calculated to intimidate the two managers.  Further, the Board concluded that intentionally obstructing a public highway jeopardized the lives of all motorists driving on the highway at that time, and was therefore “inherently dangerous.”  Because Hudson and Weaver’s actions were both inherently dangerous and calculated to intimidate, their actions were not protected by the NLRA.

By: Samuel Sverdlov and Howard Wexler

Seyfarth Synopsis: The E-Verify program has become a controversial topic in the political arena and throughout workplaces nationwide.  Last month, the NLRB held, amongst other things, that an employer violated the NLRA by unilaterally enrolling in the E-Verify program without first bargaining with the union.

Immigration law has long been at the forefront of political discourse in the United States.  One question that employers continue to grapple with is whether they should enroll in  E-Verify — a U.S. Department of Homeland Security website that allows employers to determine whether employees are eligible to work in the United States.  The NLRB’s recent decision in  The Ruprecht Company only complicates matters as it held than an employer committed an unfair labor practice when it failed to first bargain with its employees’ union prior to enrolling in E-Verify.

By way of background, in January 2015, a meatpacking company received a subpoena from ICE requesting documents regarding its employee verification process.  Following the receipt of the subpoena, the company unilaterally enrolled in E-Verify.  A month later, the union contacted the company regarding rumors of an ICE audit, which the company confirmed.  Shortly thereafter, ICE informed the company via letter that it apprehended 8 of its employees who were deemed unauthorized to work in the United States.  The company informed the union of the letter, and the union requested a copy, which the company provided with the names redacted.  The company refused to provide an unredacted copy until it had an opportunity to confer with counsel.  (The company later received another letter from ICE regarding 194 additional employees who were also deemed unauthorized to work in the United States.)  The company thereafter informed the union that it a confidentiality agreement to provide the unredacted letters.  Two weeks later, the company provided the union with a draft confidentiality agreement, which the union did not sign.  The union did not provide a copy of a draft confidentiality agreement at any time.  In the interim, the company began terminating bargaining-unit employees deemed unauthorized to work in the United States.  The union thereafter filed ULP charges against the employer arguing that the company’s enrollment in E-Verify and refusal to provide the unredacted ICE letters violated the NLRA.

With respect to E-Verify, the Board held that the company’s unilateral enrollment in the E-Verify program “compromised the union’s ability, and the [company’s] incentive, to engage in the give-and-take process with respect to E-Verify by changing the starting point for bargaining.  Once the [company] enrolled in the program, it had the greater leverage.”  Consequently, the Board ordered the company to withdraw from the E-Verify program at the union’s request.

With respect to the ICE letters containing bargaining-unit employee names, the Board held that the company violated the NLRA by withholding the letter.  The Board held that the names of the employees are relevant to the union’s representative duties.  Further, even if the names of the employees are entitled to confidentiality protections, the company “did not timely assert a confidentiality interest or propose a reasonable accommodation and engage in accommodation bargaining.”  Specifically, the Board held that “the party asserting confidentiality has the burden of proposing the accommodation.”  Thus, it was untimely for the company to wait two weeks to send the union a draft confidentiality agreement because the delay “hampered any ability the [u]nion may have had to timely assist adversely affected employees.”  As a result, the Board ordered the company to provide the unredacted ICE letters to the union.

Ruprecht serves as an example of the intense scrutiny an employer faces during an ICE audit.  Not only does the employer have to defend itself in the face of a government investigation, but the company’s actions are also being closely monitored by both its workforce and the public at-large.  Mistakes can lead to ULP charges, public backlash, and more.  Following Ruprecht, employers with unionized workforces should be cautious.  To that end, employers should consult with labor and immigration counsel when considering enrollment in E-Verify, or during any inquiry by the government regarding the citizenship of their employees.

By Monica Rodriguez and Jeffrey A. Berman

Seyfarth Synopsis: The National Labor Relations Board recently commenced an examination of the continued validity of a number of Obama Board actions. These include joint employer status, employee use of company email systems, and the “quickie election rules.” This blog provides an overview of the Board’s recent activities.

Just like Vladimir  and Estragon in Waiting for Godot, employers, unions, and employees are waiting for the National Labor Relations Board (“NLRB”) to finalize the actions it recently commenced.

Here are the highlights of the Board’s and General Counsel’s recent activities.

New Proposed Joint Employer Standard

Just this week, on September 13, 2018, the Board commenced the rule making process with an eye toward changing the current joint employer standard. Unlike Board decisions, which are subject to change as the composition of the Board majority changes, Board-issued rules are much more permanent. For a more in depth discussion, see Seyfarth’s management alert.

Review Of The Board’s Ethics And Recusal Guidelines

The Board’s ethics and recusal procedures recently received a fair amount of attention in connection with its joint employer decisions. In response, Chairman Ring announced that the Board would undertake a “comprehensive internal ethics and recusal review to ensure that the Agency has appropriate policies and procedures in place to ensure full compliance with all ethical obligations and recusal requirements.”

On June 8, 2018, the Board formally announced that it would commence a review of its policies and procedures governing ethics and recusal requirements for Board Members. Eventually, the Board will issue a report, which should contain findings and establish guidelines for the future.

Changes To Bargaining Relationship Standards In The Construction Industry

Focusing its attention on the construction industry, the Board recently issued a request for amicus briefs on what the standard should be to determine the majority status of construction unions that have entered into pre-hire agreements, which are permitted under the Act.

Most bargaining relationships are governed by Section 9(a) of the Act, which requires the union to have the support of a majority of employees in the bargaining unit. However, Section 8(f) of the Act allows construction industry employers to extend recognition to unions without necessity of showing majority support.

In Staunton Fuel & Material, 335 NLRB 717 (2001), the Obama Board held that a construction union could continue its status as the majority representative merely by showing that the collective bargaining agreement unequivocally indicates that the union requested and was granted recognition as the majority or Section 9(a) representative of the unit employees, based on the union having shown, or having offered to show, evidence of its majority support.

The Board has asked for amicus briefs on whether it revisit Staunton.

The Board also has requested amicus brief on whether a construction industry employer that wants to challenge the extension of Section 9(a) recognition pursuant to a pre-hire agreement must do so within six months of the time that recognition was extended.

The briefing is due October 26, 2018.

Employee Use Of Employer Email Systems

As Seyfarth reported, shortly after becoming General Counsel, Peter Robb, issued a GC memo signaling that the Trump Board may review the issue of whether employees have the right to use employer email systems for protected activity. Last month, the Board invited interested parties to file briefs on the issue.

In 2014, the Obama Board held that employees who have been given access to their employer’s email system for work-related purposes have a presumptive right to use that system, on nonworking time, for communications protected by the Act. In doing so, the Board overruled the previous rule, which held that employees did not have such a statutory right.

The Board now invites briefing to see if the Board should revert back to the old rule, or adhere to, modify, or overrule the old standard. The Board also wants to know that, if it reverts back to the old rule, should the Board carve out any exceptions. Because the case currently pending before the Board involves computer resources, not just email systems, the Board also seeks input regarding whether a different standard should apply to computer resources.

The initial deadline to submit briefing was September 5, 2018, but the Board extended the briefing period to October 5, 2018.

Misclassification Of Employees

The previous General Counsel, Richard Griffin, successfully argued to several Administrative Law Judges that misclassifying employees as independent contractors constitutes an unfair labor practice. In addition, Griffin’s Assistant General Counsel issued an Advice Memorandum advising a Regional Director to issue a complaint premised on the misclassification theory, which Seyfarth reported here.

One of the cases brought under former General Counsel currently is pending before the NLRB, Velox Express, Inc. (15-CA-184006). Because of the importance of the case, the NLRB invited interested parties to file amicus briefs. One of the amicus briefs was filed by the current General Counsel, Peter Robb. Parting company with Griffin, Peter Robb has argued that misclassifying an employee as independent contractor, which deprives the worker of protection under the Act, standing alone, does not violate the Act.

2014 Representation Election Regulations

As previously discussed, in December 2017, the Board invited comments regarding whether the quickie election rules promulgated by the Obama Board should be retained, modified or rescinded. The comment period was extended to April 2018. Although the comment period has ended, the Board has yet to release its findings.

We will continue to monitor the Board’s developments on these issues to see if the tides will change for employers.  Based on the Board’s and GC’s actions, it seems like there is hope for employers yet.

Seyfarth Synopsis: The National Labor Relations Board (NLRB or Board) announced that it will publish a Notice of Proposed Rulemaking on September 14, 2018 in the Federal Register regarding its standard for assessing whether a joint-employer relationship exists.

Under the NLRB’s joint-employer doctrine, the Board analyzes whether two separate business entities (e.g., service provider and client, franchisor and franchisee) share sufficient control over key employment terms such that both enterprises may have joint collective bargaining obligations, or may be jointly liable for certain unfair labor practices.   The reach of the NLRB’s joint-employer doctrine determines whether a business relationship intended by the parties that only one of them is to be an employer (i.e., an independent contractor relationship) will be recognized as such under the National Labor Relations Act.

In August 2015, in a 3-2 decision, the NLRB overruled 30 years of its precedent to dramatically expand its joint-employer standard.  (Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015)) (“BFI”).   In BFI, the Board majority held that it no longer would require proof that a putative joint employer has exercised any “direct and immediate” control over the essential working conditions of another company’s workers.   Under the Board’s BFI standard, a company could be deemed a joint-employer even if its “control” over the essential working conditions of another business’s employees was indirect, limited and routine, or contractually reserved but never exercised.

The NLRB’s BFI decision currently is on appeal to the United States Court of Appeals for the District of Columbia Circuit. Seyfarth Shaw represents the appellant, Browning-Ferris Industries of California, Inc., in that case.

Under the NLRB’s new proposed rule — set forth below with accompanying examples — an employer may be found to be a joint-employer of another employer’s employees only 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. Indirect influence and contractual reservations of authority  no longer would be sufficient to establish a joint-employer relationship.

In announcing the new proposed joint-employer standard, NLRB Chairman John Ring was joined by Board Members Marvin Kaplan, and William Emanuel. Board Member Lauren McFerran dissented from the proposed rule.  Employers and others who are interested in submitting comments to the Board regarding the proposed rule are being provided 60 days to do so.  If you potentially would like to submit a comment or have one drafted and submitted on your behalf, please do not hesitate to contact your Seyfarth Shaw attorney.

Proposed Rule and Examples

§ 103.40: Joint employers

An employer, as defined by Section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.

EXAMPLE 1 to § 103.40. Company A supplies labor to Company B. The business contract between Company A and Company B is a “cost plus” arrangement that establishes a maximum reimbursable labor expense while leaving Company A free to set the wages and benefits of its employees as it sees fit. Company B does not possess and has not exercised direct and immediate control over the employees’ wage rates and benefits.

EXAMPLE 2 to § 103.40. Company A supplies labor to Company B. The business contract between Company A and Company B establishes the wage rate that Company A must pay to its employees, leaving A without discretion to depart from the contractual rate. Company B has possessed and exercised direct and immediate control over the employees’ wage rates.

EXAMPLE 3 to § 103.40. Company A supplies line workers and first-line supervisors to Company B at B’s manufacturing plant. On-site managers employed by Company B regularly complain to A’s supervisors about defective products coming off the assembly line. In response to those complaints and to remedy the deficiencies, Company A’s supervisors decide to reassign employees and switch the order in which several tasks are performed. Company B has not exercised direct and immediate control over Company A’s lineworkers’ essential terms and conditions of employment.

EXAMPLE 4 to § 103.40. Company A supplies line workers and first-line supervisors to Company B at B’s manufacturing plant. Company B also employs supervisors on site who regularly require the Company A supervisors to relay detailed supervisory instructions regarding how employees are to perform their work. As required, Company A supervisors relay those instructions to the line workers. Company B possesses and exercises direct and immediate control over Company A’s line workers. The fact that Company B conveys its supervisory commands through Company A’s supervisors rather than directly to Company A’s line workers fails to negate the direct and immediate supervisory control.

EXAMPLE 5 to § 103.40. Under the terms of a franchise agreement, Franchisor requires Franchisee to operate Franchisee’s store between the hours of 6:00 a.m. and 11:00 p.m. Franchisor does not participate in individual scheduling assignments or preclude Franchisee from selecting shift durations. Franchisor has not exercised direct and immediate control over essential terms and conditions of employment of Franchisee’s employees.

EXAMPLE 6 to § 103.40. Under the terms of a franchise agreement, Franchisor and Franchisee agree to the particular health insurance plan and 401(k) plan that the Franchisee must make available to its workers. Franchisor has exercised direct and immediate control over essential employment terms and conditions of Franchisee’s employees.

EXAMPLE 7 to § 103.40. Temporary Staffing Agency supplies 8 nurses to Hospital to cover during temporary shortfall in staffing. Over time, Hospital hires other nurses as its own permanent employees. Each time Hospital hires its own permanent employee, it correspondingly requests fewer Agency-supplied temporary nurses. Hospital has not exercised direct and immediate control over temporary nurses’ essential terms and conditions of employment.

EXAMPLE 8 to § 103.40. Temporary Staffing Agency supplies 8 nurses to Hospital to cover for temporary shortfall in staffing. Hospital manager reviewed resumes submitted by 12 candidates identified by Agency, participated in interviews of those candidates, and together with Agency manager selected for hire the best 8 candidates based on their experience and skills. Hospital has exercised direct and immediate control over temporary nurses’ essential terms and conditions of employment.

EXAMPLE 9 to § 103.40. Manufacturing Company contracts with Independent Trucking Company (“ITC”) to haul products from its assembly plants to distribution facilities. Manufacturing Company is the only customer of ITC. Unionized drivers—who are employees of ITC—seek increased wages during collective bargaining with ITC. In response, ITC asserts that it is unable to increase drivers’ wages based on its current contract with Manufacturing Company. Manufacturing Company refuses ITC’s request to increase its contract payments. Manufacturing Company has not exercised direct and immediate control over the drivers’ terms and conditions of employment.

EXAMPLE 10 to § 103.40. Business contract between Company and a Contractor reserves a right to Company to discipline the Contractor’s employees for misconduct or poor performance. Company has never actually exercised its authority under this provision. Company has not exercised direct and immediate control over the Contractor’s employees’ terms and conditions of employment.

EXAMPLE 11 to § 103.40. Business contract between Company and Contractor reserves a right to Company to discipline the Contractor’s employees for misconduct or poor performance. The business contract also permits either party to terminate the business contract at any time without cause. Company has never directly disciplined Contractor’s employees. However, Company has with some frequency informed Contractor that particular employees have engaged in misconduct or performed poorly while suggesting that a prudent employer would certainly discipline those employees and remarking upon its rights under the business contract. The record indicates that, but for Company’s input, Contractor would not have imposed discipline or would have imposed lesser discipline. Company has exercised direct and immediate control over Contractor’s employees’ essential terms and conditions.

EXAMPLE 12 to § 103.40. Business contract between Company and Contractor reserves a right to Company to discipline Contractor’s employees for misconduct or poor performance. User has not exercised this authority with the following exception. Contractor’s employee engages in serious misconduct on Company’s property, committing severe sexual harassment of a coworker. Company informs Contractor that offending employee will no longer be permitted on its premises. Company has not exercised direct and immediate control over offending employee’s terms and conditions of employment in a manner that is not limited and routine.