On September 14, the National Labor Relations Board (NLRB), delivering on its promise from earlier this year, published a proposed rule that would change the definition of joint employer—returning to the pre-2015 definition. In 2015, the NLRB expanded the definition of joint employer to include indirect control over the essential terms and conditions of employment.

Under the proposed joint employer rule, an employer may be considered a joint employer (and equally liable for certain labor and employment matters) only if the two employers share or co-determine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer, according to the NLRB, 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.

If adopted as currently written, there must be direct and immediate control before a joint employer relationship would exist. What does that look like? The NLRB provided some examples of when direct control does or does not exist under this new proposed rule.

Direct Control Exists

  • Under a contract between a company and contractor, the company reserves the right to discipline the contractor’s employees for misconduct or poor performance. The company has never directly disciplined the contractor’s employees. However, the company has frequently informed the contractor about employees who have engaged in misconduct or performed poorly while suggesting that a prudent employer would discipline those employees. There is evidence that, had it not been for the company’s input, the contractor would not have disciplined these employees, or would have imposed less discipline.
  • Under the terms of a franchise agreement, the franchisor and the franchisee agree to the health insurance plan and 401(k) plan that the franchisee must make available to its workers.

Direct Control Does Not Exist

  • Under a contract between a company and a contractor, the company reserves the right to discipline the contractor’s employees for misconduct or poor performance. In only one instance has the company exercised this authority: After the contractor’s employee sexually harassed a co-worker on company property, the company told the contractor that the employee could no longer be on its premises.
  • Under the terms of a franchise agreement, a franchisor requires the franchisee to operate the franchisee’s store during certain hours. The franchisor does not participate in scheduling assignments and allows the franchisee to select shift durations.
  • Company A supplies line workers and first-line supervisors to Company B. Onsite 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.

Certainly, if adopted as written, fewer businesses would be found to be in a joint employer relationship.

Now that the NLRB has published it’s Notice of Proposed Rulemaking, the NLRB will begin receiving and considering comments before any rules is officially adopted. Interested parties and members of the public have until November 13, 2018, 60 days from the date of the notice, to submit comments on the proposed rule. Comments can be submitted electronically to www.regulations.gov, or by mail or hand-delivery to Roxanne Rothschild, Deputy Executive Secretary, National Labor Relations Board, 1015 Half Street S.E., Washington, D.C. 20570-0001. Once the comment period ends, the NLRB will hold public hearings to address the comments received. It will likely be some time before there is a final rule on the subject.

As we advised last year, Congress is also considering a bill to provide a permanent, employer friendly, definition of joint employer. The Save Local Business Act would amend the National Labor Relations Act to define the joint employer relationship by direct, actual, and immediate control—similar to the NLRB’s proposed rule.

Nevada Association of Employers (NAE) will continue to monitor developments at the NLRB to ensure our members get the latest information to stay in compliance.

NAE monitors legislative process and regulatory decisions so you don’t have to. Nevada businesses trust that they are getting the latest information on their rights and obligations as employers from NAE because it’s what we do. For more information about NAE and what we do for Nevada employers, visit our website. If you are a Nevada employer interested in membership, please contact membership@nevadaemployers.org or join today!