NLRB Chairman: Proposed Joint-Employer Rule Coming Soon

Board has limited experience with rulemaking

Allen Smith, J.D. By Allen Smith, J.D. June 7, 2018
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​The National Labor Relations Board (NLRB) plans to propose a rule this summer defining who is a joint employer, according to NLRB Chairman John Ring in a June 5 letter to three senators. Employers currently are subject to a vague definition that makes it easy for them to be found liable for violations committed by their contractors or franchisees.

The NLRB is relatively inexperienced with rulemaking. Its attempt to clarify the joint-employer definition through a December 2017 opinion fell through earlier this year.

Definition in Flux

The board expanded the definition of "joint employer" in its 2015 Browning-Ferris Industries decision, changing how much control a contractor must have over a contracted employer for the two to be joint employers. Contrary to board rulings over many previous years, direct control was no longer needed. Indirect control or potential control, such as in a contract, would be enough.

The board reversed Browning-Ferris in a December 2017 decision, Hy-Brand. However, the NLRB vacated Hy-Brand on Feb. 26 after its inspector general found that NLRB member William Emanuel was too closely involved in Hy-Brand to participate in that decision because his former law firm had been a litigant in Browning-Ferris. As a result, the Browning-Ferris standard again applies, said David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis.

On May 9, the NLRB announced that it was considering rulemaking to clarify the joint-employer definition. "Given the recent events stemmed from the alleged conflicts of interest—namely the board reinstituting the Browning-Ferris standard—I do think it's a creative approach and is the right way to go," he said.

But Sens. Kirsten Gillibrand, D-N.Y.; Bernie Sanders, I-Vt.; and Elizabeth Warren, D.-Mass., expressed concern in a May 29 letter to Ring that a rulemaking would evade ethical restrictions and advance corporate interests. The senators said Ring had "prejudged" the outcome of the rulemaking, noting that he has tweeted that "uncertainty over the standard undermines job creation and economic expansion."

"Rulemaking undertaken by the NLRB will never be for the purpose of evading ethical restrictions," Ring wrote in reply, stating that a majority of board members are committed to issuing a proposed rule soon. He also said that a comprehensive internal ethics review would be announced soon.

The board has not predetermined an outcome to the rulemaking, he stated. The NLRB instead is intent on providing clear guidance on who is a joint employer, which he said Browning-Ferris "left undefined."

"The NLRB's rewrite of joint-employer standards in the Browning-Ferris case in 2015 was one of the most controversial rulings of the board, upending 30 years of understanding of what makes a joint-employer relationship," said Nancy Hammer, vice president, regulatory affairs and judicial counsel with the Society for Human Resource Management (SHRM). "SHRM welcomes the NLRB efforts to clarify joint-employer standards through rulemaking so employers can fully understand when and how these rules apply."

[SHRM members-only HR Q&A:  What is the function of the National Labor Relations Act (NLRA)?]

On June 6, the NLRB denied a motion to reinstate Hy-Brand. The board also found Hy-Brand Industrial Contractors and Brandt Construction Co. liable as a single employer, stating that it was unnecessary to decide whether the two entities were joint employers.

Rulemaking Lasts Longer

Rulemaking, which can take years, is more difficult to change than prior case law, which the NLRB can overturn in a single opinion, observed Michael Lotito, an attorney with Littler in San Francisco. He noted that Secretary of Labor and former NLRB member Alexander Acosta has recommended that the board rely on rulemaking more.

In a 2010 Florida International University law review article, based on a March 26, 2010, speech on the future of the NLRB, Acosta observed that a common criticism of the NLRB is that it flip-flops in its decisions on labor relations issues. He noted that the NLRB up to that point had rarely issued rules and said that more rulemaking could help lead to greater stability. "Although the rulemaking process is burdensome, once adopted, this same burdensome process makes a rule very difficult to change," he stated. Acosta said that more rulemaking would "enhance the legitimacy and relevance of the NLRB."

Mixed Success

So far, the board has had limited experience with rulemaking and mixed success.

Mark Kisicki, an attorney with Ogletree Deakins in Phoenix, noted that the board has used rulemaking to:

  • Address the appropriateness of bargaining units in the health care industry. A legal challenge of the rule resulted in a 1991 Supreme Court decision, American Hospital Assn. v. NLRB, affirming the board's authority to adopt acute-care facility bargaining rules.
  • Require employers to post a designated notice about certain employee rights under the NLRA. Federal courts blocked the rule, which SHRM had objected to as violating the NLRA and the First Amendment.
  • Shorten the union campaign period, which SHRM opposed. The "ambush" election rule reduced the campaign period from an average of 37 days to 23 days, limiting the time in which employers can file objections to who may vote in the union election. The rule also required employers to quickly file a position statement with the board. The board in December 2017 issued a request for information on the rule, suggesting that it is considering the process of withdrawing it. SHRM has submitted comments to the board calling for the rule to be rescinded or modified. In addition, the U.S. House of Representatives passed the Save Local Business Act by a bipartisan vote that would codify the direct control standard established under the joint-employer definition. SHRM supports Senate passage of this legislation.

"Many other agencies of the government have had mixed success with rulemaking, demonstrating how hard it is," Lotito said. "But if you get it right, it can certainly be long-lasting."

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