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Appeals court: NLRB's 'joint employment' rule was too broad

When might one company be considered a "joint employer" with another company over the same workers? It's an important question, because joint employers share liability for labor law violations.

Consider the case of a franchisor and franchisee. When could a franchisor (parent company) be held liable for labor law violations committed by its franchisee? Traditionally, franchisors have only been held responsible for franchisees' labor law violations when the franchisor has exercised direct control over significant aspects of the employment relationship, such as on hiring, pay or working conditions.

Another situation where two companies could be considered joint employers is when a company hires temporary workers through a staffing agency. Again, if the hiring company exercises direct control over who is hired by the staffing agency, how much they are paid, or other terms of their employment, the hiring company and the staffing agency could be considered joint employers. Otherwise, the staffing agency alone is liable for labor law violations affecting their employees.

The requirements for a joint employment relationship were expanded somewhat in 2015, when the National Labor Relations Board issued a ruling in a case involving Browning-Ferris Industries Inc. of California.

2015 standard

In that case, the NLRB reaffirmed that two or more companies may be considered joint employers if they are otherwise legally considered employers and they" share or codetermine those matters governing the essential terms and conditions of employment." However, the board said that it would consider, among other factors, the degree of each company's indirect control over the essential terms and conditions of employment, control exercised through an intermediary, and reserved authority over such matters.

Considering a company's indirect or reserved authority was a controversial change. According to the Associated Press, overturning the 2015 standard was a top priority of the U.S. Chamber of Commerce, America's largest business lobby.

Court reversal

Now, the U.S. Court of Appeals for the D.C. Circuit has overturned that 2015 NLRB ruling. Interestingly, the court agreed that indirect control may be enough to substantiate a joint employment relationship. However, it ruled that the NLRB's definition of indirect control was too broad. It ordered the board to revise that definition.

That may not be necessary. Since 2015, the NLRB has been reconstituted and now has a majority appointed by the Trump administration. In September, the board proposed a rule restoring the previous definition of joint employment where direct control is required. The board expects the final rule to be adopted by June.

If your company is concerned about the joint employer standard, discuss your situation with an experienced employment law attorney.

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