New Year, Old Test? NLRB’s Continuing Efforts to Roll Back Obama-Era Joint Employment Standard Hit Another Roadblock

07 January 2019 Labor & Employment Law Perspectives Blog
Authors: Ryan N. Parsons

If the NLRB were a TV drama (imagine the ratings!), the most recent Christmastime decision by the D.C. Circuit Court of Appeals would have been a season-ending cliffhanger. It leaves the future of joint employment in doubt and is yet another reminder that employers must remain vigilant around joint employment issues.

“Joint employment” is an important concept to employers even if it’s one they may not think about all that often. The idea is that one employer, even if it does not formally employ a worker, may nevertheless bear some responsibilities to that worker (and liability for that worker’s actions), depending on the nature of the relationship between the employer and the worker. Employers have so much to consider when dealing with their own employees, much less adding on independent contractors, staffing agency temporary employees, franchisees, and contract partners.

At the NLRB, joint employment has been a recurring issue. During the Obama administration, the Board held that a key question in determining whether a joint employment relationship existed was whether the putative employer actually exercised control over the employee. In other words, if an employer brought on a temporary employee from a staffing agency, did the employer supervise that temp employee? Did the employer direct the day-to-day and minute-to-minute activities of the employee? The test resolved around actual control.

The Obama Board changed the test, however. Instead of focusing on actual control, the Obama-era test looked merely to the “right” to control. In other words, even if an employer did not actually exercise direct control over the temp employee, joint employment may be created merely if the putative employer retained the right to control the temp employee in its contract with the staffing agency.

This was the state of the law when the Board dominated by Trump appointees took aim at joint employment. It first attempted to overturn the prior Board’s standard in December 2017. Just two months later, however, it came to light that one of the members of the Board’s majority on the issue had to recuse himself from the case. As a result, the decision was vacated and the prior test was restored.

The Trump Board then decided to revise the rule by using the formal rulemaking process. The advantage of proceeding this way would be that the Board could create a formal rule that would apply to all cases and would be more difficult to set aside if and when a Democratic president came to power again. The downside, however, is that the rulemaking process takes months – and often years – to complete, as the public must be given multiple opportunities to provide input on the potential rule and comment on a draft rule once issued.

That process is still ongoing, with the current Board extending the initial notice-and-comment period through mid-January. But the Board’s process was complicated by the D.C. Circuit’s recent decision. The court determined that the Obama-era rule was a valid exercise of the Board’s powers and consistent with the existing “common law” joint employment test. This means that any attempt to roll back the Obama rule dramatically – as the Trump Board’s draft rule will surely do – will meet with skepticism from one of the highest courts in the land.

So what does all this mean for employers? While many employers hoped that the risks posed by the Obama-era joint employment standard would fade away under a Republican administration, employers should continue to vet carefully their agreements with independent contractors, staffing agencies, franchisees, and anyone else performing services on their behalf. Until the Supreme Court rules on this issue, the rules on joint employment are likely to remain murky for some time.

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