Proposed Rule2022-19181
Standard for Determining Joint-Employer Status
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 7, 2022
Issuing agencies
National Labor Relations Board
Abstract
This notice of proposed rulemaking (NPRM) proposes to rescind and replace the final rule entitled "Joint Employer Status Under the National Labor Relations Act," which was published on February 26, 2020 and took effect on April 27, 2020. The proposed rule would revise the standard for determining whether two employers, as defined in section 2(2) of the National Labor Relations Act (NLRA or Act), are joint employers of particular employees within the meaning of section 2(3) of the Act. The proposed changes are designed to explicitly ground the joint-employer standard in established common-law agency principles and provide relevant guidance to parties covered by the Act regarding their rights and responsibilities when more than one statutory employer possesses the authority to control or exercises the power to control particular employees' essential terms and conditions of employment.
Full Text
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<title>Federal Register, Volume 87 Issue 172 (Wednesday, September 7, 2022)</title>
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[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Proposed Rules]
[Pages 54641-54663]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-19181]
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NATIONAL LABOR RELATIONS BOARD
29 CFR Part 103
RIN 3142-AA21
Standard for Determining Joint-Employer Status
AGENCY: National Labor Relations Board.
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: This notice of proposed rulemaking (NPRM) proposes to rescind
and replace the final rule entitled ``Joint Employer Status Under the
National Labor Relations Act,'' which was published on February 26,
2020 and took effect on April 27, 2020. The proposed rule would revise
the standard for determining whether two employers, as defined in
section 2(2) of the National Labor Relations Act (NLRA or Act), are
joint employers of particular employees within the meaning of section
2(3) of the Act. The proposed changes are designed to explicitly ground
the joint-employer standard in established common-law agency principles
and provide relevant guidance to parties covered by the Act regarding
their rights and responsibilities when more than one statutory employer
possesses the authority to control or exercises the power to control
particular employees' essential terms and conditions of employment.
DATES: Comments regarding this proposed rule must be received by the
National Labor Relations Board (NLRB or Board) on or before November 7,
2022. Comments replying to comments submitted during the initial
comment period must be received by the Board on or before November 21,
2002. Reply comments should be limited to replying to comments
previously filed by other parties. No late comments will be accepted.
Requests for extensions of time will be granted only for good cause
shown.
ADDRESSES:
Internet--Federal eRulemaking Portal. Electronic comments may be
submitted through <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the instructions
for submitting comments.
Delivery--Comments may be submitted by mail or hand delivery to:
Roxanne L. Rothschild, Executive Secretary, National Labor Relations
Board, 1015 Half Street SE, Washington, DC 20570-0001.
For important information concerning the submission of comments and
their treatment, see SUPPLEMENTARY INFORMATION.
FOR FURTHER INFORMATION CONTACT: Roxanne L. Rothschild, Executive
Secretary, National Labor Relations Board, 1015 Half Street SE,
Washington, DC 20570-0001, (202) 273-1940 (this is not a toll-free
number), 1-866-315-6572 (TTY/TDD).
SUPPLEMENTARY INFORMATION:
I. Submission of Comments
Because of security precautions, the Board continues to experience
delays in U.S. mail delivery. You should take this into consideration
when preparing to meet the deadline for submitting comments. It is not
necessary to mail comments if they have been filed electronically with
<a href="http://regulations.gov">regulations.gov</a>. If you mail comments, the Board recommends that you
confirm receipt of your delivered comments by contacting (202) 273-1940
(this is not a toll-free number). Individuals with hearing impairments
may call 1-866-315-6572 (TTY/TDD). Because of precautions in place due
to COVID-19, the Board recommends that comments be submitted
electronically or by mail rather than by hand delivery. If you feel you
must hand deliver comments to the Board, hand delivery will be accepted
by appointment only. Please call (202) 273-1940 to arrange for hand
delivery of comments. Please note that there may be a delay in the
electronic posting of hand-delivered and mail comments due to the needs
for safe handling and manual scanning of the comments. The Board
strongly encourages electronic filing over mail or hand delivery of
comments.
Only comments submitted through <a href="http://www.regulations.gov">http://www.regulations.gov</a>, mailed
or hand delivered per the procedure described above will be accepted;
ex parte communications received by the Board will be made part of the
rulemaking record and will be treated as comments only insofar as
appropriate. Comments will be available for public inspection at <a href="http://www.regulations.gov">http://www.regulations.gov</a> and during normal business hours (8:30 a.m. to 5
p.m. EST) at the above address.
As soon as practicable, the Board will post all comments received
on <a href="http://www.regulations.gov">http://www.regulations.gov</a>. The website <a href="http://www.regulations.gov">http://www.regulations.gov</a>
is the Federal eRulemaking portal, and all comments posted there are
available and accessible to the public. The Board requests that
comments include full citations or internet links to any authority
relied upon. If a comment cites a source that is not publicly
available, the Board requests that the commenter submit a copy of that
source along with its comment.
The Board will not make any changes to the comments, including any
personal information provided therein. The Board cautions commenters
not to include personal information such as Social Security numbers,
personal addresses, telephone numbers, and email addresses in their
comments, as such submitted information will become viewable by the
public via the <a href="http://www.regulations.gov">http://www.regulations.gov</a> website. It is a commenter's
responsibility to safeguard their information. Comments submitted
through <a href="http://www.regulations.gov">http://www.regulations.gov</a> will
[[Page 54642]]
not include the commenter's email address unless the commenter chooses
to include that information as part of their comment.
II. Background
As described more fully below, in 2015, the Board restored and
clarified its traditional, common-law based standard for determining
whether two employers, as defined in section 2(2) of the Act, are joint
employers of particular employees within the meaning of section 2(3) of
the Act. See Browning-Ferris Industries of California, Inc., d/b/a BFI
Newby Island Recyclery, 362 NLRB 1599 (2015) (BFI). Consistent with
established common-law agency principles, and rejecting prior
limitations established without explanation, the Board announced that
it would consider evidence of reserved and indirect control over
employees' essential terms and conditions of employment when analyzing
joint-employer status.
While BFI was pending on review before the United States Court of
Appeals for the District of Columbia Circuit, and following a change in
the Board's composition, the Board issued a notice of proposed
rulemaking with the goal of establishing a joint-employer standard that
departed in significant respects from BFI. During the comment period,
the District of Columbia Circuit issued its decision in Browning-Ferris
Industries of California, Inc. v. NLRB, 911 F.3d 1195, 1222 (D.C. Cir.
2018), upholding ``as fully consistent with the common law the Board's
determination that both reserved authority to control and indirect
control can be relevant factors in the joint-employer analysis,'' and
remanding the case to the Board to refine the new standard. Thereafter,
the Board issued a final rule that again constrained the joint-employer
standard. Because the Board believes, contrary to our dissenting
colleagues and subject to comments, that the 2020 final rule (2020
Rule) repeats the errors that the Board corrected in BFI, it proposes
to rescind that standard and replace it with a new rule that
incorporates the BFI standard and responds to the District of Columbia
Circuit's invitation for the Board to refine that standard in its 2018
decision on review.
A. Statutory Background
Section 2(2) of the National Labor Relations Act defines an
``employer'' to include ``any person acting as an agent of an employer,
directly or indirectly.'' 29 U.S.C. 152(2) (emphasis added). In turn,
the Act provides that the ``term `employee' shall include any employee,
and shall not be limited to the employees of a particular employer,
unless [the Act] explicitly states otherwise . . . .'' Id. 152(3).
Section 7 of the Act provides that employees shall have the right
to self-organization, to form, join, or assist labor organizations, to
bargain collectively through representatives of their own choosing, and
to engage in other concerted activities for the purpose of collective
bargaining or other mutual aid or protection and to refrain from any or
all such activities. 29 U.S.C. 157. Section 9(c) of the Act authorizes
the Board to process a representation petition when employees wish to
be represented for collective bargaining and their employer declines to
recognize their representative. 29 U.S.C. 159(c). And section 8(a)(5)
makes it an unfair labor practice for an employer to refuse to bargain
collectively with the representatives of his employees. 29 U.S.C.
158(a)(5).
The Act does not specifically address situations in which statutory
employees are employed jointly by two or more statutory employers
(i.e., it is silent as to the definition of ``joint employer''), but,
as discussed below, the Board, with court approval, has long applied
common-law agency principles to determine when one or more entities
share or codetermine the essential terms and conditions of employment
of a particular group of employees.
B. The Development of Joint-Employer Law Under the National Labor
Relations Act
In Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964), a
representation case involving the relationship between a company
operating a bus terminal and its cleaning contractor, the Supreme Court
explained that the question of whether Greyhound ``possessed sufficient
control over the work of the employees to qualify as a joint employer''
was ``essentially a factual question'' for the Board to determine.\1\
The Board's subsequent decision in Greyhound Corp., 153 NLRB 1488
(1965), enfd. 368 F.2d 776 (5th Cir. 1966), completed that task.
Specifically, the Board found, and the Fifth Circuit affirmed, that
Greyhound and the cleaning contractor were joint employers of the
employees at issue because they ``share[d], or codetermine[d], those
matters governing essential terms and conditions of employment.''
Greyhound Corp., 153 NLRB at 1495.
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\1\ Boire v. Greyhound Corp. did not directly pass upon the test
for joint-employer status. The Supreme Court's primary holding in
that case was that the courts lacked subject-matter jurisdiction to
enjoin the Board from making a joint-employer determination under
Leedom v. Kyne, 358 U.S. 154 (1958). Thus, following the Supreme
Court's decision, the Board was able to resolve the merits of the
joint-employer question, subject to the statutory judicial review
process.
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For nearly two decades after Greyhound, the Board treated the right
to control employees' work and their terms and conditions of employment
as determinative in the joint-employer analysis. During this period,
the Board's joint-employer analysis generally did not turn on whether
both putative joint employers actually or directly exercised control.
In cases involving reserved control, the Board found it probative when
a putative joint employer retained the contractual power to reject or
terminate workers,\2\ establish or approve wage rates,\3\ set working
hours and schedules,\4\ approve overtime,\5\ dictate the number of
workers to be supplied,\6\ determine ``the manner and method of work
performance,'' \7\ ``inspect and approve work,'' \8\ and terminate the
contractual agreement itself at will.\9\ Reviewing courts endorsed the
Board's consideration of reserved control as probative in the joint-
employer analysis.\10\
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\2\ See Lowery Trucking Co., 177 NLRB 13, 15 (1969), enfd. sub
nom. Ace-Alkire Freight Lines v. NLRB, 431 F.2d 280 (8th Cir. 1970)
(observing that ``[w]hile [putative employer] never rejected a
driver hired by [supplier], it had the right to do so''); Ref-Chem
Co., 169 NLRB 376, 379 (1968), enf. denied on other grounds 418 F.2d
127 (5th Cir. 1969); Jewel Tea Co., 162 NLRB 508, 510 (1966).
\3\ See Ref-Chem Co., supra, 169 NLRB at 379; Harvey Aluminum,
147 NLRB 1287, 1289 (1964).
\4\ See Jewel Tea, supra, 162 NLRB at 510; Mobil Oil Corp., 219
NLRB 511, 516 (1975), enf. denied on other grounds sub nom. Alaska
Roughnecks and Drillers Assn. v. NLRB, 555 F.2d 732 (9th Cir. 1977).
\5\ Ref-Chem Co. v. NLRB, supra, 418 F.2d at 129.
\6\ Harvey Aluminum, supra, 147 NLRB at 1289; Mobil Oil, supra,
219 NLRB at 516.
\7\ Value Village, 161 NLRB 603, 607 (1966).
\8\ Ref-Chem Co. v. NLRB, supra, 418 F.2d at 129.
\9\ Value Village, supra, 161 NLRB at 607; Mobil Oil, supra, 219
NLRB at 516.
\10\ See Carrier Corp. v. NLRB, 768 F.2d 778, 781 (6th Cir.
1985); International Chemical Workers Union Local 483 v. NLRB, 561
F.2d 253, 255 (D.C. Cir. 1977); Ace-Alkire Freight Lines v. NLRB,
supra, 431 F.2d at 282; Ref-Chem Co. v. NLRB, supra, 418 F.2d at
129.
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Similarly, the Board found a putative joint employer's indirect
exercise of control over employees' essential terms and conditions of
employment probative in the joint-employer analysis during this
period.\11\ The Board found evidence of joint-employer status where a
putative joint employer inspected another firm's employees' work,
communicated work directives through the other firm's supervisors, and
exercised the power to open and close the facility based on production
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needs.\12\ The Board also found evidence of joint-employer status where
a putative joint employer held ``day-to-day responsibility for the
overall operations'' at a facility and determined the nature of work
assignments, even though that entity ``did not exercise direct
supervisory authority'' over the employees.\13\ And, the Board assigned
weight to evidence showing that a putative joint employer wielded
indirect control over wages through a variety of contractual
arrangements.\14\
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\11\ See Floyd Epperson, 202 NLRB 23, 23 (1973), enfd. 491 F.2d
1390 (6th Cir. 1974).
\12\ See Hamburg Industries, 193 NLRB 67, 67 (1971);
International Trailer Co., 133 NLRB 1527, 1529 (1961), enfd. sub
nom. NLRB v. Gibraltar Industries, 307 F.2d 428 (1962), cert. denied
372 U.S. 911 (1963).
\13\ Clayton B. Metcalf, 223 NLRB 642, 643 (1976).
\14\ Hamburg Industries, supra, 193 NLRB at 67-68 (assigning
weight to putative employer's ``indirect control over wages'' via
cost-plus arrangement); Hoskins Ready-Mix, 161 NLRB 1492, 1493
(1966) (same, noting that user employer would be the ``ultimate
source of any wage increases'' for workers); Ref-Chem Co., supra,
169 NLRB at 379 (supplier could not make any wage modification
without securing approval of the user). See also Industrial
Personnel Corp. v. NLRB, 657 F.2d 226, 229 (8th Cir. 1981) (relying
on the Board's finding that user employer reimbursed supplier for
employees' wages).
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In 1981, the Third Circuit endorsed the Board's ``share or
codetermine'' formulation of the joint-employer standard. NLRB v.
Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117, 1123
(3d Cir. 1982), enfg. 259 NLRB 148 (1981). Although subsequent Board
decisions cited the Third Circuit's decision as a correct statement of
law, those decisions also began imposing additional requirements that,
the Board now believes, lacked a clear basis in established common-law
agency principles or prior Board or court decisions. See TLI, Inc., 271
NLRB 798 (1984), and Laerco Transportation, 269 NLRB 324 (1984).
Specifically, subsequent Board decisions introduced three control-
related restrictions requiring (1) that a putative joint employer
``actually'' exercise control, (2) that such control be ``direct and
immediate,'' and (3) that such control not be ``limited and routine.''
See, e.g., AM Property Holding Corp., 350 NLRB 998, 999-1003 (2007),
enfd. in relevant part sub nom. Service Employees International Union,
Local 32BJ v. NLRB, 647 F.3d 435 (2d Cir. 2011); Airborne Express, 338
NLRB 597, 597 (2002); Flagstaff Medical Center, 357 NLRB 659, 666-667
(2011).\15\ By introducing these additional requirements, TLI/Laerco
and their progeny departed, without explanation, from the Board's
longstanding approach, which the Board is inclined to believe was
consistent with the common law.
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\15\ See also Southern California Gas Co., 302 NLRB 456, 461-462
(1991); Goodyear Tire and Rubber Co., 312 NLRB 674, 677-678 (1993).
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In 2015, the Board clarified its joint-employer standard in
Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island
Recyclery, 362 NLRB 1599 (2015) (BFI), a representation case, and
applied that standard retroactively to find that two employers jointly
employed the employees in the petitioned-for unit. Consistent with
Supreme Court decisions and pre-1984 Board precedent, BFI sought to
firmly ground the joint-employer standard in established common-law
agency principles.\16\ As the BFI Board explained, under the new joint-
employer standard:
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\16\ See, e.g., NLRB v. United Insurance Co. of America 390 U.S.
254, 256-258 (1968) (applying common-law test to determine whether
insurance agents were statutory employees or independent
contractors).
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[T]he Board may find that two or more statutory employers are joint
employers of the same statutory employees if they ``share or
codetermine those matters governing the essential terms and conditions
of employment.'' In determining whether a putative joint employer meets
this standard, the initial inquiry is whether there is a common-law
employment relationship with the employees in question.
362 NLRB at 1600 (emphasis added) (quoting NLRB v. Browning-Ferris
Industries of Pennsylvania, Inc., 691 F.2d 1117, 1123 (3d Cir. 1982),
enfg. 259 NLRB 148 (1981)).\17\
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\17\ See also 362 NLRB at 1613-1614 (articulating restated
standard and explaining that ``[t]he common-law definition of an
employment relationship establishes the outer limits of a
permissible joint-employer standard under the Act''). The BFI Board
further explained that ``[i]f this common-law employment
relationship exists, the inquiry then turns to whether the putative
joint employer possesses sufficient control over employees'
essential terms and conditions of employment to permit meaningful
collective bargaining.'' Id. at 1600.
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The BFI Board also addressed an important element of the ``share or
codetermine'' test: the definition of ``the essential terms and
conditions of employment'' that a joint employer must control. The BFI
Board, in keeping with the Board's longstanding practice, took ``an
inclusive approach in defining `essential terms and conditions of
employment.' '' 362 NLRB at 1613. Citing prior Board and judicial
decisions, the Board identified a ``non-exhaustive list of bargaining
subjects,'' which included: hiring, firing, discipline, supervision,
direction, wages, hours, dictating the number of workers to be
supplied, scheduling, seniority, overtime, assigning work, and
determining the manner and method of work performance. Id.
The BFI Board also eliminated the restrictive requirements that had
been introduced into Board law after the Third Circuit's 1982 Browning-
Ferris decision. BFI explained that these control-related restrictions
were contrary to common-law agency principles and that the Board would
``no longer require that a joint employer not only possess the
authority to control employees' terms and conditions of employment, but
must also exercise that authority, and do so directly, immediately, and
not in a `limited and routine' manner.'' Id. at 1600, 1613-1614.
Instead, it held that the ``right to control, in the common-law sense,
is probative of joint-employer status, as is the actual exercise of
control, whether direct or indirect.'' Id. at 1614. The Board overruled
contrary precedent.\18\
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\18\ See 362 NLRB at 1614 (overruling AM Property Holding Corp.,
350 NLRB 998 (2007), enfd. in relevant part sub nom. Service
Employees Int'l Union, Local 32BJ v. NLRB, 647 F.3d 435 (2d Cir.
2011); Airborne Express, 338 NLRB 597 (2002), TLI, Inc., 271 NLRB
798 (1984), enfd. mem. 772 F.2d 894 (3d Cir. 1985); and Laerco
Transportation, 269 NLRB 324 (1984)).
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On September 14, 2018, while BFI was pending before the U.S. Court
of Appeals for the District of Columbia Circuit on review,\19\ a
divided Board issued a notice of proposed rulemaking to establish a new
joint-employer standard.\20\ The 2018 NPRM proposed to return to the
more restrictive pre-BFI approach to determining joint-employer status.
Specifically, the proposed rule provided that a ``putative joint
employer must possess and actually exercise substantial direct and
immediate control over the employees' terms and conditions of
employment in a manner that is not limited and routine.'' Id. at 46696-
46697.
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\19\ After the Board certified the petitioning union, BFI
refused to bargain. The Board found that BFI's refusal to bargain
violated Sec. 8(a)(5) and (1) of the Act. See Browning-Ferris
Industries of California, Inc., 363 NLRB No. 95 (2016). BFI sought
review of the BFI decision by the District of Columbia Circuit.
While BFI was pending before the District of Columbia Circuit,
the Board overruled BFI in Hy-Brand Industrial Contractors, Ltd.,
365 NLRB No. 156 (2017). Thereafter, Hy-Brand was vacated, and the
Board explained that because the decision was vacated, the
``overruling of the Browning-Ferris decision is of no force or
effect.'' Hy-Brand Industrial Contractors, Ltd., 366 NLRB No. 26,
slip op. at 1 (2018).
\20\ See The Standard for Determining Joint-Employer Status, 83
FR 46681 (Sept. 14, 2018). Then-Member McFerran dissented.
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On December 28, 2018, the U.S. Court of Appeals for the District of
Columbia Circuit issued its decision in BFI. Browning-Ferris Industries
of California, Inc. v. NLRB (BFI), 911 F.3d 1195 (D.C. Cir. 2018). The
District of Columbia Circuit ``uph[e]ld as fully consistent with the
common law the Board's
[[Page 54644]]
determination that both reserved authority to control and indirect
control can be relevant factors in the joint-employer analysis.'' Id.
at 1222. The court affirmed that ``under Supreme Court and circuit
precedent, the National Labor Relations Act's test for joint-employer
status is determined by the common law of agency.'' Id. at 1206. In
addition, the court agreed that the ``Board's conclusion that an
employer's authorized or reserved right to control is relevant evidence
of a joint-employer relationship wholly accords with traditional
common-law principles of agency.'' Id. at 1213. The court found that
the Board ``correctly discerned'' that under the common law, ``indirect
control can be a relevant factor in the joint-employer inquiry.'' Id.
at 1216.
Despite broadly upholding the Board's BFI joint-employer standard,
the District of Columbia Circuit reversed the Board's ``articulation
and application of the indirect-control element'' to the extent that
the Board did not ``distinguish between indirect control that the
common law of agency considers intrinsic to ordinary third-party
contracting relationships, and indirect control over the essential
terms and conditions of employment.'' Id. at 1222-1223. In remanding
the case to the Board, the court identified as key the ``common-law
principle that a joint employer's control--whether direct or indirect,
exercised or reserved--must bear on the `essential terms and conditions
of employment' . . . and not on the routine components of a company-to-
company contract.'' Id. at 1221 (citation omitted).\21\
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\21\ On remand, the Board declined the District of Columbia
Circuit's invitation to clarify and refine the joint-employer
standard. Instead, the Board found that any retroactive application
of a refined standard would be manifestly unjust. The Board
therefore dismissed the complaint and amended the certification of
representative to remove BFI as a joint employer. Browning-Ferris
Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 369
NLRB No. 139, slip op. at 1 (2020). Thereafter, a divided Board
denied the union's motion for reconsideration. Browning-Ferris
Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 370
NLRB No. 86 (2021).
On July 29, 2022, the District of Columbia Circuit found the
Board's retroactivity analysis erroneous and granted the union's
petition for review and vacated the Board's order dismissing the
complaint and amending the certification of representative. Sanitary
Truck Drivers & Helpers Local 350, International Brotherhood of
Teamsters v. NLRB, ---- F.4th ----, 2022 WL 3008026 (D.C. Cir.
2022).
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On February 26, 2020, the Board promulgated its final joint-
employer rule.\22\ Although the Board acknowledged the District of
Columbia Circuit's approval of the BFI Board's use of common-law agency
principles in fashioning its joint-employer standard, the Board
emphasized that ``the court recognized that [BFI] did not present the
issue of whether either indirect control or a contractually reserved
but unexercised right to control can be dispositive of joint-employer
status absent evidence of exercised direct and immediate control.'' Id.
at 11185. As a result, the Board explained that it modified the
proposed rule to ``factor in'' an entity's indirect and reserved
control over essential terms and conditions of employment or mandatory
subjects of bargaining, but only to the extent that such indirect and/
or reserved control ``supplements and reinforces'' evidence that the
entity also possesses or exercises direct and immediate control over
essential terms and conditions of employment. Id. at 11185-11186,
11194-11198, and 11236.
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\22\ Joint Employer Status Under the National Labor Relations
Act, 85 FR 11184 (Feb. 26, 2020). Then-Member McFerran's term had
ended on December 16, 2019.
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The Board also included several additional definitions in the final
rule. Id. at 11192-11193. The final rule specifically explained that to
show that an entity ``shares or codetermines'' the essential terms and
conditions of another employer's employees, ``the entity must possess
and exercise such substantial direct and immediate control over one or
more essential terms or conditions of their employment as would warrant
finding that the entity meaningfully affects matters relating to the
employment relationship with those employees.' '' Id. at 11186 and
11236. The Board also retained the requirement that a joint employer
exercise ``substantial direct and immediate control'' and defined that
term to mean ``direct and immediate control that has a regular or
continuous consequential effect on an essential term or condition of
employment of another employer's employees.'' Id. at 11203-11205 and
11236. The final rule also specified that control is not
``substantial'' if it is ``only exercised on a sporadic, isolated, or
de minimis basis.'' Id. at 11236. The final rule also defined
``indirect control'' as ``indirect control over essential terms and
conditions of employment of another employer's employees but not
control or influence over setting the objectives, basic ground rules,
or expectations for another entity's performance under a contract.''
Id. at 11236. The Board provided an ``exhaustive'' list of essential
terms and conditions of employment that included ``wages, benefits,
hours of work, hiring, discharge, discipline, supervision, and
direction'' and which the Board noted was ``expanded and made
exclusive.'' Id. at 11186, 11205 and 11235-11236.\23\
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\23\ On September 17, 2021, the Service Employees International
Union (SEIU) filed a complaint in the U.S. District Court for the
District of Columbia, Case No. 21-cv-2443, challenging the final
joint-employer rule and seeking declaratory judgment and injunctive
relief. SEIU's lawsuit alleged, inter alia, that the Board's final
rule ``arbitrarily and capriciously'' excluded health and safety
matters from the rule's exhaustive list of essential terms and
conditions of employment. On December 10, the Office of Information
and Regulatory Affairs (OIRA) published the fall unified regulatory
agenda, which contained an entry for the Board's planned joint-
employer rulemaking. Thereafter, on December 22, 2021, SEIU and the
Board filed a joint motion to stay the proceeding, which the court
granted on January 6, 2022.
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III. Validity and Desirability of Rulemaking
Section 6 of the Act provides that ``[t]he Board shall have
authority from time to time to make, amend, and rescind, in the manner
prescribed by the Administrative Procedure Act, such rules and
regulations as may be necessary to carry out the provisions of this
Act.'' 29 U.S.C. 156. See also American Hospital Assn. v. NLRB, 499
U.S. 606 (1991); NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974)
(``[T]he choice between rulemaking and adjudication lies in the first
instance within the Board's discretion.''); NLRB v. Wyman-Gordon Co.,
394 U.S. 759 (1969).
For nearly the entirety of the Act's history, the Board has
developed its joint-employer jurisprudence through case-by-case
adjudication. The Board's 2020 Rule represented a significant departure
from this precedent, for the first time formulating a joint-employer
standard through the Board's rulemaking authority. In comparison to
rulemaking, adjudication possesses a number of benefits when
determining joint-employer relationships. The issue of common-law
joint-employer status is a highly fact-specific one, which may be
better suited to individualized determination on a case-by-case
basis.\24\ Further, an exhaustive, ``one-size-fits-all'' rule may be an
inappropriate mechanism to address the complex and fact-specific
scenarios presented by sophisticated contracting arrangements in the
modern workplace.
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\24\ See 362 NLRB at 1614 (noting that ``issues [of joint-
employer status] are best examined and resolved in the context of
specific factual circumstances.'').
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Subject to comments, the Board nevertheless believes that
rescinding the 2020 Rule and setting forth a revised joint-employer
standard through rulemaking is desirable for several reasons. First,
the Board believes, subject to comments, that the 2020 Rule's approach
to defining joint-
[[Page 54645]]
employer status wrongly departs from common-law agency principles,
which the National Labor Relations Act makes applicable in this
context. In the Board's view, the 2020 Rule again incorporates control-
based restrictions that unnecessarily narrow the common law and which
threaten to undermine the goals of Federal labor law. By expressly
grounding the joint-employer standard in the common law, the proposed
rule would avoid repeating the errors the Board made beginning in the
mid-1980s and incorporated again in the 2020 Rule. Instead, the
proposed rule would restore the Board's focus on whether a putative
joint employer possesses the authority to control or exercises the
power to control particular employees' essential terms and conditions
of employment, consistent with the common law and relevant court
decisions. Finally, the proposed rule responds to the District of
Columbia Circuit's invitation for the Board to ``erect some legal
scaffolding'' to ensure that the joint-employer standard appropriately
focuses on forms of reserved and indirect control that bear on
employees' essential terms and conditions of employment.\25\
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\25\ See BFI, 911 F.3d at 1220.
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Moreover, the Board believes that establishing a definite, readily
available standard will assist employers and labor organizations in
complying with the Act. In addition, because the joint-employer
standard has changed several times in the past decade, the Board sees a
heightened need to seek public comment on this important area of labor
law. The Board also seeks to establish a rule regarding joint
employers' bargaining obligations and potential unfair labor practice
liability that correctly reflects both background legal principles and
the National Labor Relations Act's public policy of ``encouraging the
practice and procedure of collective bargaining'' and maximizing
employees' ``full freedom of association, self-organization, and
designation of representatives of their own choosing, for the purpose
of negotiating the terms and conditions of their employment or other
mutual aid or protection.'' 29 U.S.C. 151. While no rule can eliminate
the prospect of all litigation in this fact-intensive area of law, it
is the Board's hope that the proposed rule, codifying what we view as
the essential elements of a joint employer relationship, will reduce
uncertainty and litigation over the basic parameters of joint-employer
status. The Board therefore tentatively believes rulemaking to have
determinate advantages over addressing joint-employer issues purely
through adjudication.
IV. The Proposed Rule
The proposed rule would codify the Board's longstanding joint-
employer standard, approved by the Third Circuit and the District of
Columbia Circuit Court of Appeals, which provides that an employer is a
joint employer of particular employees if the employer has an
employment relationship with those employees under established common-
law agency principles and the employer shares or codetermines those
matters governing at least one of the employees' essential terms and
conditions of employment. Consistent with common-law agency principles
and the District of Columbia Circuit's decision in BFI, the Board
believes, subject to comments, that a party asserting a joint-
employment relationship may establish joint-employer status with
evidence of indirect and reserved forms of control, so long as those
forms of control bear on employees' essential terms and conditions of
employment. The proposed rule reflects the Board's preliminary view,
subject to comments, that the Act's purposes of promoting collective
bargaining and stabilizing labor relations are best served when two or
more statutory employers that each possess some authority to control or
exercise the power to control employees' essential terms and conditions
of employment are parties to bargaining over those employees' working
conditions.\26\
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\26\ The proposed rule does not incorporate BFI's requirement
that a ``putative joint employer possess[ ] sufficient control over
employees' essential terms and conditions of employment to permit
meaningful collective bargaining.'' 362 NLRB at 1600. However, the
Board's initial view, subject to comments, is that by focusing on
whether a putative joint employer possesses the authority to control
or exercises the power to control employees' essential terms and
conditions of employment, any required bargaining under the new
standard will necessarily be meaningful. We emphasize that,
consistent with BFI, the proposed rule would only require a putative
joint employer to bargain over those essential terms and conditions
of employment it possesses the authority to control or over which it
exercises the power to control.
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A. Proposal To Clarify That an Employer Is an Employer of Particular
Employees if the Employer Has an Employment Relationship With Those
Employees Under Common-Law Agency Principles
Proposed Sec. 103.40(a) provides that an employer, as defined by
section 2(2) of the National Labor Relations Act, is an employer of
particular employees, as defined by section 2(3) of the Act, if the
employer has an employment relationship with those employees under
common-law agency principles. Proposed Sec. 103.40(a) would explicitly
ground the Board's joint-employer analysis in common-law agency
principles, consistent with the Board and District of Columbia Circuit
decisions in BFI. As the Supreme Court has explained, common-law agency
principles apply when construing Federal statutes whose terms are
interpreted under the common law.\27\ Relevant sources of common-law
agency principles are not hard to find. Subject to comments and as set
forth further below, the Board believes that such sources include
primary articulations of these principles by common-law judges as well
compendiums, reports, and restatements of common law decisions such as
the Restatement (Second) of Agency (1958), and early court decisions
addressing ``master-servant relations.'' \28\
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\27\ See NLRB v. Town & Country Electric, Inc., 516 U.S. 85, 92-
95 (1995) (where Congress has used the term ``employee'' in a
statute without clearly defining it, the Court assumes that Congress
``intended to describe the conventional master-servant relationship
as understood by common-law agency doctrine''). See also Clackamas
Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440, 448-449
(2003); Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318,
322-324 (1992); Community for Creative Non-Violence v. Reid, 490
U.S. 730, 740, 752 fn. 31 (1989); Kelley v. Southern Pacific Co.,
419 U.S. 318, 323-324 (1974); NLRB v. United Insurance Co. of
America, 390 U.S. 254, 256-258 (1968).
\28\ As described above, the employer-employee relationship
under the Act is the common-law employer-employee relationship,
which is also described (particularly in older sources) using the
term ``master-servant relations.'' Beginning in the late 19th
century, American legal commentators began to use the terms
``master-servant'' and ``employer-employee'' interchangeably. See,
e.g., Horace Gray Wood, A Treatise on the Law of Master and Servant;
Covering the Relation, Duties and Liabilities of Employers and
Employees (1877). The Restatement (Second) of Agency and other
secondary sources from the early to mid-20th century similarly treat
these sets of terms as synonymous. See Restatement (Second of
Agency), sec. 2 cmt. d (``The word `employee' is commonly used in
current statutes to indicate the type of person herein described as
servant.''); 35 Am. Jur. Master and Servant sec. 2 (1st ed. 1941)
(``The relationship of employer and employee is the same as that of
master and servant.''). Accordingly, we refer elsewhere in the NPRM
to the ``employer-employee'' relations and the ``employer-employee
relationship.''
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As the District of Columbia Circuit has recognized, both the first
Restatement of Agency and the Restatement (Third) of Agency ``identify
the `right to control' as a relevant factor in establishing [an] . . .
employment relationship.'' BFI, 911 F.3d at 1213. Going farther, the
Restatement (Second) of Agency (1958) makes clear that the right to
control is the touchstone of the common-law employment relationship.
Thus, as the District of Columbia Circuit explained in BFI, ``the
`right to control'
[[Page 54646]]
runs like a leitmotif through the Restatement (Second) of Agency.'' 911
F.3d at 1211. The Restatement's definitions of ``master'' and
``servant'' confirm that the right to control is sufficient to
establish an employment relationship. The Restatement defines
``master'' as ``a principal who employs an agent to perform service in
his affairs and who controls or has the right to control the physical
conduct of the other in the performance of the service.'' Restatement
(Second) of Agency, sec. 2(1). In turn, the Restatement defines
``servant'' as ``a person employed to perform services in the affairs
of another and who with respect to the physical conduct in the
performance of the services is subject to the other's control or right
to control.'' Id. sec. 220(1).
The Board believes, subject to comments, that making the common-law
employer-employee relationship foundational to the joint-employer
analysis is consistent with the District of Columbia Circuit's
statement that the Board must apply the NLRA in a manner that ``is
bounded by the common-law's definition of a joint employer'' and
``color within the common-law lines identified by the judiciary.'' 911
F.3d at 1208.
B. Proposal To Establish That Two or More Employers of the Same
Particular Employees Are Joint Employers of Those Employees if the
Employers Share or Codetermine Those Matters Governing Employees'
Essential Terms and Conditions of Employment
Proposed Sec. 103.40(b) first recognizes, as did the 2020 Rule,
that the joint-employer issue arises (and the same test applies) in all
contexts under the Act, including both representation and unfair labor
practice case contexts. Cf. BFI of Pennsylvania, 691 F.2d at 1119, 1125
(enforcing a Board order holding joint employers jointly responsible
for remedying discharges that violated section 8(a)(3) and (1) of the
Act).
Proposed Sec. 103.40(b) also incorporates the principle from BFI
that ``the existence of a common-law employment relationship is
necessary, but not sufficient, to find joint-employer status.'' 362
NLRB at 1610. The proposed rule states that ``two or more employers of
the same particular employees are joint employers of those employees if
the employers share or codetermine those matters governing employees'
essential terms and conditions of employment.'' By including this
language, proposed Sec. 103.40(b) codifies the longstanding core of
the joint-employer test, consistent with the formulation of the
standard that several Courts of Appeals (notably, the Third Circuit and
the District of Columbia Circuit) have endorsed. See BFI, 911 F.3d at
1209 (citing Dunkin' Donuts Mid-Atlantic Distribution Center v. NLRB,
363 F.3d 437, 440 (D.C. Cir. 2004)); NLRB v. Browning-Ferris Industries
of Pennsylvania, Inc., 691 F.2d 1117, 1124 (3d Cir. 1982). See also
3750 Orange Place Limited Partnership v. NLRB, 333 F.3d 646, 660 (6th
Cir. 2003); Holyoke Visiting Nurses Assn. v. NLRB, 11 F.3d 302, 306
(1st Cir. 1993).
C. Proposal To Define ``Share or Codetermine Those Matters Governing
Employees' Essential Terms and Conditions of Employment'' to Mean for
an Employer To Possess the Authority To Control (Whether Directly,
Indirectly, or Both), or To Exercise the Power To Control (Whether
Directly, Indirectly, or Both), One or More of the Employees' Essential
Terms and Conditions of Employment
Proposed Sec. 103.40(c) seeks to define the terms ``share or
codetermine those matters governing employees' essential terms and
conditions of employment'' that appear in proposed Sec. 103.40(b). The
proposed rule would define ``share or codetermine'' to mean ``for an
employer to possess the authority to control (whether directly,
indirectly, or both), or to exercise the power to control (whether
directly, indirectly, or both), one or more of the employees' essential
terms and conditions of employment.'' Proposed Sec. 103.40(c)
incorporates the view of the BFI Board and the District of Columbia
Circuit that evidence of the authorized or reserved right to control,
as well as evidence of the exercise of control (whether direct or
indirect, including control through an intermediary, as discussed
further below) is probative evidence of the type of control over
employees' essential terms and conditions of employment that is
necessary to establish joint-employer status.
The Board believes, subject to comments, that this definition of
``share or codetermine'' is consistent with common-law agency
principles and avoids one of the key errors of the 2020 Rule. Thus,
proposed Sec. 103.40(c) clarifies that evidence that a putative joint
employer possesses the authority or exercises the power to control one
or more of the employees' essential terms and conditions of employment
is relevant to the joint-employer inquiry, regardless of whether such
control is direct or indirect. By contrast, Sec. 103.40(a) of the 2020
Rule required a putative joint employer to ``possess and exercise
substantial direct and immediate control over essential terms and
conditions of employment,'' and, in turn, Sec. 103.40(d) defined
``substantial direct and immediate control'' as ``direct and immediate
control that has a regular or continuous consequential effect on an
essential term or condition of employment of another employer's
employees.'' \29\ Like the additional control-related restrictions the
Board began introducing in the mid-1980's in TLI/Laerco and their
progeny,\30\ these definitions in the 2020 Rule wrongly depart from the
common law, in the Board's preliminary view subject to comments, as set
forth in greater detail below.
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\29\ See Joint Employer Status Under the National Labor
Relations Act, 85 FR 11184, 11235 (Feb. 26, 2020).
\30\ TLI, Inc., 271 NLRB 798 (1984); Laerco Transportation, 269
NLRB 324 (1984). See also AM Property Holding Corp., 350 NLRB 998
(2007), enfd. in relevant part sub nom. Service Employees
International Union, Local 32BJ v. NLRB, 647 F.3d 435 (2d Cir.
2011); Airborne Express, 338 NLRB 597 (2002); Flagstaff Medical
Center, 357 NLRB 659 (2011).
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D. Proposal To Define ``Essential Terms and Conditions of Employment''
To Generally Include Wages, Benefits, and Other Compensation; Hours of
Work and Scheduling; Hiring and Discharge; Discipline; Workplace Health
and Safety; Supervision; Assignment; and Work Rules and Directions
Governing the Manner, Means, or Methods of Work Performance
Pursuant to proposed Sec. 103.40(d), ``essential terms and
conditions of employment'' will ``generally include, but are not
limited to: wages, benefits, and other compensation; hours of work and
scheduling; hiring and discharge; discipline; workplace health and
safety; supervision; assignment; and work rules and directions
governing the manner, means, or methods of work performance.'' The
Board believes, subject to comments, that this definition is consistent
with the broad, inclusive approach to defining the set of essential
terms and conditions of employment the Board took prior to the 2020
Rule, with court approval. See, e.g., Aldworth Co., 338 NLRB 137, 139
(2002) (``The relevant facts involved in th[e] determination [of shared
or co-determined essential terms and conditions of employment] extend
to nearly every aspect of employees' terms and conditions of employment
and must be given weight commensurate with their significance to
employees' work life.''), enfd. sub nom. Dunkin' Donuts Mid-Atlantic
Distribution Center v. NLRB, 363 F.3d 437 (D.C. Cir. 2004).
The Board believes, subject to comments, that in most workplaces,
the proposed rule offers a set of useful
[[Page 54647]]
benchmarks for identifying essential terms and conditions of
employment. In addition, both the Act and the common law offer support
for generally treating these terms and conditions of employment as
essential. Proposed Sec. 103.40(d) includes ``wages, benefits, and
other compensation'' and ``hours of work and scheduling.'' \31\ The
structure and text of the Act provide significant support for
anticipating that in most employment relationships these terms and
conditions of employment will be considered ``essential.'' Section
8(d), defining the duty to bargain, refers to ``wages, hours, and other
terms and conditions of employment.'' 29 U.S.C. 158(d). And, section
9(a) refers to a chosen union as the exclusive representative of
employees ``for the purposes of collective bargaining in respect to
rates of pay, wages, hours of employment, or other conditions of
employment.'' 29 U.S.C. 159(a).
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\31\ We note that Sec. 103.40(b) of the 2020 Rule also included
``wages, benefits, [and] hours of work'' as essential terms and
conditions of employment. See 85 FR 11235.
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Section 2 and section 220 of the Restatement (Second) of Agency--
which the courts have acknowledged as persuasive authority for
construing the common-law definition of ``employer''--provide further
guidance that the Board believes, subject to comments, warrants
treating additional terms and conditions of employment as essential. As
set forth above, section 2 of the Restatement emphasizes the importance
of a putative employer's control of the ``physical conduct'' of an
employee ``in the performance of the service'' to the employer. It is
the Board's view, subject to comments, that section 2 justifies in most
cases treating discipline, workplace health and safety, supervision,
assignment, and certain work rules and directions as essential terms
and conditions of employment.\32\ Section 220 of the Restatement
likewise supports the usual inclusion of other work rules and
directions related to determining the manner, means, or methods of work
performance as essential terms and conditions of employment, as it
emphasizes the ``extent of control'' an employer ``may exercise over
the details of the work'' in identifying what distinguishes an employee
from an independent contractor. And, section 220 supports including
hiring and discharge as essential terms and conditions of employment,
as that section treats employment tenure and the ``length of time for
which the person is employed'' as relevant.
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\32\ Sec. 2 of the Restatement (Second of Agency) provides
further support for proposed Sec. 103.40(d)'s inclusion of ``hours
of work and scheduling'' as typically included on the list of
essential terms and conditions of employment.
We note that Sec. 103.40(b) of the 2020 Rule also treated
several of these terms and conditions of employment as essential,
including ``hiring, discharge, discipline, supervision, and
direction.'' See 85 FR 11235.
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The Board proposes an inclusive approach to defining the set of
essential terms and conditions of employment to ensure that the joint-
employer standard can encompass changing circumstances in the workplace
over time, as well as the particularities of certain industries or
occupations. Thus, while the proposed rule identifies terms and
conditions that would generally be considered essential, the Board
anticipates that comments will permit it to refine the list of
essential terms and conditions of employment. The Board observes that,
over time and through its adjudicatory processes, the Board's case law
has developed a non-exhaustive list of ``mandatory subjects'' of
collective bargaining, i.e. subjects that implicate wages, hours and
other terms and conditions of employment as delineated by sections
9(a), 8(a)(5) and 8(d) of the Act.\33\ The Board has found mandatory
subjects of bargaining to include, inter alia: overtime pay; \34\ paid
vacations; \35\ the provision of group health insurance plans; \36\ the
scheduling of employee breaks; \37\ paid lunch periods; \38\ employee
parking; \39\ grievance \40\ and arbitration \41\ procedures; work
rules; \42\ employee dress codes; \43\ health and safety issues; \44\
and workplace meal prices.\45\
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\33\ NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342,
349 (1958).
\34\ Am. Ambulance, 255 NLRB 417, 418-19 (1981), enfd. without
opinion 692 F.2d 762 (9th Cir. 1982).
\35\ Jimmy-Richard Co., 210 NLRB 802, 808 (1974), enfd. 527 F.2d
803 (D.C. Cir. 1975).
\36\ W.W. Cross & Co., 77 NLRB 1162, 1163 (1948), enfd. 174 F.2d
875 (1st Cir. 1949).
\37\ El Paso Elec. Co., 355 NLRB 428, 451 (2010), enfd 681 F.3d
651 (5th Cir. 2012).
\38\ Van Dorn Mach. Co., 286 NLRB 1233, 1233-1234, 1234 fn. 5
(1987), enfd. 881 F.2d 302 (6th Cir. 1989).
\39\ United Parcel Serv., 336 NLRB 1134, 1134 (2001).
\40\ Healthcare Workers Union, Loc. 250 (Alta Bates Med. Ctr.),
321 NLRB 382, 384 (1996).
\41\ NLRB v. Ind. Stave Co., Diversified Indus. Div., 591 F.2d
443, 446 (8th Cir. 1979), enfg. as modified 233 NLRB 1202 (1977).
\42\ The Toledo Blade Co., Inc., 343 NLRB 385, 387 (2004).
\43\ Medco Health Sols. of Las Vegas, Inc., 357 NLRB 170, 172
(2011), enfd. in rel. part 701 F.3d 710 (D.C. Cir. 2012).
\44\ NLRB v. Am. Nat. Can Co., Foster-Forbes Glass Div., 924
F.2d 518, 524 (4th Cir. 1991), enfg. 293 NLRB 901, 904 (1989).
\45\ Ford Motor Co., 230 NLRB 716, 718 (1977), enfd. 571 F.2d
993 (7th Cir. 1978), affd. 441 U.S. 488 (1979).
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The shortcomings of the 2020 Rule's exhaustive list of essential
terms and conditions of employment (which did not include workplace
health and safety) were revealed during the COVID-19 pandemic. This
experience has persuaded the Board, subject to comments, that other
similarly unforeseen circumstances may arise in the future and so the
joint-employer standard should not adopt an exhaustive list of
essential terms and conditions of employment in given workplaces, but
instead leave some flexibility for the Board in future adjudication
under a final rule. Proposed Sec. 103.40(d) likewise aims to ensure
that the Board's approach to defining essential terms and conditions of
employment is not needlessly overinclusive. For example, the Board is
inclined to believe that, while workplace health and safety likely
constitutes an essential condition of employment in healthcare, mining,
and construction industry workplaces, there may be other workplaces in
which health and safety concerns are less acute. We note, as well, that
because the proposed rule requires the existence of a common-law
employment relationship between a joint employer and particular
employees, a joint employer necessarily will control those terms and
conditions of employment sufficient to establish an employment
relationship, regardless of which terms and conditions it does not
control. The Board invites comment on all aspects of its approach to
essential terms and conditions of employment, including the specific
terms and conditions of employment it should (or should not) generally
consider ``essential.'' \46\
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\46\ In particular, the Board seeks comment on the following
questions. As mentioned above, the starting point for the proposed
rule is the Act, which specifically references wages, hours, and
other terms and conditions of employment. Should the proposed list
of essential terms and conditions of employment solely include those
terms and conditions of employment that are referenced in the
statute? What terms and conditions of employment are essential to
the existence of a common-law employment relationship? Is the
Board's proposed inclusive approach to defining essential terms and
conditions of employment appropriate? If so, how should the Board
generally approach the task of identifying the essential terms and
conditions?
We disagree with our dissenting colleagues' contention that the
pending litigation challenging the 2020 Rule's exclusion of health
and safety matters from the rule's exhaustive list of essential
terms and conditions of employment in any way forecloses our
preliminary view that, moving forward, an inclusive approach to
defining essential terms and conditions of employment would better
serve the policies of the Act.
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[[Page 54648]]
E. Proposal to Specify That Whether an Employer Possesses the Authority
To Control or Exercises the Power To Control One or More of the
Employees' Terms and Conditions of Employment Is Determined Under
Common-Law Agency Principles and That Evidence of Reserved or Indirect
Control Is Sufficient To Establish Status as a Joint Employer
Proposed Sec. 103.40(e) provides that common-law agency principles
govern the determination of whether an employer possesses the authority
to control or exercises the power to control one or more of the
essential terms and conditions of employment of the employees at issue.
As discussed above, the Board acknowledges that ``Congress has tasked
the courts, and not the Board, with defining the common-law scope of
`employer' '' and that ``the common-law lines identified by the
judiciary'' thus delineate the boundaries of the ``policy expertise
that the Board brings to bear'' on the question of whether a business
entity is a joint employer of another employer's employees under the
Act. BFI v. NLRB, 911 F.3d at 1208-1209. Accordingly, in defining the
types of control that will be sufficient to establish joint-employer
status under the Act, the Board looks for guidance from the judiciary,
including primary articulations of relevant principles by judges
applying the common law, as well as secondary compendiums, reports, and
restatements of these common law decisions, focusing ``first and
foremost [on] the `established' common-law definitions at the time
Congress enacted the National Labor Relations Act in 1935 and the Taft-
Hartley Amendments in 1947.'' Id. at 1209 (citations omitted).
Subject to comments, the Board believes that the policies of the
Act, together with the expansive common-law employer-employee
relationship defined by the judiciary, make it appropriate for the
Board to give determinative weight to the existence of a putative joint
employer's authority to control the essential terms and conditions of
employment, whether or not such control is exercised, and without
regard to whether any exercise of such control is direct or indirect,
such as through an intermediary.
1. Reserved Control
First, long before the 1935 enactment of the Act, the Supreme Court
recognized and applied a common-law rule that ``the relation of master
and servant exists whenever the employer retains the right to direct
the manner in which the business shall be done, as well as the result
to be accomplished, or, in other words, `not only what shall be done,
but how it shall be done.' '' Singer Mfg. Co. v. Rahn, 132 U.S. 518,
523 (1889) (emphasis added) (quoting Railroad Co. v. Hanning, 82 U.S.
649, 657 (1872)). The Court in Singer affirmed the holding below that a
worker was an employee \47\ of a company because the Court concluded
that the company had contractually reserved such control over the
performance of the work that it ``might, if it saw fit, instruct [the
worker] what route to take, or even what speed to drive.'' Id. at 523.
In reaching this conclusion, the Court relied solely on the parties'
contract, and did not discuss whether or in what manner the company had
ever actually exercised any control over the terms and conditions under
which the worker performed his work. In other words, the Court found a
common-law employer-employee relationship based on contractually
reserved control without reference to whether or how that control was
exercised.\48\
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\47\ As discussed above, a ``servant'' is an employee. See,
e.g., 30 C.J.S. Employer--Employee sec. 1 (2022) (``The terms
`servant' and `employee' are interchangeable.'').
\48\ See also Chicago Rock Island & Pac. Ry. Co. v. Bond, 240
U.S. 449, 456 (1916) (worker was not employee of railroad company
where contract provided ``company reserves and holds no control over
[worker] in the doing of such work other than as to the results to
be accomplished,'' and Court found company ``did not retain the
right to direct the manner in which the business should be done, as
well as the results to be accomplished, or, in other words, did not
retain control not only of what should be done, but how it should be
done.'') (emphasis added); Little v. Hackett, 116 U.S. 366, 376
(1886) (``[I]t is this right to control the conduct of the agent
which is the foundation of the doctrine that the master is to be
affected by the acts of his servant.'') (emphasis added) (quoting
Bennet v. New Jersey R.R. & Transp. Co., 36 N.J.L. 225 (N.J. 1873)).
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Between the Court's decision in Singer and the relevant
congressional enactments of the NLRA in 1935 and the Taft-Hartley
amendments in 1947, Federal courts of appeals and State high courts
consistently followed the Supreme Court in emphasizing the primacy of
the right of control over whether or how it was exercised in decisions
that turned on the existence of a common-law employer-employee
relationship. For example, in 1934, the Supreme Court of Missouri
examined whether a worker was an ``employee'' of two companies under a
State workmen's compensation statute--the terms of which the court
construed ``in the sense in which they were understood at common
law''--and affirmed that ``the essential question is not what the
companies did when the work was being done, but whether they had a
right to assert or exercise control.'' \49\ And, in 1945, the Court of
Appeals for the District of Columbia Circuit explained that, in
distinguishing employees from independent contractors, ``it is the
right to control, not control or supervision itself, which is most
important.'' \50\
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\49\ Maltz v. Jackoway-Katz Cap Co., 82 SW2d 909, 912, 918 (Mo.
1934). See also McDermott's Case, 186 NE 231, 232-233 (Mass. 1933)
(``One may be a servant though far away from the master, or so much
more skilled than the master that actual direction and control would
be folly, for it is the right to control, rather than the exercise
of it that is the test.''); Larson v. Independent School Dist No.
11J of King Hill, 22 P.2d 299, 301 (Idaho 1933) (``It is not
necessary that control be exercised, if the right of control
exists.''); Gordon v. S.M. Byers Motor Car Co., 164 A. 334, 335-336
(Pa. 1932) (``The control of the work reserved in the employer which
makes the employee a mere servant . . . means a power of control,
not necessarily the exercise of the power.'') (internal quotation
and citation omitted); Brothers v. State Industrial Accident
Commission, 12 P.2d 302, 304 (Or. 1932) (``[T]he true test of the
relationship of employer and employee is not the actual exercise of
control, but the right to exercise control.'') (internal quotation
and citation omitted); Murrays Case, 154 A. 352, 354 (Me. 1931)
(``Authorities are numerous and uniform that the vital test is to be
found in the fact that the employer has or not retained power of
control or superintendence over the employee or contractor. The test
of the relationship is the right to control. It is not the fact of
actual interference with the control, but the right to interfere
that makes the difference between an independent contractor and a
servant or agent. There is no conflict as to this general rule'')
(internal quotation and citation omitted); Van Watermeullen v.
Industrial Commission, 174 NE 846, 847-848 (Ill. 1931) (``One of the
principal factors which determine whether a worker is an employee or
an independent worker is the matter of the right to control the
manner of doing the work, not the actual exercise of that right.'');
Norwood Hospital v. Brown, 122 So. 411, 413 (Ala. 1929) (``[T]he
ultimate question . . . is not whether the employer actually
exercised control, but whether it had a right to control.'').
\50\ Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir. 1945). See
also Industrial Commission v. Meddock, 180 P.2d 580, 584 (Ariz.
1947) (``It is the right to control rather than the fact that the
employer does control that determines the status of the parties, and
this right to control is, in turn, tested by those standards
applicable to the facts at hand.''); D.M. Rose & Co. v. Snyder, 206
SW 2d 897, 904 (Tenn. 1947) (internal quotations and citations
omitted) (``[the] right of control is the distinguishing mark which
differentiates the relation of master and servant from that of
employer and independent contractor. . . . Wherever the defendant
has had such right of control, irrespective of whether he exercised
it or not, he has been held to be the responsible principal or
master.''); Green Valley Coop. Dairy Co. v. Industrial Comm'n, 27 NW
2d 454, 457 (Wis. 1947) (citation omitted) (``It is quite immaterial
whether the right to control is exercised by the master so long as
he has the right to exercise such control.''); Bobik v. Industrial
Commission, 64 NE 2d, 829, (Ohio 1946) (``[I]t is not, however, the
actual exercise of the right by interfering with the work but rather
the right to control which constitutes the test.''); Cimorelli v.
New York Cent. R. Co., 148 F.2d 575, 578 (6th Cir. 1945) (``The fact
of actual interference or exercise of control by the employer is not
material. If the existence of the right or authority to interfere or
control appears, the contractor cannot be independent.''); Dunmire
v. Fitzgerald, 37 A.2d 596, 599 (Pa. 1944) (in determining ``who was
the controlling master of the borrowed employe[e], . . . . The
criterion is not whether the borrowing employer in fact exercised
control, but whether he had the right to exercise it.''); Bush v.
Wilson & Co., 138 P.2d 457, 461 (Kan. 1943) (``[W]hether a person is
an employee of another depends upon whether the person who is
claimed to be an employer had a right to control the manner in which
the work was done. It has been pointed out many times that this
means not actually the exercise of control, but does mean the right
to control.''); Ross v. Schneider, 27 SE 2d 154, 157 (Va. 1943)
(quoting Murray's Case, 154 A. 352, 354 (Me. 1931)) (``Authorities
are numerous and uniform that the vital test is to be found in the
fact that the employer has or not retained power of control or
superintendence over the employee or contractor. `The test of the
relationship is the right to control. It is not the fact of actual
interference with the control, but the right to interfere that makes
the difference between an independent contractor and a servant or
agent.' Tuttle v. Embury-Martin Lumber Co., [158 NW 875, 879 (Mich.
1916)].''); Jones v. Goodson, 121 F.2d 176, 179 (10th Cir. 1941)
(``the legal relationship of employer and employee . . . exists when
the person for whom services are performed has the right to control
and direct . . . the details and means by which [the service] is
accomplished. . . . it is not necessary that the employer actually
direct or control the manner in which the services are performed; it
is sufficient if he has the right to do so.''); S.A. Gerrard Co. v.
Industrial Accident Commission, 110 P.2d 377 (Cal. 1941) (``the
right to control, rather than the amount of control which was
exercised, is the determinative factor.'').
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[[Page 54649]]
Unsurprisingly, early twentieth century secondary authority
similarly distills from the cases a common-law rule under which the
right of control establishes the existence of the common-law employer-
employee relationship, without regard to whether or how such control is
exercised. For example, in 1922, an American Law Report (A.L.R.)
---------------------------------------------------------------------------
annotation states as black-letter law that:
In every case which turns upon the nature of the relationship
between the employer and the person employed, the essential question
to be determined is not whether the former actually exercised
control over the details of the work, but whether he had a right to
exercise that control.\51\
---------------------------------------------------------------------------
\51\ General discussion of the nature of the relationship of
employer and independent contractor, 19 A.L.R. 226 at sec. 7 & fn. 1
(1922) (emphasis added) (citations omitted). A 1931 A.L.R.
annotation similarly reports that ``[i]t is not the fact of actual
interference or exercise of control by the employer which renders
one a servant rather than an independent contractor, but the
existence of the right or authority to interfere or control.'' Tests
in determining whether one is an independent contractor, 75 A.L.R.
725 (1931).
Other, earlier secondary authority was also consistent with
this view. For example, the second edition of The American & English
Encyclopedia of Law, published over several years spanning the turn
of the century, explains that ``[t]he relation of master and servant
exists where the employer has the right to select the employee; the
power to remove and discharge him; and the right to direct both what
work shall be done and the way and manner in which it shall be
done.'' 20 The American & English Encyclopedia of Law 12 Master and
Servant (2d ed. 1902) (emphasis added) (citations omitted).
Likewise, in 1907, the Cyclopedia of Law and Procedure defines
``master,'' inter alia, as ``[o]ne who not only prescribes the end,
but directs, or at any time may direct, the means and methods of
doing the work.'' 26 Cyclopedia of Law and Procedure 966 fn. 2
Master and Servant (1907) (emphasis added) (citations omitted). The
1925 first edition of Corpus Juris echoes the same definitions set
forth in the Cyclopedia, and additionally notes state high court
common-law authority holding that ``where the master has the right
of control, it is not necessary that he actually exercise such
control.'' 39 C.J. Master and Servant sec. 1 Definitions 33 fn. 8
(1st ed. 1925) (emphasis added) (quoting Tucker v. Cooper, 158 P.
181 (Cal. 1916)).
And, as stated above, the first Restatement of Agency, published in
---------------------------------------------------------------------------
1933, defines ``master,'' and ``servant,'' thus:
(1) A master is a principal who employs another to perform
service in his affairs and who controls or has the right to control
the physical conduct of the other in the performance of the service.
(2) A servant is a person employed by a master to perform
service in his affairs whose physical conduct in the performance of
the service is controlled or is subject to the right of control by
the master.\52\
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\52\ Restatement (First) of Agency sec. 2 (Am. Law Inst. 1933)
(emphasis added). See also id. at sec. 220 (``A servant is a person
employed to perform a service for another in his affairs and who,
with respect to his physical conduct in the performance of the
service, is subject to the other's control or right to control.'')
(emphasis added). As noted above, the District of Columbia Circuit
observed in BFI v. NLRB, 911 F.3d at 1211, that ``the `right to
control' runs like a leitmotif through the Restatement (Second) of
Agency,'' which, though published in 1958, is relevantly similar to
the first restatement.
Finally, the first edition of American Jurisprudence, published
between 1936 and 1948, states that ``the really essential element of
the [employer-employee] relationship is the right of control--the right
of one person, the master, to order and control another, the servant,
in the performance of work by the latter, and the right to direct the
manner in which the work shall be done,'' and ``[t]he test of the
employer-employee relation is the right of the employer to exercise
control of the details and method of performing the work.'' \53\
---------------------------------------------------------------------------
\53\ 35 Am. Jur. Master and Servant sec. 3 (1st ed. 1941)
(emphasis added).
---------------------------------------------------------------------------
The Board believes, subject to comments and based on consultation
of this and other judicial authority, that when Congress enacted the
NLRA in 1935 and the Taft-Hartley Amendments in 1947, the existence of
a putative employer's reserved authority to control the details of the
terms and conditions under which work was performed sufficed to
establish a common-law employer-employee relationship without regard to
whether or in what manner such control was exercised.
From 1947 to today, innumerable judicial decisions and secondary
authorities examining the common-law employer-employee relationship
have continued to emphasize the primacy of the putative employer's
authority to control, without regard to whether or in what manner that
control has been exercised. For example, in 2014, the Supreme Court of
California affirmed that ``what matters under the common law is not how
much control a hirer exercises, but how much control the hirer retains
the right to exercise.'' \54\ As
[[Page 54650]]
noted above, the Restatement (Second) of Agency relevantly echoes the
First Restatement's emphasis on the right of control.\55\ Corpus Juris
Secundum provides that ``[a]n employee/servant is a type of agent whose
physical conduct is controlled or is subject to the right to control by
the master; the servant's principal, who controls or has the right to
control the physical conduct of the servant, is called the master.''
\56\ And, the second edition of American Jurisprudence provides that
``the principal test of an employment relationship is whether the
alleged employer has the right to control the manner and means of
accomplishing the result desired.'' \57\ Based on its examination of
this and other judicial and secondary authority, the Board agrees with
the District of Columbia Circuit that ``for what it is worth [the
common-law rule in 1935 and 1947] is still the common-law rule today.''
\58\ The Board also notes that, as set forth in greater detail above,
this view is in keeping with the Board's prior treatment of reserved
control in the period following the Greyhound decision and before the
Board began imposing additional control-related restrictions in TLI/
Laerco and their progeny.
---------------------------------------------------------------------------
\54\ Ayala v. Antelope Valley Newspapers, Inc., 327 P.3d 165,
169, 172 (Cal. 2014); see also, e.g., Garcia-Celestino v. Ruiz
Harvesting, Inc., 898 F.3d 1110, 1121 (11th Cir. 2018) (``We
emphasize that `it is the right to control, not the actual exercise
of control that is significant.'''); Mallory v. Brigham Young Univ.,
332 P.3d 922, 928-929 (Utah 2014) (``If the principal has the right
to control the agent's method and manner of performance, that agent
is a servant whether or not the right is specifically exercised.'');
Shatto v. McLeod Regional Medical Center, 753 SE2d 416, 419, 420
(S.C. 2013) (``While evidence of actual control exerted by a
putative employer is evidence of an employment relationship, the
critical inquiry is whether there exists the right and authority to
control and direct the particular work or undertaking.''); Anthony
v. Okie Dokie Inc., 976 A.2d 901, 906 (DC 2009) (quoting Safeway
Stores Inc. v. Kelly, 448 A.2d 856, 860 (DC 1982)) (``The
determinative factor `is whether the employer has the right to
control and direct the servant in the performance of his work and
the manner in which the work is to be done . . . and not the actual
exercise of control or supervision.' ''); Universal Am-Can Ltd. V.
WCAB, 762 A.2d 328, 332-333 (Pa. 2000) (``[I]t is the existence of
the right to control that is significant, irrespective of whether
the control is actually exercised.''); Reed v. Glyn, 724 A.2d 464,
466 (Vt. 1998) (``It is to be observed that actual interference with
the work is unnecessary--it is the right to interfere that
determines.''); JFC Temps, Inc. v. W.C.A.B. (Lindsay), 620 A.2d 862,
864-865 (Pa. 1996) (``The law governing the ``borrowed'' employee is
well-established. . . . The entity possessing the right to control
the manner of the performance of the servant's work is the employer,
irrespective of whether the control is actually exercised.'');
Harris v. Miller, 438 SE 2d 731, 735 (N.C. 1994) (``The traditional
test of liability under the borrowed servant rule [provides that] a
servant is the employe (sic) of the person who has the right of
controlling the manner of his performance of the work, irrespective
of whether he actually exercises that control or not.'') (internal
quotation and citation omitted); Beddia v. Goodin, 957 F.2d 254, 257
(6th Cir. 1992) (``The test is whether the employer retained
control, or the right to control, the modes and manner of doing the
work contracted for. It is not necessary that the control ever be
exercised.''); Ex parte Curry, 607 S.2d 230, 232 (Ala. 1992) (``In
the last analysis, it is the reserved right of control rather than
its actual exercise that provides the answer.''); ARA Leisure
Services, Inc. v NLRB, 782 F.2d 456, 460 (4th Cir. 1986) (``It is
the right to control, rather than the actual exercise of control,
that is significant.''); NLRB v. Associated Diamond Cabs, Inc., 702
F.2d 912, 920 (11th Cir. 1983) (``[I]t is the right to control, not
the actual exercise of control, that is significant.''); Glenmar
Cinestate Inc. v. Farrell, 292 SE2d 366, 369 (Va. 1982) (``It is not
the fact of actual interference with the control, but the right to
interfere, that makes the difference between an independent
contractor and a servant or agent.''); Baird v. Sickler, 433 NE 2d
593, 594-595 (Ohio 1982) (``For the relationship to exist, it is
unnecessary that such right of control be exercised; it is
sufficient that the right merely exists.''); Seafarers Local 777
(Yellow Cab) v. NLRB, 603 F.2d 862, 874 (D.C. Cir. 1978) (quoting
Williams v. U.S., 126 F.2d 129, 132 (7th Cir. 1942)) (``[I]t is the
right and not the exercise of control which is the determining
element.''); Combined Insurance Co. of America v. Sinclair, 584 P.2d
1034, 1042 (Wyo. 1978) (``The base determining factor is whether
[putative employer] retained [t]he right of control of the manner
that [putative employee] operated his vehicle and not whether such
control was in fact exercised.''); NLRB v. Deaton Inc., 502 F.2d
1221, 1225 (5th Cir. 1974) (``It is the right and not the exercise
of control which is the determining element''); Dovell v. Arundel
Supply Corp., 361 F.2d 543, 545 (D.C. Cir. 1966) (quoting Grace v.
Magruder, 148 F.2d 679, 681 (D.C. Cir. 1945)) (``[I]t is the right
to control, not control or supervision itself, which is most
important.''); United Ins. Co. of America v. NLRB, 304 F.2d 86, 89
(7th Cir. 1962) (``[I]t is the right and not the exercise of control
which is the determining element.''); Cohen v. Best Made Mfg. Co.,
169 A.2d 10, 11-12 (R.I. 1961) (``The final test is the right of the
employer to exercise power of control rather than the actual
exercise of such power.''); Fardig v. Reynolds, 348 P.2d 661, 663
(Wash. 1960) (``It is well settled in this state that . . . [it] is
not the actual exercise of the right of interference with the work,
but the right to control, which constitutes the test.'').
\55\ See Restatement (Second) of Agency secs. 2, 220 (Am. Law
Inst. 1958).
\56\ 30 C.J.S. Employer--Employee sec. 1 (2022) (emphasis added)
(citations omitted).
\57\ 27 Am. Jur. 2d. Employment Relationship sec. 1 (2022)
(emphasis added) (citations omitted).
\58\ BFI v. NLRB, 911 F.3d at 1210 & fn. 6.
---------------------------------------------------------------------------
Finally, because the facts of many cases do not require
distinguishing between contractually reserved and actually exercised
control, many judicial decisions and other authorities spanning the
last century have articulated versions of the common-law test that do
not expressly include this distinction. But the Board is not aware of
any common-law judicial decision or other common-law authority directly
supporting the proposition that, given the existence of a putative
employer's contractually reserved authority to control, further
evidence of direct and immediate exercise of that control is necessary
to establish a common-law employer-employee relationship. For these
reasons, the Board believes, subject to comments, that the judicially
defined common-law boundaries on the Board's exercise of its policy
expertise cannot justify the adoption of a joint-employer standard that
requires a showing of actual exercise of direct and immediate control
in order to establish that an entity is a joint employer of another
entity's employees, as current Sec. 103.40 improperly requires.
2. Indirect Control or Control Exercised Through an Intermediary
The Board believes, subject to comments, that evidence that an
employer has actually exercised such control over essential terms and
conditions, whether directly or indirectly, such as through an
intermediary, necessarily also suffices to establish the existence of a
joint-employer relationship. As the District of Columbia Circuit has
recognized, ``[t]he common law . . . permits consideration of those
forms of indirect control that play a relevant part in determining the
essential terms and conditions of employment.'' BFI v. NLRB, 911 F.3d
at 1199-1200. In addition, the District of Columbia Circuit has
explained that the definition of ``employer'' set forth in section 2(2)
of the Act ``textually indicates that the statute looks at all
probative indicia of employer status, whether exercised `directly or
indirectly''' and therefore that the Act ``expressly recognizes that
agents acting `indirectly' on behalf of an employer could also count as
employers.'' Id. at 1216.
Judicial decisions and secondary authorities addressing the common-
law employer-employee relationship confirm that indirect control,
including control exercised through an intermediary, is relevant to the
existence of an employment relationship. The Restatement (Second) of
Agency explicitly recognized the significance of indirect control, both
in providing that ``the control or right to control needed to establish
the relation of master and servant may be very attenuated'' and in
discussing the subservant doctrine, which deals with cases in which one
employer's control may be exercised indirectly, while a second entity
directly controls employees.\59\ As the District of Columbia Circuit
explained in BFI, ``the common law has never countenanced the use of
intermediaries or controlled third parties to avoid the creation of a
master-servant relationship.'' \60\
---------------------------------------------------------------------------
\59\ Restatement (Second) of Agency sections 5(2), comments e,
f, and illustration 6; 220(1), comment d; 226, comment a (1958).
\60\ 911 F.3d at 1217 (citing Nicholson v. Atchison, T. & S. F.
Ry. Co., 147 P. 1123, 1126 (Kan. 1915) (use of a ``branch company''
as a ``mere instrumentality'' ``did not break the relation of master
and servant existing between the plaintiff and the [putative
master]'').
---------------------------------------------------------------------------
Consistent with these longstanding common-law principles, the Board
believes, subject to comments, that evidence showing that a putative
joint employer wields indirect control over the essential terms and
conditions of employment of another employer's employees is relevant to
the joint-employer inquiry. Ignoring relevant evidence of indirect
control over essential terms and conditions of employment would, in the
words of the District of Columbia Circuit, ``allow manipulated form to
flout reality,'' \61\ contrary to the teachings of the common law.
Under the proposed rule, for example, evidence that a putative joint
employer communicates work assignments and directives to another
entity's managers or exercises ongoing oversight to ensure that job
tasks are performed properly may demonstrate the type of indirect
control over essential terms and conditions of employment that is
necessary to establish a joint-employer relationship. The Board
welcomes comment on this and other forms of indirect control that
should be considered probative (or not probative) of joint-employer
status.
---------------------------------------------------------------------------
\61\ Id. at 1219.
---------------------------------------------------------------------------
F. Proposal To Clarify That Evidence of Control Over Matters That Are
Immaterial to the Existence of an Employment Relationship or That Do
Not Bear on Employees' Essential Terms and Conditions of Employment Is
Not Relevant to the Joint-Employer Inquiry
Proposed Sec. 103.40(f) incorporates the District of Columbia
Circuit's teaching in BFI that an employer's control over matters that
are immaterial to the existence of an employment relationship under
established common-law agency principles, or that otherwise do not bear
on the employees' essential terms and conditions of employment, is not
relevant to the joint-employer inquiry.\62\ In addition, the proposed
rule responds to the District of Columbia Circuit's criticism that the
BFI Board did not sufficiently ``distinguish between indirect control
that the common law of
[[Page 54651]]
agency considers intrinsic to ordinary third-party contracting
relationships, and indirect control over the essential terms and
conditions of employment.'' BFI, 911 F.3d at 1222-1223. In remanding
the case to the Board, the court identified as key the ``common-law
principle that a joint employer's control--whether direct or indirect,
exercised or reserved--must bear on the `essential terms and conditions
of employment' . . . and not on the routine components of a company-to-
company contract.'' Id. at 1221 (citation omitted).
---------------------------------------------------------------------------
\62\ BFI, 911 F.3d at 1222-1223.
---------------------------------------------------------------------------
The Board's proposed rule does not purport to exhaustively detail
the universe of business arrangements that bear on the existence of a
common-law employer-employee relationship. However, the Board agrees
with the BFI Board and the District of Columbia Circuit that
contractual terms limited to ``dictat[ing] the results of a contracted
service,'' that aim ``to control or protect [the employer's] own
property,'' \63\ or to ``set the objective, basic ground rules, and
expectations for a third-party contractor'' \64\ will generally not be
relevant to the inquiry (assuming those terms do not otherwise affect
the employees' essential terms and conditions of employment). In
addition, the Board agrees that ``routine components of a company-to-
company contract,'' like a ``very generalized cap on contract costs,''
or an ``advance description of the tasks to be performed under the
contract,'' will generally not be material to the existence of an
employment relationship under common-law agency principles.\65\ The
Board specifically seeks public comment regarding this portion of its
proposed rule and invites commenters to address which ``routine
components of a company-to-company contract'' the Board should not
consider relevant to the joint-employer analysis. In addition, the
Board invites comment regarding which contractual controls reserved by
a putative joint employer over another entity's employees should
establish that the putative joint employer is also a common-law
employer of the other entity's employees.
---------------------------------------------------------------------------
\63\ BFI, supra, 362 NLRB at 1614.
\64\ BFI, supra, 911 F.3d at 1220.
\65\ Id. The Board believes, subject to comments, that certain
forms of so-called ``cost-plus'' contracting arrangements bear on
employees' essential terms and conditions of employment. See, e.g.,
Dunkin' Donuts Mid-Atlantic Distribution Center v. NLRB, 363 F.3d
437, 441 (D.C. Cir. 2004) (one entity ``determined [another
entity's] employee wage and benefit rates'' by ``specifying, in the
parties' `cost-plus' lease agreement, the rates it would reimburse
[that entity].''). However, because such contractual arrangements
may reveal varying degrees of indirect control over the wages of
another entity's employees, ``[a] characterization of the
transaction as a `cost plus' contract is not necessarily
determinative of the question as to the relationship of the parties
thereto.'' 35 Am. Jur. Master and Servant sec. 5 (1st ed. 1941). As
a result, the proper categorization of such arrangements may be a
matter best left to development through case-by-case adjudication.
See id. (where parties have entered into a cost-plus contract,
``some of the authorities have held the parties to be employer and
contractor, and others have held them to be master and servant.'').
---------------------------------------------------------------------------
G. Proposal To Clarify That a Party Asserting Joint-Employer Status Has
the Burden of Establishing That Relationship by a Preponderance of the
Evidence
Proposed Sec. 103.40(g) confirms, in keeping with BFI, 362 NLRB at
1616, that the party asserting that an employer is a joint employer of
particular employees has the burden of establishing that relationship
by a preponderance of the evidence.
H. Proposal To Explain That the Provisions of the Rule Are Intended To
Be Severable
Proposed Sec. 103.40(h) explains that the Board intends the
provisions of the rule to be severable in the event any provision of
the rule is held to be unlawful. The Board's preliminary view is that
proposed Sec. 103.40(a), (b), and (c), which address the common-law
employment relationship, may be severable from the other provisions of
the proposed rule, which address statutory issues that are informed by
the common law. The Board specifically invites public comment on its
preliminary view regarding the severability of the provisions of the
rule.
V. Conclusion
The Board welcomes public comment on all aspects of its proposed
rule. In particular, the Board seeks input from employees, unions, and
employers with experience in workplaces in which multiple entities
possess or exercise some control over a particular group of employees'
working conditions.
Although the Board has offered proposed rule text that would
rescind the 2020 Rule and replace it with a new rule setting forth the
joint-employer standard, the Board is also specifically interested in
commenters' responses to the following questions. Should the Board
solely rescind the 2020 joint-employer rule and not replace it with a
new rule? If so, how could the Board address the issue that the prior
legal standard (BFI 2015) was denied enforcement in part by the
District of Columbia Circuit? In the alternative, should the Board
amend the 2020 Rule, and if so, should the rule be amended in the
manner set forth in this NPRM? Are there any reliance interests related
to the 2020 Rule, and if so, how should the Board assess those
interests?
As stated above, comments regarding this proposed rule must be
received by the Board on or before November 7, 2022. Comments replying
to comments submitted during the initial comment period must be
received by the Board on or before November 21, 2022.
Our dissenting colleagues were part of the Board that issued the
2020 Rule at a time when the Board consisted of a three-member quorum
without any dissenting views.\66\ As discussed above, the 2020 Rule
displaced BFI, which had returned to the Board's traditional joint-
employer analysis after a period during which the Board applied a more
restrictive standard that we preliminarily believe was not supported by
the text or purposes of the Act, by earlier Board or court precedent,
or by the common law. Our dissenting colleagues express many of the
same criticisms of the Board's traditional standard, as embodied in BFI
and the proposed rule, that they expressed in the now-vacated decision
in Hy-Brand Industrial Contractors,\67\ and in the 2020 Rule.\68\ We
have expressed our preliminary view that the Act's purpose of promoting
effective collective bargaining is better served by the Board's
traditional standard than by the overly restrictive standard embodied
in the 2020 Rule.\69\ We look forward to receiving and reviewing the
public's comments and, afterward, considering these issues afresh with
the good-faith participation of all members of the Board.
---------------------------------------------------------------------------
\66\ As mentioned above, then-Member McFerran dissented from the
2018 NPRM that resulted in the 2020 Rule before her prior term
expired on December 19, 2019. She was reappointed August 10, 2020,
after the publication of the 2020 Rule.
\67\ 365 NLRB No. 156 (2017), vacated by 366 NLRB No. 26 (2018).
\68\ Member Kaplan was a member of the panel majority that
reversed BFI in Hy-Brand before a different Board panel vacated that
decision.
\69\ Contrary to our dissenting colleague's suggestion, the
proposed rule would only require a putative joint employer to
bargain over those terms and conditions of employment which it
possesses the authority to control or over which it exercises the
power to control.
---------------------------------------------------------------------------
VI. Dissenting View of Members Kaplan and Ring
Two-and-a-half years ago, the Board issued a final rule (``the 2020
Rule'') setting forth the standard for determining, under the National
Labor Relations Act (``NLRA'' or ``the Act''), whether two entities
constitute a joint employer of employees directly
[[Page 54652]]
employed by only one of them.\70\ There, after thoroughly considering
tens of thousands of public comments and carefully analyzing the legal
landscape, the Board adopted a comprehensive joint-employer standard
that is consistent with common-law agency principles and provides clear
guidance to regulated parties. The 2020 Rule was an immense
undertaking, requiring thousands of personnel hours to complete. Today,
however, with their Notice of Proposed Rulemaking (``NPRM''), the
majority sets in motion a project to do it all over again. Worse, the
rule they propose would be clearly inferior to the 2020 Rule, it would
be contrary to the very common-law principles they so insistently
emphasize, and it would fail to pass muster under the Administrative
Procedure Act.
---------------------------------------------------------------------------
\70\ Joint Employer Status Under the National Labor Relations
Act, 85 FR 11184 (Feb. 26, 2020) (codified at 29 CFR 103.40).
---------------------------------------------------------------------------
Our colleagues offer no valid justification for launching a second
resource-intensive joint-employer rulemaking. They do not purport to
rely on any experience under the 2020 Rule. Indeed, they cannot do so,
since the Board has yet to apply it in a single case. Nor do they rely
on any court precedent postdating the 2020 Rule's publication or on any
factual developments, much less any seismic shift in American
workplaces. The majority's stated purpose for this new rulemaking is to
``explicitly ground the joint-employer standard in common-law agency
principles and provide relevant guidance to parties covered by the Act
regarding their rights and responsibilities under the Act.'' But the
2020 Rule already achieves both these objectives and does so far better
than the rule the majority proposes. Indeed, the proposed rule fails to
achieve either of its stated aims. It neither articulates the common-
law agency principles that appropriately bear on determining joint-
employer status under the NLRA nor provides any real guidance to the
regulated community. Instead, it simply purports to expand joint-
employer status to the outermost limits of the common law (while
actually going beyond those limits) and leaves everything else to case-
by-case adjudication.
The universally accepted general formulation of the joint-employer
standard--embodied in the 2020 Rule--is that an employer may be
considered a joint employer of a separate employer's employees only if
the two employers ``share or codetermine the employees' essential terms
and conditions of employment.'' See Sec. 103.40 of the Board's Rules
and Regulations; see also Browning-Ferris Industries of California,
Inc. v. NLRB, 911 F.3d 1195, 1201 (D.C. Cir. 2018); NLRB v. Browning-
Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117, 1123 (3d Cir.
1982), enfg. 259 NLRB 148 (1981). To establish that this ``share or
codetermine'' standard has been met, the Board's longstanding rule was
that a putative joint employer's control over employment matters must
be direct and immediate. See, e.g., TLI, Inc., 271 NLRB 798, 798-799
(1984), enfd. mem. sub nom. General Teamsters Local Union No. 326 v.
NLRB, 772 F.2d 894 (3d Cir. 1985); Laerco Transportation, 269 NLRB 324
(1984). Indirect control, or an unexercised contractual reservation of
a right to control, was insufficient.
This standard, which had been applied for at least 30 years, was
eliminated by a divided Board in Browning-Ferris Industries of
California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599
(2015) (BFI).\71\ Under BFI, one company could be deemed a joint
employer of another company's employees based exclusively on either a
never-exercised contractual reservation of right to control one or more
essential terms and conditions of employment or on its indirect control
of or influence over such terms and conditions, provided the evidence
satisfied a second analytical step, namely, that ``the putative joint
employer possesses sufficient control over employees' essential terms
and conditions of employment to permit meaningful bargaining.'' BFI,
362 NLRB at 1600.
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\71\ Review granted in part and remanded 911 F.3d 1195 (D.C.
Cir. 2018).
---------------------------------------------------------------------------
The United States Court of Appeals for the District of Columbia
Circuit denied enforcement of the Board's decision in BFI. The D.C.
Circuit held that while the common law supported the Board's holding
that indirect control and a contractually reserved right to control are
relevant to the joint-employer inquiry, the BFI Board had ``overshot
the common-law mark'' by failing to distinguish evidence of indirect
control that bears on workers' essential terms and conditions of
employment from evidence that simply documents the routine parameters
of company-to-company contracting. Browning-Ferris Industries of
California, Inc. v. NLRB, 911 F.3d at 1216. The court also faulted the
Board for failing to ``meaningfully apply'' the second step of its
standard. Id. at 1221-1222. Finally, and importantly, the court did not
affirm BFI's holding that indirect control, or a contractually reserved
right to control, can establish joint-employer status absent direct and
immediate control. It left those issues undecided. Id. at 1213, 1218.
In formulating the 2020 Rule, the Board heeded the D.C. Circuit's
guidance. It announced a joint-employer standard that is firmly
grounded in common-law agency principles. It recognized that indirect
control and a contractually reserved right to control are probative of
joint-employer status. But, addressing the issues the D.C. Circuit left
unaddressed, it also recognized that making either one dispositive of
joint-employer status, absent evidence of direct and immediate control
over one or more essential terms and conditions of employment, would
contravene the common law and ill serve the purposes and policies of
the Act. Accordingly, the 2020 Rule specified that to establish that an
entity shares or codetermines the essential terms and conditions of
another employer's employees, the entity must possess and exercise such
substantial direct and immediate control over one or more essential
terms or conditions of their employment as would warrant finding that
the entity meaningfully affects matters relating to the employment
relationship with those employees. Evidence of the entity's indirect
control over essential terms and conditions of employment of another
employer's employees, the entity's contractually reserved but never
exercised authority over the essential terms and conditions of
employment of another employer's employees, or the entity's control
over mandatory subjects of bargaining other than the essential terms
and conditions of employment is probative of joint-employer status, but
only to the extent it supplements and reinforces evidence of the
entity's possession or exercise of direct and immediate control over a
particular essential term and condition of employment. 29 CFR
103.40(a). The 2020 rule also specified in detail how a joint-employer
determination is to be made, enumerating the specific factors that
would be considered and how those factors would be applied. This
included defining a closed set of ``essential terms and conditions of
employment,'' specifying how ``direct and immediate control'' would be
determined with respect to each of them, and defining all other key
terms used in the rule. See 29 CFR 103.40(b)-(f). Thus, the 2020 Rule
aligns with the common law and the D.C. Circuit's 2018 decision and
provides a self-contained, comprehensive standard for
[[Page 54653]]
determining whether a joint-employer relationship exists.
The proposed rule would eliminate all the 2020 Rule's detailed
guidance regarding conduct that constitutes direct and immediate
control of each essential term and condition of employment. In its
place, the proposed rule simply incorporates by reference the entire
body of common-law agency principles. As a result, unions, employers,
and employees would find no guidance in the rule itself. Instead, they
would have to go searching for guidance in the common law to determine
whether a joint-employer relationship exists.
Worse, the proposed rule also radically expands the circumstances
in which joint-employer status can be found, going well beyond common-
law limits and anything contemplated by the Board's decision in BFI. As
discussed below, the proposed rule makes a never-exercised contractual
reservation of right to control, or indirect control of or influence
over a single term or condition of employment deemed ``essential,''
determinative of joint-employer status. BFI did not.\72\ In addition,
rather than respond to the D.C. Circuit's criticism of the BFI Board's
failure to meaningfully apply the second step of its announced
standard, the proposed rule simply abandons that step altogether,
embracing the unsupported and wholly unreasonable assumption that where
an entity possesses nothing more than a never-exercised right of
control, any bargaining by that entity ``will necessarily be
meaningful.'' In addition, the proposed rule substitutes an open-ended,
non-exclusive list of essential terms and conditions of employment for
the closed list set forth in the 2020 Rule. As explained below, this
open-ended list renders the proposed rule impermissibly vague and
therefore arbitrary and capricious. For all these reasons, we
respectfully dissent.
---------------------------------------------------------------------------
\72\ See BFI, 362 NLRB at 1614 (``The right to control . . . is
probative of joint-employer status, as is the actual exercise of
control, whether direct or indirect'' (emphasis added).).
---------------------------------------------------------------------------
Background and the 2020 Rule
Section 2(2) of the National Labor Relations Act defines an
``employer'' to include ``any person acting as an agent of an employer,
directly or indirectly.'' 29 U.S.C. 152(2). In determining whether an
employment relationship exists between an entity and employees directly
employed by a separate employer, common-law agency principles are
controlling.\73\ The Board will find that two separate entities are
joint employers of employees directly employed by only one of them if
the evidence shows that they share or codetermine those matters
governing the employees' essential terms and conditions of
employment.\74\
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\73\ NLRB v. United Insurance Co. of America, 390 U.S. 254, 256
(1968).
\74\ CNN America, Inc., 361 NLRB 439, 441 (2014) (quoting TLI,
Inc., 271 NLRB at 798), enf. denied in part 865 F.3d 740 (D.C. Cir.
2017). The ``share or codetermine'' standard was first stated by the
United States Court of Appeals for the Third Circuit in NLRB v.
Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d at 1123.
As the D.C. Circuit observed in its 2018 decision, after the Third
Circuit formulated the ``share or codetermine'' standard, the Board
and the courts began coalescing around it. Browning-Ferris
Industries of California, Inc. v. NLRB, 911 F.3d at 1201.
---------------------------------------------------------------------------
The Board, with court approval, long held that a determination that
two or more entities do share or codetermine such matters requires
proof that a putative joint employer has actually exercised substantial
direct and immediate control over one or more essential terms and
conditions of employment of another entity's employees. See Summit
Express, Inc., 350 NLRB 592, 592 fn. 3 (2007) (finding that the General
Counsel failed to prove direct and immediate control and therefore
dismissing joint-employer allegation); Airborne Express, 338 NLRB 597,
597 fn. 1 (2002) (holding that ``the essential element'' in a joint-
employer analysis ``is whether a putative joint employer's control over
employment matters is direct and immediate'') (citing TLI, Inc., 271
NLRB at 798-799); Laerco Transportation, 269 NLRB at 324 (dismissing
joint-employer allegation where user employer's supervision of supplied
employees was limited and routine); see also NLRB v. CNN America, Inc.,
865 F.3d 740, 748-751 (D.C. Cir. 2017) (finding that the Board erred by
failing to adhere to its ``direct and immediate control'' standard);
SEIU Local 32BJ v. NLRB, 647 F.3d 435, 442-443 (2d Cir. 2011) (```An
essential element' of any joint employer determination is `sufficient
evidence of immediate control over the employees.' '') (quoting
Clinton's Ditch Co-op Co. v. NLRB, 778 F.2d 132, 138 (2d Cir. 1985)).
Under this precedent, an entity's unexercised contractual reservation
of a right to control or indirect control/influence was insufficient to
establish joint-employer status.
In 2015, a divided Board significantly lowered the bar for proving
a joint-employer relationship in BFI, supra, 362 NLRB at 1599. There, a
Board majority eliminated the requirement of proof that a putative
joint employer had actually exercised direct and immediate control over
essential terms and conditions of employment. Id. at 1613-1614. The BFI
majority held that a joint-employer relationship could be based solely
on an unexercised contractual reservation of right to control and/or
indirect control. In other words, the BFI majority expanded the joint-
employer doctrine to potentially include in the collective-bargaining
process an employer's independent business partner that has an indirect
or potential impact on the employees' essential terms and conditions of
employment, even where the business partner has not itself actually
established those essential employment terms or collaborated with the
undisputed employer in setting them.
The defining feature of the Board's BFI standard was its
elimination of the preexisting requirement of proof that a putative
joint employer actually exercised substantial direct and immediate
control over the essential terms and conditions of another company's
workers. Contrary to our colleagues' claims that the D.C. Circuit
``broadly uph[e]ld[ ] the Board's BFI joint-employer standard,'' the
court did not uphold its defining feature. It expressly left
unaddressed whether indirect control or contractually-reserved-but-
unexercised authority could, standing alone, establish a joint-employer
relationship.\75\
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\75\ 911 F.3d at 1213 (``[B]ecause the Board relied on evidence
that Browning-Ferris both had a `right to control' and had
`exercised that control,' this case does not present the question
whether the reserved right to control, divorced from any actual
exercise of that authority, could alone establish a joint-employer
relationship.'') (internal citation omitted); 911 F.3d at 1218
(``[W]hether indirect control can be `dispositive' is not at issue
in this case because the Board's decision turned on its finding that
Browning-Ferris exercised control `both directly and indirectly.'
'').
---------------------------------------------------------------------------
After canvassing common-law agency principles, including those
identified in the Restatements of Agency, the D.C. Circuit did ``uphold
as fully consistent with the common law the [BFI] Board's determination
that both reserved authority to control and indirect control can be
relevant factors in the joint-employer analysis.'' 911 F.3d at 1222
(emphasis added). In short, the court held that contractually reserved
control and indirect control can contribute to a joint-employer finding
without addressing whether those factors could independently establish
a joint-employer relationship.
The court in Browning-Ferris Industries of California v. NLRB made
several other important points that subsequently informed the 2020
Rule. First, the court made clear that the common law sets the outer
limit of a permissible joint-employer standard
[[Page 54654]]
under the Act, without suggesting in any way that the standard must or
should be coextensive with that outer limit.
The policy expertise that the Board brings to bear on applying
the National Labor Relations Act to joint employers is bounded by
the common-law's definition of a joint employer. The Board's
rulemaking, in other words, must color within the common-law lines
identified by the judiciary.
Id. at 1208 (emphasis added). Hence, while it is clear that the Board
is precluded from adopting a more expansive joint-employer doctrine
than the common law permits, it may adopt a narrower standard that
promotes the Act's policies. This is a point that was recognized by the
Board majority in BFI itself. BFI, 362 NLRB at 1613 (``The common-law
definition of an employment relationship establishes the outer limits
of a permissible joint-employer standard under the Act.''). Indeed, the
Board, with court approval, has long made policy choices not to
exercise the full extent of its jurisdiction, including as to
particular classes of employment relationships.\76\
---------------------------------------------------------------------------
\76\ See Northwestern University, 362 NLRB 1350, 1352 (2015)
(declining to assert jurisdiction over Northwestern University
football players who receive grant-in-aid scholarships, even
assuming they are statutory employees, due to the nature and
structure of the NCAA Division I Football Bowl Subdivision); Brevard
Achievement Center, 342 NLRB 982, 983-985 (2004) (declining to
exercise jurisdiction over disabled workers whose relationship with
an employer is ``primarily rehabilitative'' as opposed to
``typically industrial'' because ``Congress did not intend that the
Act govern'' the former); Brown University, 342 NLRB 483, 493 (2004)
(dismissing representation petition based on the ``belief that the
imposition of collective bargaining on graduate students would
improperly intrude into the educational process and would be
inconsistent with the purposes and policies of the Act''), overruled
on policy grounds by Columbia University, 364 NLRB No. 90 (2016);
Siemons Mailing Service, 122 NLRB 81 (1959) (describing Board's
discretionary commerce standard).
---------------------------------------------------------------------------
Second, the D.C. Circuit made clear that, under the common law, the
independent-contractor standard, with its emphasis on the right to
control, is different from the joint-employer standard:
[T]he independent-contractor and joint-employer tests ask
different questions. The independent-contractor test considers who,
if anyone, controls the worker other than the worker herself. The
joint-employer test, by contrast, asks how many employers control
individuals who are unquestionably superintendent.
911 F.3d at 1214. In this regard, the court explained that ``a rigid
focus on independent-contractor analysis omits the vital second step in
joint-employer cases, which asks, once control over the workers is
found, who is exercising that control, when, and how.'' Id. at 1215
(emphasis in original). To rephrase, the vital second step of a common-
law joint-employer analysis does indeed focus on the exercise of
control.
Third, the D.C. Circuit held that the BFI Board's treatment of the
indirect-control factor contravened the common law. Id. at 1221.
Specifically, the court concluded that the BFI Board had ``overshot the
common-law mark'' by failing to distinguish evidence of indirect
control that bears on workers' essential terms and conditions of
employment from evidence that simply documents the routine parameters
of company-to-company contracting. Id. at 1216. The court explained
that, for example, it would be inappropriate to give any weight in a
joint-employer analysis to the fact that Browning-Ferris had controlled
the basic contours of a contracted-for service, such as by requiring
four lines' worth of employee sorters plus supporting screen cleaners
and housekeepers. Id. at 1220-2221.
Fourth, the court held that the Board had erred by failing to
meaningfully apply the second step of its two-step standard: ``whether
the putative joint employer possesses sufficient control over
employees' essential terms and conditions of employment to permit
meaningful collective bargaining.'' On this point, the court rebuked
the Board for ``never delineat[ing] what terms and conditions of
employment are `essential' '' and for adopting an ``inclusive'' and
``non-exhaustive'' approach to the meaning of ``essential terms.'' Id.
at 1221-1222. The court also faulted the Board for failing to clarify
what ``meaningful collective bargaining'' might require in the parties'
arrangement. The court remanded the case to the Board for further
proceedings consistent with the court's opinion.\77\
---------------------------------------------------------------------------
\77\ On remand, the Board found that any retroactive application
of a refined standard would be manifestly unjust. The Board
therefore dismissed the complaint and amended the certification of
representative to remove BFI as a joint employer. Browning-Ferris
Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 369
NLRB No. 139, slip op. at 1 (2020). Thereafter, a divided Board
denied the union's motion for reconsideration. Browning-Ferris
Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 370
NLRB No. 86 (2021).
On further review, the D.C. Circuit found the Board's
retroactivity analysis erroneous, granted the union's petition for
review, and vacated the Board's order dismissing the complaint and
amending the certification of representative. Sanitary Truck Drivers
& Helpers Local 350, International Brotherhood of Teamsters v. NLRB,
--- F.4th ----, 2022 WL 3008026 (D.C. Cir. July 29, 2022).
---------------------------------------------------------------------------
The Board's 2020 Rule is within the boundaries set by common-law
agency principles as defined by the D.C. Circuit's 2018 BFI decision
and furthers the Act's policy of promoting meaningful collective
bargaining. The 2020 Rule appropriately accounts for the ``vital second
step in joint-employer cases'' identified by the court in BFI: once
control over the workers is found, determining ``who is exercising that
control, when, and how.'' Id. at 1215. Under the 2020 Rule, an entity
can be deemed a joint employer of another company's employees only if
it possesses and actually exercises substantial direct and immediate
control over a broad-but-exhaustive list of essential terms and
conditions of employment.
The 2020 Rule does not turn a blind eye to reserved control or
indirect control. It expressly provides that those forms of control are
``probative of joint-employer status.'' See Sec. 103.40(a) of the
Board's Rules and Regulations. Specifically, each may serve to
supplement and reinforce evidence the putative joint employer either
possesses or has exercised substantial direct and immediate control
over workers' essential terms. Plainly, the fact that an entity has a
contractual reservation of a right to control is relevant to
establishing possession of control. Further, both reserved control and
indirect control are relevant to whether the control possessed and
exercised is substantial. 85 FR 11186. However, standing alone,
reserved and indirect control cannot establish that one company is the
joint employer of another's employees. See Sec. 103.40(a) of the
Board's Rules and Regulations. The 2020 Rule requires proof that a
putative joint employer played an active role, either alone or in
collaboration with an undisputed employer, in setting employees'
essential terms. The D.C. Circuit left this issue open for the Board to
resolve, and the Board appropriately did so in the 2020 Rule.
In promulgating the 2020 Rule, the Board also made clear that it
did not intend to permit an entity to immunize itself from joint-
employer status by implementing its control through an intermediary.
``Direct and immediate control exercised through an intermediary
remains direct and immediate.'' 85 FR 11209. This, too, is consistent
with the D.C. Circuit's guidance. See Browning-Ferris v. NLRB, 911 F.3d
at 1217 (``[T]he common law has never countenanced the use of
intermediaries or controlled third parties to avoid the creation of a
master-servant relationship.'').
The 2020 Rule, unlike our colleagues' proposed rule, appropriately
recognizes that the determination of joint-employer status cannot be
divorced from the practical consequences of finding that an entity is a
joint employer. The Board
[[Page 54655]]
explained that the 2020 Rule promoted the Act's policies by imposing
bargaining obligations only on those employer entities that actually
control essential working conditions and by establishing a fairly
bright-line rule to guide regulated parties. In that rule, it was
stated that the Board believes a standard that requires an entity to
possess and exercise substantial direct and immediate control over
essential terms and conditions of employment is consistent with the
purposes and policies of the Act . . . . The Act's purpose of promoting
collective bargaining is best served by a joint-employer standard that
places at the bargaining table only those entities that control terms
and conditions that are most material to collective bargaining.
Moreover, a less demanding standard would unjustly subject innocent
parties to liability for others' unfair labor practices and coercion in
others' labor disputes. A fuzzier standard with no bright lines would
make it difficult for the Board to distinguish between arm's-length
contracting parties and genuine joint employers. Accordingly,
preserving the element of direct and immediate control over essential
terms and conditions draws a discernible and predictable line,
providing ``certainty beforehand'' for the regulated community. 85 FR
11205.
A primary benefit of the 2020 Rule is the clear guidance that it
provides to regulated parties. Not only does it clearly identify the
general types of control that will render one company the joint
employer of another's workers, it also provides specific examples with
respect to each essential employment term. For example, with respect to
``wages,'' the 2020 Rule provides that an employer exercises direct and
immediate control if it determines the wage rate paid to another
employer's individual employees or job classifications, but not if it
enters into a cost-plus contract with another company. Further, with
respect to the essential term of ``direction,'' the 2020 Rule provides
that an entity exercises direct and immediate control by assigning
particular employees their individual work schedules, positions, and
tasks, but not if it merely sets the schedule for completing a project
or describes the work to be accomplished on a project. The 2020 Rule
provides similar examples for each of the other six ``essential''
terms. And the 2020 Rule makes clear that like reserved and indirect
control over essential terms, control over non-essential mandatory
subjects of bargaining can be probative of joint-employer status but is
insufficient, standing alone, to establish a joint-employer
relationship.
Reasons for Our Dissent
We dissent from the majority's decision to engage in rulemaking in
this area at this time because, for the reasons stated above, there is
no valid justification for doing so, particularly a mere two-and-a-half
years after the 2020 Rule was promulgated. We further dissent from the
majority's NPRM because the proposed rule is fundamentally flawed and
inconsistent with the common law and the policies of the Act for the
reasons stated below. The proposed rule is sufficiently flawed that a
decision to adopt it would be arbitrary and capricious. For the same
reasons, any revised rule that could be permissibly based on it would
be arbitrary and capricious as well.
A. The Proposed Rule Is Arbitrary and Capricious Because It Fails To
Provide Meaningful Guidance
The choice between rulemaking and adjudication is left to the
Agency's informed discretion in the first instance.\78\ In either
circumstance, however, the Administrative Procedure Act (APA), 5 U.S.C.
551 et seq., establishes standards that Federal agencies must follow.
Specifically, the APA prohibits administrative agencies from acting
arbitrarily and capriciously. In this regard, the Supreme Court has
explained that the APA requires the agency to ``provide reasoned
explanation for its action . . . . An agency may not, for example,
depart from a prior policy sub silentio . . . . And of course the
agency must show that there are good reasons for the new policy.'' FCC
v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009) (internal
citation omitted). More recently, the Supreme Court succinctly held
that ``[t]he APA's arbitrary-and-capricious standard requires that
agency action be reasonable and reasonably explained.'' FCC v.
Prometheus Radio Project, __ U.S. __, 141 S. Ct. 1150, 1158 (2021). The
proposed rule fails this test.
---------------------------------------------------------------------------
\78\ NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974)
(``[T]he choice between rulemaking and adjudication lies in the
first instance within the Board's discretion.''); SEC v. Chenery
Corp., 332 U.S. 194, 203 (1947) (``[T]he choice made between
proceeding by general rule or by individual, ad hoc litigation is
one that lies primarily in the informed discretion of the
administrative agency.'').
---------------------------------------------------------------------------
The majority justifies their decision to engage in rulemaking here
by claiming that the proposed rule will, among other things, establish
``a definite, readily available standard [that] will assist employers
and labor organizations in complying with the Act'' and ``reduce
uncertainty and litigation over the basic parameters of joint-employer
status'' compared to determining joint-employer status through
adjudication. But the proposed rule fails to achieve these goals. It
offers no greater certainty or predictability than adjudication because
it expressly contemplates that joint-employer status will be determined
through adjudication under the common law, not under the provisions of
the proposed rule, in most if not all cases. In this respect, it will
also provide markedly less guidance to parties than does the 2020 Rule.
Absent any rule whatsoever, joint-employer status would be
determined through case-by-case adjudication applying the common law of
agency.\79\ Rather than specify how the common-law standard will be
applied in determining joint-employer status, however, the proposed
rule simply incorporates it by reference in no fewer than three places.
Section 103.40(a) of the proposed rule provides that ``an employer, as
defined by section 2(2) of the National Labor Relations Act (the Act),
is an employer of particular employees, as defined by section 2(3) of
the Act, if the employer has an employment relationship with those
employees under common-law agency principles.'' Section 103.40(b) of
the proposed rule provides that ``[w]hether an employer possesses the
authority to control or exercises the power to control one or more of
the employees' terms and conditions of employment is determined under
common-law agency principles.'' And Sec. 103.40(f) of the proposed
rule provides that ``[e]vidence of an employer's control over matters
that are immaterial to the existence of an employment relationship
under common-law agency principles or control over matters that do not
bear on the employees' essential terms and conditions of employment is
not relevant to the determination of whether the employer is a joint
employer.'' Determinations of joint-employer status under each of these
provisions will require adjudication under the common law, since the
proposed rule by its terms
[[Page 54656]]
provides no other guidance. This is precisely how the determinations
would be made if there were no rule at all.\80\
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\79\ See NLRB v. United Insurance Co. of America, 390 U.S. at
256 (holding that the Board must ``apply general agency principles
in distinguishing between employees and independent contractors
under the Act''); Browning-Ferris Industries of California v. NLRB,
911 F.3d at 1214-1215 (``[E]mployee-or-independent-contractor cases
can still be instructive in the joint-employer inquiry to the extent
that they elaborate on the nature and extent of control necessary to
establish a common-law employment relationship. Beyond that, a rigid
focus on independent-contractor analysis omits the vital second step
in joint-employer cases, which asks, once control over the workers
is found, who is exercising that control, when, and how.'')
(emphasis in original).
\80\ This naturally invites the question, why is the majority
proposing a new rule to replace the 2020 Rule rather than simply
rescinding the 2020 Rule? We suspect the answer is that rescinding
the 2020 Rule without replacing it with a new rule would effectively
reinstate BFI, which the majority departs from in key respects.
---------------------------------------------------------------------------
Moreover, the proposed rule incorporates ``common-law agency
principles'' but offers no guidance whatsoever as to the meaning of
that term. Does the proposed rule incorporate the Restatement of
Agency? If so, which of the three Restatements is being incorporated?
Do ``common-law agency principles'' include court decisions applying
the common law? If so, which ones? Does a decision by a single court
count, even if most other courts disagree? The proposed rule does not
answer or even acknowledge any of these questions, much less provide a
reasonable explanation for failing to do so. See FCC v. Prometheus
Radio Project, 141 S. Ct. at 1158 (``The APA's arbitrary-and-capricious
standard requires that agency action be reasonable and reasonably
explained.'').
Another weakness in the proposed rule is the uncertainty it would
inject into the identification of ``essential'' terms and conditions of
employment. Where the 2020 Rule provided an exhaustive list, the
proposed rule takes a ``broad, inclusive'' (i.e., vague) approach. The
text of the proposed regulation provides a non-exhaustive list of
``essential'' subjects without providing any guidance on how regulated
parties (or the Board) could determine whether an unlisted subject is
``essential.'' The proposed rule compounds that uncertainty by
suggesting that whether a particular subject is ``essential'' may
depend on the particular industry involved, and further, that the
category of ``essential'' terms may change over the course of time.
In Browning-Ferris Industries of California, Inc. v. NLRB, the D.C.
Circuit faulted the BFI Board for failing to delineate what terms and
conditions are ``essential'' to make collective bargaining
``meaningful'' and instead simply declaring that it would adhere to an
`` `inclusive' and `non-exhaustive' approach.'' 911 F.3d at 1221-1222
(citation omitted). In remanding the case to the Board, the D.C.
Circuit articulated its trust that, before finding a joint-employer
relationship, the Board ``would not neglect to . . . explain which
terms and conditions are `essential' to permit `meaningful collective
bargaining,' '' id. at 1222--referring, in that last phrase, to the
second step of the BFI standard.\81\ Our colleagues' response? They
keep BFI's ``inclusive'' and ``non-exhaustive'' approach to
``essential'' terms and conditions, but they evade--for the time
being--the task of furnishing the explanation the D.C. Circuit requires
by tossing out the second step of the BFI standard altogether and
declaring that ``any required bargaining under the new standard will
necessarily be meaningful.'' Whether this solution has legs remains to
be seen. Although the D.C. Circuit did not expressly endorse BFI's
second step, presumably the court would not have instructed the Board
to explain that step more fully on remand if it deemed it superfluous
to begin with.
---------------------------------------------------------------------------
\81\ See BFI, 362 NLRB at 1600 (``If this common-law employment
relationship exists, the inquiry then turns to whether the putative
joint employer possesses sufficient control over employees'
essential terms and conditions of employment to permit meaningful
collective bargaining.'').
---------------------------------------------------------------------------
The proposed rule is a step backward from the 2020 Rule in all
these respects. As noted above, the 2020 Rule specified the factors to
be considered in making a joint-employer determination and explained
how they relate to each other. This permitted parties to determine
whether a joint-employer relationship would be found based on the text
of the rule itself, without any need to resort to Restatements of
Agency, precedent applying the common law, or any other source to make
that determination because the 2020 Rule itself reflected the
boundaries established by the common law. It also specified the terms
or conditions of employment that would be considered essential in
determining joint-employer status. For all these reasons, the 2020 Rule
indisputably provides parties with greater certainty and predictability
than they would have if joint-employer status were decided by
adjudication. The proposed rule, on the other hand, does not.
While administrative agencies have the authority to revise or amend
previously promulgated rules, the APA requires the agency to ``provide
reasoned explanation for its action . . . . [and] show that there are
good reasons for the new policy.'' FCC v. Fox Television Stations,
Inc., 556 U.S. at 515 (internal citation omitted). Here, our colleagues
fail to acknowledge that their proposed rule provides less guidance for
the regulated community than the 2020 Rule. Nor have they shown that
there are ``good reasons'' for replacing a clear, well-defined, and
comprehensive rule with one that simply sets employers, employees, and
unions adrift in a sea of common-law agency precedent, just as if there
were no joint-employer rule at all. For this reason as well, the
proposed rule is arbitrary and capricious. Id.
B. The Proposed Rule Is Contrary to the Common Law
The drastic changes our colleagues propose making to existing law
also do not find support in the common-law standards they claim to
endorse. They assert that the Act's policies ``make it appropriate for
the Board to give determinative weight to the existence of a putative
joint employer's authority to control the essential terms and
conditions of employment, whether or not such control is exercised, and
without regard to whether any exercise of such control is direct or
indirect.'' However, they fail to cite a body of court precedent
holding that a joint-employer relationship--whether under the common
law or in the specific context of the National Labor Relations Act--may
be based solely on a never-exercised contractual reservation of right
to control or on indirect control of or impact on employees' essential
working conditions.
Contrary to our colleagues' suggestion, Greyhound Corp., 153 NLRB
1488 (1965), does not support their view that a joint-employer
relationship may be based exclusively on a never-exercised contractual
reservation of a right to control and/or indirect control. In that
case, the Board found that Greyhound was a joint employer of its
cleaning contractor's employees based in part on Greyhound's actual
exercise of substantial direct and immediate control over the
employees' essential terms and conditions of employment. Specifically,
the Board relied on the fact that Greyhound had actually engaged in
``detailed supervision'' of the employees on a day-to-day basis
regarding the manner and means of their performance. Id. at 1496. Also,
the Board relied on the fact that Greyhound had actually prompted the
discharge of one of the contractor's employees whom Greyhound had felt
was unsatisfactory. Id. at 1491 fn. 8. To be sure, the Board also gave
some weight to provisions in the business contract between Greyhound
and the contractor. That contract granted Greyhound the right to
specify the ``exact manner and means'' through which the employees'
work would be accomplished, control their wages, set their schedules,
and assign employees to perform the work. Id. at 1495-1496. But the
Board specifically stated that ``[t]he joint employer finding herein is
premised on the common control exercised by Greyhound and [the cleaning
contractor] over the employees.'' Id. at 1492 (emphasis
[[Page 54657]]
added). And the Board explained that Greyhound had ``reserved to
itself, both as a matter of express contractual agreement and in actual
practice, rights over these employees which are consistent with its
status as their employer along with [the cleaning contractor].'' Id. at
1495 (emphasis added). In short, Greyhound supports the 2020 Rule, not
the proposed rule.\82\
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\82\ The majority misleadingly claims that ``[f]or nearly two
decades after Greyhound, the Board treated the right to control
employees' work and their terms and conditions of employment as
determinative in the joint-employer analysis.'' To support that
assertion, the majority cites a number of decisions in which the
Board and reviewing courts found ``probative'' (i.e., relevant) a
company's unexercised contractual reservation of right to control
and/or its indirect control over essential terms and conditions of
employment. But, in nearly every one of those cases, the Board also
relied in part on an entity's actual exercise of direct and
immediate control and did not state or imply that a joint-employer
finding would have been appropriate absent that exercise of control.
See, e.g., Lowery Trucking Co., 177 NLRB 13, 15 (1969) (finding that
freight company was joint employer of drivers supplied by trucking
company based in part on actual exercise of detailed supervision,
participation in the hiring process, discharge of two drivers, and
discipline of a third), enfd. sub nom. Ace-Alkire Freight Lines v.
NLRB, 431 F.2d 280 (8th Cir. 1970). Our research revealed only two
cases in which the Board apparently based a joint-employer finding
exclusively on an unexercised contractual reservation of right to
control essential employment terms: Jewel Tea Co., 162 NLRB 508
(1966), and Value Village, 161 NLRB 603 (1966). However, in each
case, the Board failed to offer any rationale for why an unexercised
reservation of right, standing alone, could establish joint-employer
status under the Act. In that regard, those two opinions were
conclusory. Two conclusory decisions do not establish a traditional
approach. Moreover, our research uncovered no cases in which the
Board or a court based a joint-employer finding solely on indirect
control.
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In an earlier case related to Greyhound, the Supreme Court held
that a Federal district court lacked subject-matter jurisdiction to
enjoin the Board from conducting a representation election based on the
plaintiff's challenge to the Board's joint-employer determination in
the representation proceeding. Boire v. Greyhound Corp., 376 U.S. 473
(1964). While the Court there did not rule directly on the joint-
employer standard, it observed that the Board had found Greyhound and
the cleaning contractor constituted a joint employer ``because they had
exercised common control over the employees.'' Id. at 475. The Court
further stated that ``whether Greyhound possessed sufficient indicia of
control to be an `employer' is essentially a factual issue.'' Id. at
481. Accordingly, Boire v. Greyhound offers no support for the proposed
rule.
The majority's proposed rule also finds no support in NLRB v.
Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d at 1117.
There, the Third Circuit set forth the ``correct standard'' as follows:
``[W]here two or more employers exert significant control over the same
employees--where from the evidence it can be shown that they share or
co-determine those matters governing essential terms and conditions of
employment--they constitute `joint employers' within the meaning of the
NLRA.'' Id. at 1124 (emphasis added).\83\ Applying that standard, the
court found that the operator of a refuse site (BFI) was a joint
employer of drivers directly employed and supplied by its trucking
contractors. The court relied on BFI's actual exercise of substantial
direct and immediate control over the drivers' essential terms and
conditions of employment. Specifically, BFI possessed and exercised the
right to hire and fire the drivers at issue. Id. at 1120, 1124. Also,
BFI and the trucking contractors ``together determined the drivers'
compensation and shared in the day to day supervision of the drivers.''
Id. at 1125. On that record, the Third Circuit found that substantial
evidence ``support[ed] the Board's finding that BFI exerted significant
control over the work of the drivers,'' and it therefore affirmed the
Board's joint-employer conclusion. Id. at 1125 (emphasis added). The
Third Circuit did not hint, much less hold, that an entity shares or
codetermines matters governing essential terms and conditions of
employment of a separate employer's employees without having actually
exercised control over those terms and conditions--on its own or in
collaboration with the undisputed employer--by hiring, discharging,
disciplining, supervising, or directing them or by setting their wages,
benefits, or hours of work.
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\83\ To be sure, the proposed rule incorporates the ``share or
codetermine'' standard in proposed Sec. 103.40(b). However, in
Sec. 103.40(c), it defines the ``share or codetermine'' standard to
include indirect control of, and possession of a never-exercised
authority to control, any essential term or condition of employment.
This is not how the standard has been understood or applied
historically. Indeed, it is contrary to the understanding of the
court that first formulated the ``share or codetermine'' standard,
the Third Circuit, which equated it with a shared ``exert[ion]'' of
``significant control'' over a group of employees. NLRB v. Browning-
Ferris Industries of Pennsylvania, 691 F.2d at 1194. Our colleagues'
definition of the ``share or codetermine'' standard, so at variance
with how that standard has been understood, reminds us of a dialogue
between Humpty Dumpty and Alice in chapter 6 of Lewis Carroll's
Through the Looking Glass: ``When I use a word,'' Humpty Dumpty said
in a rather scornful tone, ``it means just what I choose it to
mean--neither more nor less.'' ``The question is,'' said Alice,
``whether you can make words mean so many different things.'' ``The
question is,'' said Humpty Dumpty, ``which is to be master--that's
all.''
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Our colleagues also mistakenly rely on independent-contractor-or-
employee cases to support their proposed drastic changes to the Board's
joint-employer standard. To be sure, the courts have stated that a
worker is an employee, not an independent contractor, if an employer
possesses a ``right to control'' her manner and means of performance,
regardless of whether that right is exercised. In determining whether
an employer possesses a ``right to control'' in that context, courts
consider a variety of factors, which the Supreme Court summarized in
Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).\84\
But, as referenced above, the D.C. Circuit explained in Browning-Ferris
v. NLRB that the common-law independent-contractor standard and joint-
employer standard are different because the joint-employer standard has
a crucial second step, which asks, who is exercising control, when, and
how. 911 F.3d at 1215. As the court explained, ``using the independent-
contractor test exclusively to answer the joint-employer question would
be rather like using a hammer to drive in a screw: it only roughly
assists the task because the hammer is designed for a different
purpose.'' Id. Our colleagues' proposed rule simply disregards the
second step of the common-law joint-employer standard identified by the
D.C. Circuit. It would eliminate any requirement of actual exercise of
control and thus render immaterial ``how'' any control is exercised
(directly or indirectly). Therefore, the proposed rule is inconsistent
with the common law for this reason as well.
---------------------------------------------------------------------------
\84\ The so-called ``Reid factors,'' which are culled from the
Federal common law of agency, include (1) the skill required; (2)
the source of the instrumentalities and tools; (3) the location of
the work; (4) the duration of the relationship between the parties;
(5) whether the hiring party has the right to assign additional
projects to the hired party; (6) the extent of the hired party's
discretion over when and how long to work; (7) the method of
payment; (8) the hired party's role in hiring and paying assistants;
(9) whether the work is part of the regular business of the hiring
party; (10) whether the hiring party is in business; (11) the
provision of employee benefits; and (12) the tax treatment of the
hired party. Id. at 751-752.
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C. The Proposed Rule Misleadingly Claims To Return to the BFI Standard
Our colleagues say that they are proposing ``to rescind [the 2020
Rule] and replace it with a new rule that incorporates the BFI
standard.'' This is not so. The majority's proposed rule ventures into
territory the BFI Board steered clear of. It would not merely return
the Board to the BFI standard but would implement a standard
considerably more extreme than BFI. As shown below, the proposed rule's
expansions of joint-employer status are contrary to the common law and
the policies of the Act.
[[Page 54658]]
First, although the BFI majority opened the door to finding joint-
employer status, on the facts of a particular case, based solely on
indirect control or a never-exercised reserved right to control,\85\
they stopped short of declaring these dispositive of joint-employer
status as a matter of law.\86\ Our colleagues' proposed rule does not.
Section 103.40(b) of the proposed rule provides that employers are
joint employers if they ``share or codetermine those matters governing
employees' essential terms and conditions of employment,'' and Sec.
103.40(c) states that ``[t]o `share or codetermine those matters
governing employees' essential terms and conditions of employment'
means for an employer to possess the authority to control (whether
directly, indirectly, or both), or to exercise the power to control
(whether directly, indirectly, or both), one or more of the employees'
essential terms and conditions of employment'' (emphasis added). And if
that isn't clear enough, Sec. 103.40(e) of the proposed rule states:
``Possessing the authority to control is sufficient to establish status
as a joint employer, regardless of whether control is exercised.
Exercising the power to control indirectly is sufficient to establish
status as a joint employer, regardless of whether the power is
exercised directly'' (emphasis added).
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\85\ See BFI, 362 NLRB at 1613-1614 (``We will no longer require
that a joint employer not only possess the authority to control
employees' terms and conditions of employment, but must also
exercise that authority, and do so directly, immediately, and not in
a `limited and routine' manner.'').
\86\ See BFI, 362 NLRB at 1614 (``The right to control . . . is
probative of joint-employer status, as is the actual exercise of
control, whether direct or indirect'' (emphasis added).).
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The proposed rule also abandons BFI's second step, which required
proof that ``the putative joint employer possesses sufficient control
over employees' essential terms and conditions of employment to permit
meaningful collective bargaining.'' 362 NLRB at 1600. Our colleagues
thus repudiate the BFI Board's view that in some cases, a putative
joint employer's degree of control over the terms and conditions of
employment of another employer's employees will be insufficient to
warrant placing the putative joint employer at the bargaining table,
and accordingly that it would be contrary to the policies of the Act to
find a joint-employer relationship in those circumstances. 362 NLRB at
1610-1611, 1614. Instead, our colleagues simply assert that where ``a
putative joint employer possesses the authority to control or exercises
the power to control employees' essential terms and conditions of
employment, any required bargaining under the new standard will
necessarily be meaningful.'' The majority offers no support whatsoever
for this step. They simply declare that it must be so.
The majority's omission of BFI's ``meaningful collective
bargaining'' inquiry contradicts the D.C. Circuit's decision in
Browning-Ferris Industries of California, Inc. v. NLRB, supra. There,
the D.C. Circuit faulted the Board for failing to apply the second step
of the BFI standard and declared that the Board must explain how a
putative joint-employer's control would result in ``meaningful
collective bargaining'' before it could find a joint-employer
relationship. Presumably, the court would not have remanded for that
purpose if the inquiry were unnecessary to the joint-employer
determination.
In our view, the majority's assumption that any bargaining required
under their newly-fashioned standard will necessarily be meaningful is
also patently unreasonable. It bears emphasis that joint-employer
bargaining requires separate entities to bargain together. Such
bargaining will be unworkable unless those entities' interests are
sufficiently aligned to permit them to bargain together, rather than
against, each other. Moreover, it makes no sense to force an entity to
participate in collective bargaining where its influence over the terms
and conditions of employment of another employer's employees is too
attenuated to make its participation meaningful, and it is unfair to
impose unfair labor practice liability on that entity if it fails or
refuses to do so. Nevertheless, the proposed rule would require just
that, even where a putative joint employer has never exercised a
reserved right to control any one term or condition of employment our
colleagues would deem essential--including where that employment term
has never before been so deemed but is discovered to be essential in
the case itself.\87\ It is unlikely, to say the least, that bargaining
on the basis of so tenuous a relationship will be either meaningful or
productive.
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\87\ See Sec. 103.40(d) of the proposed rule: `` `Essential
terms and conditions of employment' will generally include, but are
not limited to: wages, benefits, and other compensation; hours of
work and scheduling; hiring and discharge; discipline; workplace
health and safety; supervision; assignment; and work rules and
directions governing the manner, means, or methods of work
performance'' (emphasis added). Holding a party liable under sec.
8(a)(5) of the Act for failing to bargain, where the violation is
premised on a finding that the party is a joint employer based on a
contractually reserved right to control an employment term never
before deemed essential would surely abrogate that party's due
process rights. Yet that is an outcome the proposed rule evidently
countenances. And if the Board were to adopt a recent position
advocated by the General Counsel, the affirmative remedy for that
violation might not be limited to an order to bargain. See ArrMaz
Products, Inc., 12-CA-294086 (arguing that the Board should order
the employer to ``make the bargaining-unit employees whole for the
lost opportunity to engage in collective bargaining,'' overruling
Ex-Cell-O Corp., 185 NLRB 107 (1970)).
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It is difficult to imagine a better recipe for injecting chaos into
the practice and procedure of collective bargaining that the majority
claims to promote. This is contrary to the national labor policy that
Congress established, which aims to ``achiev[e] industrial peace by
promoting stable collective-bargaining relationships.'' Auciello Iron
Works, Inc. v. NLRB, 517 U.S. 781, 790 (1996) (emphasis added).\88\
Moreover, collective bargaining was intended by Congress to be a
process that could conceivably produce agreements. See, e.g., NLRB v.
Insurance Agents' International Union, 361 U.S. 477, 485 (1960)
(Congress intended collective bargaining to be ``a process that look[s]
to the ordering of the parties' industrial relationship through the
formation of a contract.''); H.J. Heinz Co. v. NLRB, 311 U.S. 514, 523
(1941) (The object of collective bargaining under the Act is ``an
agreement between employer and employees as to wages, hours and working
conditions.''). There is nothing stable about the collective-bargaining
relationships the proposed rule would create, nor is there any
likelihood that those relationships would result in an agreement.
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\88\ See also Colgate-Palmolive-Peet Co. v. NLRB, 338 U.S. 355,
362 (1949) (``To achieve stability of labor relations was the
primary objective of Congress in enacting the National Labor
Relations Act.'').
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D. The Proposed Rule Is Not Required To Address Health and Safety
Matters
Contrary to the majority's wholly unsupported suggestion, the 2020
Rule does not turn a blind eye to a putative joint employer's control
over health and safety matters. To be sure, the 2020 Rule does require
that an entity possess and exercise direct and immediate control over
one or more essential terms or conditions of employment, as defined by
the Rule, before joint-employer status may be found, and health and
safety matters are not one of those essential terms and conditions of
employment. As noted above, however, the 2020 Rule also specifically
states that ``the entity's control over mandatory subjects of
bargaining other than the essential terms and conditions of employment
is probative of joint-employer status, but only to the extent it
supplements and reinforces evidence of the entity's possession or
exercise of direct and
[[Page 54659]]
immediate control over a particular essential term and condition of
employment.'' As such, control over health and safety matters is
relevant to joint-employer status under the 2020 Rule.
We therefore emphatically reject the majority's unsupported
assertion that ``[t]he shortcomings of the 2020 Rule's exhaustive list
of essential terms and conditions of employment (which did not include
workplace health and safety) were revealed during the COVID-19
pandemic.'' While the proposed rule cites no source for this claim, it
is a matter of public record that this is one of the allegations in the
complaint filed by the Service Employees International Union in their
pending lawsuit to invalidate the 2020 Rule.\89\ It is the obligation
of the Board to defend against that lawsuit, not to effectively support
it by publicly endorsing the plaintiff's allegations.
---------------------------------------------------------------------------
\89\ See Service Employees International Union v. NLRB, Case No.
21-cv-2443 (D.D.C.). The complaint in that case, like the NPRM here,
alleges that the 2020 Rule ``arbitrarily and capriciously excludes
health and safety matters from the set of employment conditions over
which an entity that exercises control must bargain. The latter
error is particularly egregious in the context of the global COVID-
19 pandemic.'' (On January 6, 2022, the court granted a joint motion
filed by the SEIU and the Board to stay Case No. 21-cv-2443 in light
of the Board's stated intent to engage in a second rulemaking on the
joint-employer standard.)
---------------------------------------------------------------------------
There is, moreover, no merit to this reckless charge. Not one
example has been cited in which a union's inability to bargain with a
putative joint employer of employees it represents has adversely
affected any employee's health or safety for any reason, much less
because of the COVID-19 pandemic. Nor is it at all evident why a union
would be unable to secure needed health and safety measures, including
protections against COVID-19, through bargaining with the entity that
is the undisputed employer of the employees it represents without also
including a putative joint employer, much less that the differences
between the 2020 Rule and the proposed rule would make any difference
in this regard.
Among other things, the unlikely scenario posited by the majority
would involve an undisputed employer that contracted away its control
over its employees' health and safety despite its established legal
obligation to provide a safe workplace and the liability that it would
incur if it breached that duty.\90\ Even in that implausible scenario,
the differences between the 2020 Rule and the proposed rule would be
material only if the putative joint employer controlled health and
safety but none of the essential terms and conditions of employment
specified in the 2020 Rule. Our colleagues offer no reason to believe
that this situation has ever occurred.
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\90\ See, e.g., 29 U.S.C. 654, which states that each employer
shall furnish to each of his employees employment and a place of
employment which are free from recognized hazards that are causing
or are likely to cause death or serious physical harm to his
employees and shall comply with occupational safety and health
standards promulgated under this chapter.
---------------------------------------------------------------------------
Conclusion
For all these reasons, we dissent from this Notice of Proposed
Rulemaking to rescind and replace the 2020 Rule. We would leave the
2020 Rule in place and move the U.S. District Court for the District of
Columbia to lift the stay on the SEIU's challenge to it. We would
defend the 2020 Rule, and we are confident that it would be upheld by
the courts as within the boundaries set by common-law agency
principles. Of course, given that a second round of rulemaking will
proceed, we shall consider with open minds all public comments, any
developments brought to our attention, and the considered views of our
colleagues.
VI. Regulatory Procedures
Regulatory Flexibility Act
A. Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act of 1980 (``RFA''), 5 U.S.C. 601, et
seq., requires agencies to ``review rules to assess and take
appropriate account of the potential impact on small businesses, small
governmental jurisdictions, and small organizations, as provided by the
[RFA].'' \91\
---------------------------------------------------------------------------
\91\ E.O. 13272, sec. 1, 67 FR 53461 (``Proper Consideration of
Small Entities in Agency Rulemaking'').
---------------------------------------------------------------------------
It requires agencies promulgating proposed rules to prepare an
Initial Regulatory Flexibility Analysis (``IRFA'') and to develop
alternatives wherever possible, when drafting regulations that will
have a significant impact on a substantial number of small entities.
However, an agency is not required to prepare an IRFA for a proposed
rule if the agency head certifies that, if promulgated, the rule will
not have a significant economic impact on a substantial number of small
entities.\92\ The RFA does not define either ``significant economic
impact'' or ``substantial number of small entities.'' \93\
Additionally, ``[i]n the absence of statutory specificity, what is
`significant' will vary depending on the economics of the industry or
sector to be regulated. The agency is in the best position to gauge the
small entity impacts of its regulations.'' \94\
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\92\ 5 U.S.C. 605(b).
\93\ 5 U.S.C. 601.
\94\ Small Business Administration Office of Advocacy, ``A Guide
for Government Agencies: How to Comply with the Regulatory
Flexibility Act'' (``SBA Guide'') at 18, <a href="https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf">https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf</a>.
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Although the Board believes that it is unlikely that the proposed
rule will have a significant economic impact on a substantial number of
small entities, it seeks public input on this hypothesis and has
prepared an IRFA to provide the public the fullest opportunity to
comment on the proposed rule. An IRFA describes why an action is being
proposed; the objectives and legal basis for the proposed rule; the
number of small entities to which the proposed rule would apply; any
projected reporting, recordkeeping, or other compliance requirements of
the proposed rule; any overlapping, duplicative, or conflicting Federal
rules; and any significant alternatives to the proposed rule that would
accomplish the stated objectives, consistent with applicable statutes,
and that would minimize any significant adverse economic impacts of the
proposed rule on small entities.\95\ Descriptions of this proposed
rule, its purpose, objectives, and legal basis are contained earlier in
the Summary and Supplemental Information sections and are not repeated
here.
---------------------------------------------------------------------------
\95\ 5 U.S.C. 603(b).
---------------------------------------------------------------------------
As with the Board's 2020 Rule on Joint Employer Status under the
Act, we assume that the costs of compliance for most small entities
will be minimal. We assume for purposes of this analysis all small
employers and small entity labor unions will incur a low cost of
compliance with the rule, related to reviewing and understanding the
substantive changes to the joint-employer standard. The Board welcomes
comments from the public that will shed light on potential compliance
costs unknown to the Board or on any other part of this IRFA.
B. Description and Estimate of Number of Small Entities to Which the
Rule Applies
In order to evaluate the impact of the proposed rule, the Board
first identified the entire universe of businesses that could be
impacted by a change in the joint-employer standard. According to the
United States Census Bureau, there were 6,102,412 business firms with
employees in 2019.\96\ Of those, the
[[Page 54660]]
Census Bureau estimates that about 6,081,544 were firms with fewer than
500 employees.\97\ While this proposed rule does not apply to employers
that do not meet the Board's jurisdictional requirements, the Board
does not have the data to determine the number of excluded
entities.\98\ Accordingly, the Board assumes for purposes of this
analysis that all of the 6,081,544 small business firms could be
impacted by the proposed rule and will incur the one-time compliance
cost of reading and familiarizing themselves with the text of the new
rule.\99\
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\96\ U.S. Department of Commerce, Bureau of Census, 2019
Statistics of U.S. Businesses (``SUSB'') Annual Data Tables by
Enterprise Employment Size, <a href="https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html">https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html</a> (from downloaded Excel Table
entitled ``U.S. & States, 6-digit NAICS'' found at <a href="https://www2.census.gov/programs-surveys/susb/tables/2019/us_state_6digitnaics_2019.xlsx">https://www2.census.gov/programs-surveys/susb/tables/2019/us_state_6digitnaics_2019.xlsx</a>. ``Establishments'' refer to single
location entities--an individual ``firm'' can have one or more
establishments in its network. The Board has used firm level data
for this IRFA because establishment data is not available for
certain types of employers discussed below. Census Bureau
definitions of ``establishment'' and ``firm'' can be found at
<a href="https://www.census.gov/programs-surveys/susb/about/glossary.html">https://www.census.gov/programs-surveys/susb/about/glossary.html</a>.
\97\ The Census Bureau does not specifically define small
business, but does break down its data into firms with 500 or more
employees and those with fewer than 500 employees. See U.S
Department of Commerce, Bureau of Census, 2019 SUSB Annual Data
Tables by Enterprise Employment Size, <a href="https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html">https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html</a> (from downloaded Excel
Table entitled ``U.S. & States, 6-digit NAICS'') found at <a href="https://www2.census.gov/programs-surveys/susb/tables/2019/us_state_6digitnaics_2019.xlsx">https://www2.census.gov/programs-surveys/susb/tables/2019/us_state_6digitnaics_2019.xlsx</a>. Consequently, the 500-employee
threshold is commonly used to describe the universe of small
employers. For defining small businesses among specific industries,
the standards are defined by the North American Industry
Classification System (NAICS), which we set forth below.
\98\ Pursuant to 29 U.S.C. 152(6) and (7), the Board has
statutory jurisdiction over private sector employers whose activity
in interstate commerce exceeds a minimal level. NLRB v. Fainblatt,
306 U.S. 601, 606-07 (1939). To this end, the Board has adopted
monetary standards for the assertion of jurisdiction that are based
on the volume and character of the business of the employer. In
general, the Board asserts jurisdiction over employers in the retail
business industry if they have a gross annual volume of business of
$500,000 or more. Carolina Supplies & Cement Co., 122 NLRB 88
(1959). But shopping center and office building retailers have a
lower threshold of $100,000 per year. Carol Management Corp., 133
NLRB 1126 (1961). The Board asserts jurisdiction over non-retailers
generally where the value of goods and services purchased from
entities in other states is at least $50,000. Siemons Mailing
Service, 122 NLRB 81 (1959).
The following employers are excluded from the NLRB's
jurisdiction by statute: Federal, State and local governments,
including public schools, libraries, and parks, Federal Reserve
banks, and wholly-owned government corporations, 29 U.S.C. 152(2);
employers that employ only agricultural laborers, those engaged in
farming operations that cultivate or harvest agricultural
commodities, or prepare commodities for delivery, 29 U.S.C. 153(3);
and employers subject to the Railway Labor Act, such as interstate
railroads and airlines, 29 U.S.C. 152(2).
\99\ The Board welcomes comments from the public regarding
particularized direct costs that exist in these or any other sector.
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The Board also recognizes that businesses that are involved in the
exchange of employees or operational control, or labor unions that
represent employees at such businesses, may have a particular interest
in the rule and are most likely to incur the compliance costs discussed
herein. Therefore, as it did in its 2018 IRFA, the Board is emphasizing
the relevance of the rule to entities in the following five categories:
(1) contractors/subcontractors; (2) temporary help service suppliers;
(3) temporary help service users; (4) franchisees; and (5) labor
unions.\100\
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\100\ Comments received in response to the 2018 IRFA did not
reveal any other categories of small entities that would likely take
special interest in a change in the standard for determining joint-
employer status under the Act or indicate that there is a unique
burden for entities in these categories. 85 FR 11234.
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(1) Businesses that enter contracts or subcontracts to receive a
wide range of services that may satisfy primary business objectives or
solve discrete problems that they are not qualified to address often
share workspaces and control over workers, rendering their
relationships potentially subject to application of the Board's joint-
employer standard. The Board does not have the means to identify
precisely how many businesses are impacted by contracting and
subcontracting within the U.S. or how many contractors and
subcontractors would be small businesses as defined by the SBA. In its
2018 IRFA, the Board solicited input on the number of contractors and
subcontractors that qualify as small businesses but received no
responsive comments.\101\
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\101\ 83 FR 46694 fn. 56; 85 FR 11234.
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(2) Temporary help service providers (NAICS #561320) are primarily
engaged in supplying workers to supplement a client-employer's
workforce. To be defined as a small business temporary help service
supplier by the SBA, the entity must generate receipts of less than $30
million annually.\102\ In 2017, there were 14,343 temporary service
supplier firms in the U.S.\103\ Of these temporary service supplier
firms, 13,384 had receipts of $29,999,999 or less. Therefore, according
to SBA standards, 93.3% of all temporary help service supplier firms
are small businesses.
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\102\ 13 CFR 121.201.
\103\ The Census Bureau only provides data about receipts in
years ending in 2 or 7, so the 2017 data is the most recent
available information regarding receipts. See U.S Department of
Commerce, Bureau of Census, 2017 SUSB Annual Data Tables by
Establishment Industry, NAICS classification #561320, <a href="https://www2.census.gov/programs-surveys/susb/tables/2017/us_6digitnaics_rcptsize_2017.xlsx">https://www2.census.gov/programs-surveys/susb/tables/2017/us_6digitnaics_rcptsize_2017.xlsx</a>.
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(3) Entities that use temporary help services in order to staff
their businesses are widespread throughout many types of industries.
The Census Bureau's 2020 Annual Business Survey revealed that of the
2,687,205 respondent firms with paid employees, 94,930 of those firms
obtained staffing from temporary help services in that calendar
year.\104\ This survey provides the only gauge of employers that obtain
staffing from temporary help services and the Board is without the
means to estimate what portion of those are small businesses as defined
by the NAICS. For purposes of this IRFA, the Board assumes that all
94,930 users of temporary services are small businesses.
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\104\ U.S. Department of Commerce, Bureau of Census, 2020 Annual
Business Survey--Characteristics of Businesses, <a href="https://www.census.gov/data/tables/2020/econ/abs/2020-abs-characteristics-of-businesses.html">https://www.census.gov/data/tables/2020/econ/abs/2020-abs-characteristics-of-businesses.html</a> (from downloaded Excel Table entitled ``Type(s)
of Workers Employed by Sector, Sex, Ethnicity, Race, and Veteran
Status,'' found at https://data.census.gov/cedsci/
table?q=ab1900%2a&tid=ABSCB2019.AB1900CSCB01&hidePreview=true&nkd=QDE
SC~B20).
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(4) Franchising is a method of distributing products or services in
which a franchisor lends its trademark or trade name and a business
system to a franchisee, which pays a royalty and often an initial fee
for the right to conduct business under the franchisor's name and
system.\105\ Franchisors generally exercise some operational control
over their franchisees, which potentially renders the relationship
subject to application of the Board's joint-employer standard. The
Board does not have the means to identify precisely how many
franchisees operate within the U.S., or how many are small businesses
as defined by the SBA. The Census Bureau's 2020 Annual Business Survey
revealed that, of the 130,492 firms that operated a portion of their
business as a franchise, 125,989 had fewer than 500 paid
employees.\106\ Based on this available data and the fact that the 500-
employee threshold is commonly used to describe the universe of small
employers, we assume that 125,989 (96.5% of total) are small
businesses.
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\105\ See International Franchising Establishments FAQs, found
at <a href="https://www.franchise.org/faqs-about-franchising">https://www.franchise.org/faqs-about-franchising</a>.
\106\ U.S. Department of Commerce, Bureau of Census, 2020 Annual
Business Survey--Characteristics of Businesses, <a href="https://www.census.gov/data/tables/2020/econ/abs/2020-abs-characteristics-of-businesses.html">https://www.census.gov/data/tables/2020/econ/abs/2020-abs-characteristics-of-businesses.html</a> (from downloaded Excel Table entitled
``Businesses Operated as a Franchise by Sex, Ethnicity, Race,
Veteran Status, and Employment Size of Firm,'' found at https://
data.census.gov/cedsci/
table?q=ab1900%2a&tid=ABSCB2019.AB1900CSCB04&hidePreview=true&nkd=QDE
SC~B06).
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(5) Labor unions, as defined by the NLRA, are entities ``in which
employees participate and which exist for the
[[Page 54661]]
purpose . . . of dealing with employers concerning grievances, labor
disputes, wages, rates of pay, hours of employment, or conditions of
work.'' \107\ By defining which employers are joint employers under the
NLRA, the proposed rule impacts labor unions generally, and more
directly may affect those labor unions that organize the specific
business sectors discussed above. The SBA's ``small business'' standard
for ``Labor Unions and Similar Labor Organizations'' (NAICS #813930) is
$14.5 million in annual receipts.\108\ In 2017, there were 13,137 labor
union firms in the U.S.\109\ Of these firms, at least 12,875 labor
union firms (98% of total) had receipts of under $10 million and are
definitely small businesses according to SBA standards. Since the Board
cannot determine how many of the 89 labor union firms with receipts
between $10,000,000 and $14,999,999 fall below the $14.5 million annual
receipt threshold, it will assume that these are all small businesses
as defined by the SBA. For the purposes of the IRFA, the Board assumes
that 12,964 labor union firms (98.7% of total) are small businesses.
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\107\ 29 U.S.C. 152(5).
\108\ 13 CFR 121.201.
\109\ See U.S Department of Commerce, Bureau of Census, 2017
SUSB Annual Data Tables by Establishment Industry, NAICS
classification #722513, <a href="https://www2.census.gov/programs-surveys/susb/tables/2017/us_6digitnaics_rcptsize_2017.xlsx">https://www2.census.gov/programs-surveys/susb/tables/2017/us_6digitnaics_rcptsize_2017.xlsx</a>.
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Based on the foregoing, the Board assumes there are 13,384
temporary help supplier firms, 94,930 temporary help user firms,
125,989 franchise firms, and 12,964 union firms that are small
businesses. Therefore, among these four categories of employers that
are likely most interested in the proposed rule, 247,267 business firms
are assumed to be small businesses as defined by the SBA.\110\ We
believe that these small businesses, and small businesses regularly
engaged in contracting/subcontracting, have a general interest in the
rule and would be most likely impacted by the one-time compliance cost
of reviewing and understanding the rule, as described below. But
employers will only be significantly impacted when they are alleged to
be a joint employer in a Board proceeding. Given our historic filing
data, this number is very small relative to the number of small
entities in these five categories.
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\110\ Comments received in response to the 2018 IRFA did not
reveal any other categories of small entities that would likely take
special interest in a change in the standard for determining joint-
employer status under the Act or that there was a unique burden for
entities in these subcategories. 85 FR 11234.
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A review of the Board's representation petitions and unfair labor
practice (ULP) charges provides a basis for estimating the frequency
that the joint-employer issue comes before the NLRB. During the four-
year period between January 1, 2018 and December 31, 2021, 75,343
representation and unfair labor practice cases were initiated with the
Agency. In 772 of those filings, the representation petition or ULP
charge asserted a joint-employer relationship between at least two
employers.\111\ Accounting for repetitively alleged joint-employer
relationships in these filings, we identified 467 separate joint-
employer relationships involving an estimated 934 employers.\112\
Accordingly, the joint-employer standard most directly impacted
approximately .015% of all 6,102,412 business firms (including both
large and small businesses) over the four-year period.
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\111\ This includes initial representation case petitions (RC
petitions) and unfair labor practice charges (CA cases) filed
against employers.
\112\ Since a joint-employer relationship requires at least two
employers, we have estimated the number of employers by multiplying
the number of asserted joint-employer relationships by two. Some of
these filings assert more than two joint employers; but, on the
other hand, some of the same employers are named multiple times in
these filings. Additionally, this number is certainly inflated
because the data does not reveal those cases where a joint-employer
relationship exists but the parties' joint-employer status is not in
dispute.
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C. Recordkeeping, Reporting, and Other Compliance Costs
The RFA requires the Agency to determine the amount of ``reporting,
recordkeeping and other compliance requirements'' imposed on small
entities.\113\ The United States Court of Appeals for the District of
Columbia Circuit has explained that this provision requires an agency
to consider direct burdens that compliance with a new regulation will
likely impose on small entities.\114\
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\113\ See 5 U.S.C. 603(b)(4), 604(a)(4).
\114\ See Mid-Tex Elec. Co-op v. FERC, 773 F.2d 327, 342 (D.C.
Cir. 1985) (``[I]t is clear that Congress envisioned that the
relevant `economic impact' was the impact of compliance with the
proposed rule on regulated small entities.'').
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At the outset, it is critical to understand that entities may
lawfully choose to associate as joint employers under Federal law.
Joint-employer status under the NLRA is relevant only to apportioning
liability and bargaining obligations as a result of NLRB unfair labor
practice and representation cases, not to whether such liabilities and
obligations exist in the first instance. While entities may choose to
rearrange their business relationships to minimize risk of joint-
employer status, they may also choose not to. Accordingly, because the
proposed rule would not make any form of business arrangement unlawful,
it appears to impose no direct compliance costs other than those for
reading and understanding the rule.
We therefore believe that the proposed rule imposes no capital
costs for equipment needed to meet the regulatory requirements; no
direct costs of modifying existing processes and procedures to comply
with the proposed rule; no lost sales and profits directly resulting
from the proposed rule; no changes in market competition as a direct
result of the proposed rule and its impact on small entities or
specific submarkets of small entities; no extra costs associated with
the payment of taxes or fees associated with the proposed rule; and no
direct costs of hiring employees dedicated to compliance with
regulatory requirements.\115\ And, like the current rule, the proposed
rule does not impose any new information collection or reporting
requirements on small entities.
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\115\ See SBA Guide at 37.
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For the purposes of this IRFA, the Board assumes that small
entities, with particular emphasis on those small entities in the five
categories with special interest in the proposed rule, will be
interested in reviewing the rule to understand the restored common-law
joint-employer standard. We estimate that a human resources or labor
relations specialist at a small employer who undertook to become
generally familiar with the proposed changes may take at most one hour
to read the text of the rule and the supplementary information
published in the Federal Register.\116\ It is also possible that a
small employer may wish to consult with an attorney, which we estimated
to require one hour as well.\117\ Using the Bureau of Labor Statistics'
estimated wage and benefit costs, we have
[[Page 54662]]
assessed these labor costs to be between $147.24 and $151.51.\118\
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\116\ Data from the Bureau of Labor Statistics indicates that
employers are more likely to have a human resources specialist (BLS
#13-1071) than to have a labor relations specialist (BLS #13-1075).
Compare Occupational Employment and Wages, May 2021, 13-1075 Labor
Relations Specialists, found at <a href="https://www.bls.gov/oes/current/oes131075.htm">https://www.bls.gov/oes/current/oes131075.htm</a>, with Occupational Employment and Wages, May 2021, 13-
1071 Human Resources Specialists, found at <a href="https://www.bls.gov/oes/current/oes131071.htm">https://www.bls.gov/oes/current/oes131071.htm</a>.
\117\ The Board believes that an experienced labor relations
specialist or labor relations attorney would not expend more than an
hour to read and understand the rule. The proposed rule returns to
the pre-2020 Rule standard and incorporates the common-law
definition of ``employer'' that already applies in most
jurisdictions throughout the nation. We believe most employers are
already knowledgeable with these standards if relevant to their
businesses, as are labor relations attorneys.
\118\ For wage figures, see May 2021 National Occupancy
Employment and Wage Estimates, found at <a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>. The Board has been administratively informed
that BLS estimates that fringe benefits are approximately equal to
40 percent of hourly wages. Thus, to calculate total average hourly
earnings, BLS multiplies average hourly wages by 1.4. In May 2021,
average hourly wages for labor relations specialists (BLS #13-1075)
were $37.05. The same figure for a lawyer (BLS #23-1011) is $71.17.
Accordingly, the Board multiplied each of those wage figures by 1.4
and added them to arrive at its estimate.
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Labor unions would also review the rule, similarly incurring an
hour of legal fees. ($99.64, see fn. 118.) Like labor compliance
professionals or employer labor-management attorneys, union counsels
would only require one hour of legal time because they would already be
familiar with the pre-2020 standard for determining joint-employer
status under the Act and common-law principles.
The Board is not inclined to find the estimated $151.51 cost to
small employers and the estimated $99.64 cost to small labor unions
for review to be significant within the meaning of the RFA. In
making this finding, one important indicator is the cost of
compliance in relation to the revenue of the entity or the
percentage of profits affected.\119\ Other criteria to be considered
are the following:
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\119\ See SBA Guide at 18.
--Whether the rule will cause long-term insolvency, i.e., regulatory
costs that may reduce the ability of the firm to make future capital
investment, thereby severely harming its competitive ability,
particularly against larger firms;
--Whether the cost of the proposed regulation will (a) eliminate
more than 10 percent of the businesses' profits; (b) exceed one
percent of the gross revenues of the entities in a particular
sector, or (c) exceed five percent of the labor costs of the
entities in the sector.\120\
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\120\ Id. at 19.
The minimal cost to read and understand the rule will not generate any
such significant economic impacts.
Since the only quantifiable impact that we have identified is the
$151.51 or $99.64 that may be incurred in reviewing and understanding
the rule, we do not believe, subject to comments, that the proposed
rule will have a significant economic impact on a substantial number of
small entities.
D. Duplicate, Overlapping, or Conflicting Federal Rules
The Board has not identified any Federal rules that conflict with
the proposed rule. It welcomes comments that suggest any potential
conflicts not noted in this section.
E. Alternatives Considered
Pursuant to 5 U.S.C. 603(c), agencies are directed to look at ``any
significant alternatives to the proposed rule which accomplish the
stated objectives of applicable statutes and which minimize any
significant economic impact of the proposed rule on small entities.''
The SBA has described this step as ``[t]he keystone of the IRFA,''
because ``[a]nalyzing alternatives establishes a process for the agency
to evaluate proposals that achieve the regulatory goals efficiently and
effectively without unduly burdening small entities, erecting barriers
to competition, or stifling innovation.'' \121\ The Board considered
two primary alternatives to the proposed rules.
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\121\ Id. at 37.
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First, the Board considered taking no action. As explained in
section II above, the Board believes, subject to comments, that the
2020 Rule wrongly departs from the common-law definition of employer.
The Board is additionally concerned that the 2020 Rule does not
adequately reflect important background legal principles and the Act's
public policy of ``encouraging the practice and procedure of collective
bargaining'' and maximizing employees' ``full freedom of association,
self-organization, and designation of representatives of their own
choosing, for the purpose of negotiating the terms and conditions of
their employment or other mutual aid or protection.'' \122\ Thus, for
the reasons stated in Sections II and III above, the Board believes it
necessary to revisit the 2020 Rule. Consequently, we reject maintaining
the status quo.
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\122\ 29 U.S.C. 151.
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Second, the Board considered creating exemptions for certain small
entities, but is inclined to believe, subject to comments, that doing
so would be both contrary to judicial precedent and impracticable. As
noted previously, the Supreme Court and District of Columbia Circuit
have explained that common-law agency principles apply when construing
statutes, like the Act, whose terms are otherwise undefined in
statute.\123\ The Board is therefore bound to assess the employment
relationship under common-law rules and is inclined to believe that the
Act and judicial precedent would not provide strong support for the
development of exceptions to longstanding common-law principles solely
for small entities.\124\ Moreover, even if the Act would permit such an
exemption, the Board believes that exception would swallow the rule,
given that such a large percentage of employers and unions would be
exempt under the SBA definitions. We further agree with the
observations regarding a small-entity exemption that the Board made in
the 2020 Rule, which are equally applicable now, that as this rule
often applies to relationships involving a small entity (such as a
franchisee) and a large enterprise (such as a franchisor), exemptions
for small businesses would decrease the application of the rule to
larger businesses as well, potentially undermining the policy behind
this rule. Additionally, given the very small quantifiable cost of
compliance, it is possible that the burden on a small business of
determining whether it fell within a particular exempt category might
exceed the burden of compliance. Congress gave the Board very broad
jurisdiction, with no suggestion that it wanted to limit coverage of
any part of the Act to only larger employers.\125\ As the Supreme Court
has noted, ``[t]he [NLRA] is federal legislation, administered by a
national agency, intended to solve a national problem on a national
scale.'' \126\
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\123\ See fn. 27, supra, and accompanying text (citing NLRB v.
Town & Country Electric, Inc., 516 U.S. 85, 92-95 (1995)); BFI, 911
F.3d at 1206.
\124\ Although it does not have the ability to quantify a
specific number, the Board notes again that it has declined
jurisdiction over employers whose activity in commerce does not
exceed a minimal level. See fn. 98, supra. That declination of
jurisdiction should exclude many small employers from the reach of
the proposed rule. Many other small entities are excluded by the
NLRA's terms, which protect only concerted activities engaged in
between two or more statutory employees; thus, businesses with zero
or one statutory employee are unaffected by the proposed rule.
\125\ However, there are standards that prevent the Board from
asserting authority over entities that fall below certain
jurisdictional thresholds. This means that extremely small entities
outside of the Board's jurisdiction will not be affected by the
proposed rule. See 29 CFR 104.204.
\126\ NLRB v. Nat. Gas Util. Dist. of Hawkins Cty., Tenn., 402
U.S. 600, 603-04 (1971) (quotation omitted).
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85 FR 11235. We therefore rejected a small entity exemption as an
effective alternative to the proposed rule. The Board welcomes comments
on other alternatives to consider that would reduce the regulatory
burden on small entities while carrying out the mission of the Act in
conformance with the statutory language and judicial precedent.
Paperwork Reduction Act
The NLRB is an agency within the meaning of the Paperwork Reduction
Act (PRA). 44 U.S.C. 3502(1) and (5). This Act creates rules for
agencies when they solicit a ``collection of information,'' 44 U.S.C.
3507, which is defined as ``the obtaining, causing to be obtained,
soliciting, or requiring the
[[Page 54663]]
disclosure to third parties or the public, of facts or opinions by or
for an agency, regardless of form or format.'' 44 U.S.C. 3502(3)(A).
The PRA only applies when such collections are ``conducted or sponsored
by those agencies.'' 5 CFR 1320.4(a).
The proposed rule does not involve a collection of information
within the meaning of the PRA; rather, it adopts a judicially approved
standard for determining joint-employer status under the Act. Outside
of administrative proceedings (discussed below), the proposed rule does
not require any entity to disclose information to the NLRB, other
government agencies, third parties, or the public.
The only circumstance in which the proposed rule could be construed
to involve disclosures of information to the Agency, third parties, or
the public is when an entity's status as a joint employer has been
alleged in the course of the Board's administrative proceedings.
However, the PRA provides that collections of information related to
``an administrative action or investigation involving an agency against
specific individuals or entities'' are exempt from coverage. 44 U.S.C.
3518(c)(1)(B)(ii). A representation proceeding under section 9 of the
Act, as well as an investigation into an unfair labor practice under
section 10 of the Act, are administrative actions covered by this
exemption.\127\ The Board's decisions in these proceedings are binding
on and thereby alter the legal rights of the parties to the proceedings
and thus are sufficiently ``against'' the specific parties to trigger
this exemption.\128\
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\127\ See Representation--Case Procedures, 79 FR 74307, 74468-
74469 (Dec. 15, 2014).
\128\ Legislative history indicates Congress wrote this
exception to broadly cover many types of administrative action, not
just those involving ``agency proceedings of a prosecutorial
nature.'' See S. REP. 96-930 at 56, as reprinted in 1980
U.S.C.C.A.N. 6241, 6296. For the reasons more fully explained by the
Board in prior rulemaking, 79 FR 74307, 74468-69 (2015),
representation proceedings, although not qualifying as adjudications
governed by the Administrative Procedure Act, 5 U.S.C. 552b(c)(1),
are nonetheless exempt from the PRA under 44 U.S.C.
3518(c)(1)(B)(ii).
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For the foregoing reasons, the proposed rule does not contain
information collection requirements that require approval by the Office
of Management and Budget under the PRA.
List of Subjects in 29 CFR Part 103
Colleges and universities, Election procedures, Health facilities,
Jurisdictional standards, Labor management relations, Music, Remedial
orders, Sports.
The Proposed Rule
For the reasons discussed in the preamble, the Board proposes to
amend 29 CFR part 103 as follows:
PART 103--OTHER RULES
0
1. The authority citation for part 103 continues to read as follows:
Authority: 29 U.S.C. 156, in accordance with the procedure set
forth in 5 U.S.C. 553.
Subpart D--Joint Employers
0
2. Revise Sec. 103.40 to read as follows:
Sec. 103.40 Joint Employers.
(a) An employer, as defined by section 2(2) of the National Labor
Relations Act (the Act), is an employer of particular employees, as
defined by section 2(3) of the Act, if the employer has an employment
relationship with those employees under common-law agency principles.
(b) For all purposes under the Act, two or more employers of the
same particular employees are joint employers of those employees if the
employers share or codetermine those matters governing employees'
essential terms and conditions of employment.
(c) To ``share or codetermine those matters governing employees'
essential terms and conditions of employment'' means for an employer to
possess the authority to control (whether directly, indirectly, or
both), or to exercise the power to control (whether directly,
indirectly, or both), one or more of the employees' essential terms and
conditions of employment.
(d) ``Essential terms and conditions of employment'' will generally
include, but are not limited to: wages, benefits, and other
compensation; hours of work and scheduling; hiring and discharge;
discipline; workplace health and safety; supervision; assignment; and
work rules and directions governing the manner, means, or methods of
work performance.
(e) Whether an employer possesses the authority to control
[…truncated; see source link]Indexed from Federal Register on September 7, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.