The National Labor Relations Board has issued a proposed rule that would roll back an Obama-era board decision on joint-employer status for companies that hire subcontractors or use staffing or temp agency workers.
The decision by the NLRB in 2015 overturned a long-time precedent (a standard in place since 1984) that a company must have “immediate and direct” control over a worker to be considered a joint employer. The board ruled instead that a company need have only “indirect” control of a worker and not even exercise that control to be considered a joint employer.
Under the 2015 standard, a company could be deemed a joint employer even if its “control” over the essential working conditions of another business’s employees was indirect, limited and routine, or contractually reserved but never exercised.
The ruling was roundly criticized by businesses as it put both the hiring employer and its contractor or staffing agency on the hook for labor violations. The decision also applied to franchisors that were suddenly liable for labor issues at individual franchisees’ operations.
The ruling also spread plenty of confusion in the employer community, and it sent companies that used contract or temp labor to set strict written procedures of where their responsibility ended and the subcontractor’s began.
The proposed rule
The proposed rule affects businesses:
- That are franchisees or franchisors,
- Use temporary staffing agencies to supply manpower, or
- Hire outside or subcontractors to work on their sites.
Under the proposal, an employer may be found to be a joint employer of another employer’s employees only if it possesses and exercises “substantial, direct and immediate control” over the essential terms and conditions of employment “and has done so in a manner that is not limited and routine,” according to a statement issued by the NLRB.
“Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship,” the statement said.
In announcing the proposed standard, the NLRB included a number of examples of how it would apply. Here are two:
Example 1: Red Line Staffing supplies line workers and first-line supervisors to Sporting Apparel at Sporting Apparel’s manufacturing plant. On-site managers employed by Sporting Apparel regularly complain to Red Line Staffing’s supervisors about defective products coming off the assembly line.
In response to those complaints and to remedy the deficiencies, Red Line Staffing’s supervisors decide to reassign employees and switch the order in which several tasks are performed.
Sporting Apparel has not exercised direct and immediate control over Red Line Staffing’s line workers’ essential terms and conditions of employment.
Example 2: Temp Worker Plus supplies line workers and first-line supervisors to Breadstone Enterprises at Breadstone’s baking plant. Breadstone also employs supervisors on site who regularly require the Temp Worker Plus supervisors to relay detailed supervisory instructions regarding how employees are to perform their work. As required, Temp Worker Plus supervisors relay those instructions to the line workers.
Breadstone possesses and exercises direct and immediate control over Temp Worker Plus’s line workers.
The fact that Breadstone conveys its supervisory commands through Temp Worker Plus’s supervisors rather than directly to Temp Worker Plus’s line workers fails to negate the direct and immediate supervisory control.
The proposed rule is currently up for a 60-day comment period, after which it may be amended following input from stakeholders. For now, you should stick with the contracts you have had since the Obama-era decision until this new rule is set in stone.