Upcoming Change to the Co-Employer Rule

The National Labor Relations Board is expected to issue a new rule early next year re-establishing the joint employer definition that existed prior to 2015. If the new rule is enacted, franchisors, staffing agencies, and other businesses that do not directly control workers will no longer be considered joint employers.

In 2015 the NLRB decided the case of Browning-Ferris Industries, Inc. The Board held that a contract staffing agency was a co-employer of workers that the agency supplied to a recycling facility controlled by Browning-Ferris. The NLRB held that two or more entities can be considered joint employers if the entities are both employers under common law and if they share responsibility for, or co-determine, the essential terms and conditions of the workers’ employment. Under this standard, it did not matter if one of the employers did not exercise that authority. The authority to do so, even if held in reserve, was enough to trigger co-employer responsibilities.

The NLRB’s current proposed rule would reverse that decision and require businesses to exert actual control over workers before they are declared co-employers. Franchisors, staffing agencies, and other companies that do not exercise direct control over workers will no longer face liability as employers. The key section of the proposed rule states:

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 employees share or codetermine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative 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.

Franchisors and other companies that use outside staffing agencies will have to examine their policies and procedures and determine how this rule change can affect pending litigation. Employees, including temporary or contract employees, should similarly consider the role played by the franchisor or staffing agency to determine if they have any potential claims against these parties.
The period for public comment on the proposed rule ends on December 20, 2018. The new rule is expected to go into effect in 2019. The experienced attorneys at Walsten & Te Slaa can help you determine how the rule change affects your businesses’ policies or your potential employment claims.