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A proposed National Labor Relations Board ruling that would restore the previous joint-employer status standard could be a welcome relief to employers but, even if approved, may last only as long as there is a Republican administration.
Observers point out a future Democrat administration is likely to reverse the ruling.
In its 2015, 3-2 decision in Browning Ferris Industries of California Inc., a Democratic-controlled NLRB overturned the standard in place since 1984 that firms must have “immediate and direct” control over a worker to be considered a joint employer.
It held instead that a company only needs to have indirect control of a worker, and not even exercise that control, to be a joint employer.
The NLRB proposed the new rule in September, and the public has been asked to submit comments on the proposal by Nov. 13.
Experts expect that while there may be some modifications, the final ruling will essentially be approved as proposed.
They point out the ruling has widespread implications, affecting franchisor-franchisee relationships, as well as all firms that use staffing agencies and other third-party vendors, including those who have employees from other companies working on site such as cafeteria and cleaning service workers.
“The previous majority of the board felt strongly that employers were treating workers as independent contractors as opposed to employees, which in many respects deprived them of benefits and had tax implications,” said Richard D. Glovsky, a partner at Locke Lord LLP in Boston who co-chairs the firm’s labor and employment practice group. “This was something of a hallmark of the Obama administration: to do what they could to enhance employee benefits and opportunities.”
The current rule “encompasses almost all employers,” and the agency “refused to provide any specific guideline as to how that standard should apply,” said Mark G. Kisicki, a partner with Ogletree Deakins Nash Smoak & Stewart P.C. in Phoenix, who represented Browning-Ferris.
But “insofar as employers were concerned, they were not thrilled because it put an added burden on them and put them in a position where they had to make a decision as to who and how workers were employed, which had implications for unemployment insurance, workers comp, the whole plethora of issues and costs that stemmed from one being treated as an employee as opposed to an independent contractor,” Mr. Glovsky said.
The proposal is welcome news for employers in establishing certainty, say observers.
“It’s a moment of clarity,” said Ron Holland, a San Francisco-based partner with McDemott Will & Emery LLP’s employment practice. “It brings us back to a standard that’s discernable, and clear and predictable and actually gives employers and employees control over who they work for and whom the employer is.”
“It is appropriate and helpful for the board to take this important step in providing a definitive resolution to questions that have existed about joint employer status going back to the board’s 2015 decision in Browning-Ferris Industries,” said former NLRB Chairman Philip A. Miscimarra. Mr. Miscimarra, a Republican, now leads Morgan, Lewis & Bockius LLP’s special appeals practice in Washington, The proposal, if adopted, “will substantially benefit employees, unions and employers alike by permitting them to determine for themselves who the employer is in a variety of work settings, which I believe is one of the significant deficits that has existed since Browning-Ferris Industries was decided back in 2015,” he said.
The proposal “makes a lot of sense,” said former NLRB board member Harry I. Johnson III, a Republican who is now a partner with Morgan Lewis in Los Angeles. Both Mr. Miscimarra and Mr. Johnson dissented in the Browning-Ferris decision.
“It resolves a lot of ambiguities, takes many issues out of the courts and gives employers much clearer guidance on what their obligations are in terms of who is an employee and who isn’t,” Mr. Glovsky said.
What it means for employers on a day-to-day basis “the rule of reason is likely to be interjected in the joint employment standard,” said Steven M. Bernstein, a Tampa, Florida-based partner with Fisher & Phillips LLP and labor lawyer who represents employers. “This is an opportunity to breathe common sense into a rule that previously used concepts like indirect and direct control and potential control,” which are “very vague and hypothetical.”
But experts point out that what one administration gives, another can take away.
While the current administration is proposing an employer-friendly rule, “chances are future administrations whose members don’t share the same ideology” can “revamp the standard yet again in a nonfriendly way towards employers,” said David J. Przybylski, an Indianapolis-based partner with Barnes & Thornburg LLP’s labor and employment department.
It’s “a pingpong game,” Mr. Glovsky said.
Heidi Shierholz, senior economist and director of policy at the Washington-based Economic Policy Institute, said she is opposed to rescinding the current rule. The former chief economist at the Department of Labor during the Obama administration said many firms contract out jobs that are not in their core competencies, which “can lead to a great deal of murkiness about who is responsible for complying with labor standards.”
“When it is not clear who your employer is, workers’ rights and safety and wages and voice on the job can just sort of fall through the cracks,” and the proposed rule will encourage this, she said. “It makes it possible for an employer who actually does have control over the condition of your work to not actually be held accountable.”
A congressional bill would make “immediate and direct control” the standard in determining joint employer relationships.