NLRB Proposed Joint Employer Rule Would Help Workers

Last year, the National Labor Relations Board proposed a new rule that would change how it decides who is an employer. Under the proposed rule announced September 6, 2022, two or more employers would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment,” such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules. The comment period ended in December, so we can expect the new rule to arrive any time now.

To put it simply, when two employers are connected in some way, they become joint employers and they both have responsibility for their workers. It's like when two people get married, they both have responsibilities for each other and their life together.

It's important because it means that workers have more protections and can hold both employers accountable for things like unionizing and unfair labor practices.

The new joint employer rule will have many benefits for employees. Here are some of the most significant ways that employees can benefit from this rule:

1. Greater protections against retaliation: When an employee is jointly employed by two employers, they are protected by the National Labor Relations Act (NLRA) against retaliation from either employer. This means that if an employee engages in protected concerted activity, such as organizing a union, discussing wages, or discussing working conditions, they cannot be fired or otherwise punished by either employer.

2. More bargaining power: When employees are jointly employed by two employers, they can bargain with both employers for better wages, benefits, and working conditions. This gives employees more bargaining power and ability to unionize than they would have if they were only employed by one employer. The possibility of NLRB sanctions will hopefully make smaller employers think twice about engaging in unfair labor practices.

3. More coverage: If one employer does not fall under the NLRB's jurisdiction because it has too little income or does not meet other jurisdictional standards, combining two employers will make it easier to bring the company under the umbrella of the National Labor Relations Act.

4. Better wages and working conditions: Ultimately, the ability to bargain collectively will help increase wages and improve overall working conditions for employees.

Overall, the National Labor Relations Board's joint employer rule benefits employees by providing greater protections, improved working conditions, and more bargaining power. By holding both employers accountable, employees are more likely to have a voice in the workplace and to receive fair treatment.

Needless to say, managment-side is howling about the possibility of this rule going into effect. They are crying gloom and doom and predict business armageddon. I suspect that this NLRB won't accede to their demands and that this rule or something quite similar will be the final rule that is implemented this year.   

Why Your Employer May Not Be Too Small For A Discrimination Claim

Many employees are frustrated to hear that most discrimination and other employment laws don't cover small employers. For Title VII, which covers race, sex, national origin, sexual orientation (at least EEOC thinks it does), color, pregnancy, and religion, and the Americans With Disabilities Act, employers must have at least 15 employees to be covered. For the Age Discrimination in Employment Act, they must have at least 20. For COBRA, it's also 20. Family and Medical Leave Act requires 50 employees with in 75 miles of your work location.

State laws vary, but here in Florida our discrimination law, the Florida Civil Rights Act (which also covers age) covers employers with 15 employees, but some county ordinances like Miami-Dade and Broward cover employers with 5. In California it's five, Texas 15, New York 4. Here's a list of the discrimination laws by state.

But don't despair if your employer is too small to be covered under these laws. The National Labor Relations Board just issued a decision regarding a case against Browning-Ferris Industries that may help. Although NLRB doesn't rule on discrimination cases, this decision was about whether you can count the parent company if you work for a franchise. And this is important, because you may work for, say, a KFC, but your real employer is ABC Company, the tiny company that bought the franchise to your location. So your corporate employer may only have 10 employees. Part of the reason franchises are so popular is that it's a way to escape those pesky employment laws.

But maybe not for long. NLRB said that the parent company may well be liable for the misdeeds of the franchise owner. The test is simple (but complicated, as in all things legal), namely, does the parent company share or co-determine the terms or conditions of your employment? Here's how they explained it:

The Board’s joint-employer doctrine is best understood as always having incorporated the common-law concept of control—as the Supreme Court’s one decision involving the doctrine confirms. In the Greyhound case, as we have seen, the Court framed the issue presented as whether one statutory employer “possessed sufficient control over the work of the employees to qualify as a joint employer with” another statutory employer.64 Thus, the Board properly considers the existence, extent, and object of the putative joint employer’s control, in the context of examining the factors relevant to determining the existence of an employment relationship.

There's actually nothing new in this. That's always been the standard. What is new, and is causing much consternation in management-side circles, is that now NLRB will also consider whether the parent has the ability to control your terms and conditions of employment, even if it doesn't:

Under common-law principles, the right to control is probative of an employment relationship—whether or not that right is exercised. Sections 2(2) and 220(1) of the Restatement (Second) of Agency make this plain, in referring to a master as someone who “controls or has the right to control” another and to a servant as “subject to the [employer’s] control or right to control” (emphasis added). In setting forth the test for distinguishing between employees and independent contractors, Restatement (Second) Section 220(2), considers (among other factors) the “extent of control which, by the agreement, the master may exercise over the details of the work” (emphasis added). The Board’s joint-employer decisions requiring the exercise of control impermissibly ignore this principle.  

Nothing about the joint-employer context suggests that the principle should not apply in cases like this one. Indeed, the Supreme Court’s decision in Greyhound, supra, was entirely consistent with the Restatement (Second) when it described the issue as whether one firm “possessed [not exercised] sufficient control over the work of the employees to qualify as a joint employer.” Where a user employer reserves a contractual right (emphasis added) to set a specific term or condition of employment for a supplier employer’s workers, it retains the ultimate authority to ensure that the term in question is administered in accordance with its preferences. Even where it appears that the user, in practice, has ceded administration of a term to the supplier, the user can still compel the supplier to conform to its expectations. In such a case, a supplier’s apparently independent control over hiring, discipline, and work direction is actually exercised subject to the user’s control. If the supplier does not exercise its discretion in conformance with the user’s requirements, the user may at any time exercise its contractual right and intervene. Where a user has reserved authority, we assume that it has rationally chosen to do so, in its own interest. There is no unfairness, then, in holding that legal consequences may follow from this choice.

Causing additional woe-is-me complaints among management-side lawyers is that the control exercised doesn't need to be direct or immediate. Indirect control is enough.

Just as the common law does not require that control must be exercised in order to establish an employment relationship, neither does it require that control (when it is exercised) must be exercised directly and immediately, and not in a limited and routine manner (as the Board’s current joint-employer standard demands). Comment d (“Control or right to control”) to Section 220(1) of the Restatement (Second) observes that “the control or right to control needed to establish the relation of master and servant may be very attenuated.”  The common law, indeed, recognizes that control may be indirect. For example, the Restatement of Agency (Second) §220, comment l (“Control of the premises”) observes that [i]f the work is done upon the premises of the employer with his machinery by workmen who agree to obey general rules for the regulation of the conduct of employees, the inference is strong that such workmen are the servants of the owner... and illustrates this principle by citing the example of a coal mine owner employing miners who, in turn, supply their own helpers. Both the miners and their helpers are servants of the mine owner. As the illustration demonstrates, the common law’s “subservant” doctrine addresses situations in which one employer’s control is or may be exercised indirectly, where a second employer directly controls the employee.

There are very few franchise parent companies that don't control things like uniforms, time recordkeeping, the specifics of how the work is done (e.g., just how many fries are in a small order, and how long it should take to serve each customer), the equipment used, and even the training. I suspect few parent companies will not be found to be joint employers under this standard. While this case doesn't apply to discrimination and other employment laws outside the National Labor Relations Act, the reasoning is based on common law, which does apply to all these laws. And it will probably be persuasive to other agencies and possibly the courts.

Bottom line: If you work for a franchise, the parent company may be a joint employer, which means you can also count their employees when pursuing discrimination and other employment law claims, and you may have a deep pocket to reach to when suing for violations of these laws. And that's how it should be. The parent companies of franchises have taken a not-me hands off approach to the misdeeds of their franchises all too long. If they are making money off the backs of these employees, they should be responsible for making sure they are treated legally.

When Is A Company A Joint Employer With Its Franchise Operators?

The National Labor Relations Board made a finding that has caused management-side employment lawyers to blow several gaskets, namely, that McDonald's is a joint employer with a franchise owner and is thus responsible for labor law violations that occurred in a McDonald's workplace. And you're thinking, "duh," right? I mean, why wouldn't McDonald's be responsible for what happens in a McDonald's?

As with everything else in my chosen profession, it's not that simple. For many years, corporations have escaped liability for discrimination, labor law issues, overtime and unpaid wages by pointing the finger at the poor schmo who bought a franchise from them instead of manning up and taking responsibility for what happened under their name. (And yes, I said "manning," which could be sexist, but if companies are people and what kind of people is based on who is on the board, then almost all corporations are male people, aren't they?)

In general, two employers are considered joint employers if both exert significant control over employees. There are lots of complicated tests for this that make sense only to lawyers. I've pretty much always thought that franchisors (the parent companies) should be considered joint employers under most of these tests, but the companies have frequently managed to escape liability.

In the McDonald's case, employees were able to show that McDonald's provides software to franchise operators that tells them how many employees should work at any given time, and that the company also weighed in on how much employees should be paid. I can also point to some other types of control these parent companies have. They frequently train employees or provide training materials, provide uniforms, inspect uniforms, decide the very specifics of how employees are to do their jobs all the way down to portion size and customer greetings, send secret shoppers to gauge how employees are performing, and exercise other control over these employees.

Why do we care? Two reasons:

• Deep pockets: While the small company that bought the franchise may be tiny and barely solvent, the mega-parent companies can usually pay big bucks judgments.
• Counting employees: Federal discrimination laws don't cover employers with fewer than 15 employees. Family and Medical Leave Act doesn't kick in unless the employer has 50 employees within a 75 mile radius of the employee work location. There are quite a few employment laws that require minimum numbers of employees. If you can count all the franchises and parent-owned entities, you can count to 15 or 50 pretty easily, which means liability on both parent and franchise owner.

This ruling will have parent companies scrambling to exercise less control over franchise operations, which, in my opinion, is penny wise and pound foolish. If you can't count on all McDonald's restaurants looking the same, serving the same quality food and having employees look and act the same, they lose their brand. Instead, companies should be scrutinizing their franchises to make sure they are complying with employment laws instead of saying, "It's not my problem."

Is Sexual Harassment Against Contract Employees Legal?

I received this question on my post I Reported Harassment and Now HR Wants to Meet With Me. What Do I Do?

Thank you for this article, it is very informative. I was wondering what the difference is when I'm a contract employee for a company. I work minimal hours weekly at a private company. I experienced verbal sexual harassment by a coworker. I reported it to the director and was fired via email a few days later. Then a few hours later I was re-hired. They realized I could sue them apparently. They are now limiting my freedom to move around the company without someone with me. They are not firing the offender. I don't know if I have any claims against them as a contract worker (1099 misc.) but am infuriated by how unprofessionally I was treated. I asked for a copy of their sexual harassment policy and was told I am not entitled to it since just an outside vendor. I currently am back working my shifts, although they clearly do not want me there and only un-fired me to prevent a lawsuit.

In general, independent contractors are not covered by anti-discrimination laws. However, most people classified as contractors are, IMO, misclassified and are really employees. I've written about this in detail in my article 11 Things To Know Before You Sign An Independent Contractor Agreement. In general, if your employer controls the time, place and manner of your work, you're an employee. If they can discipline, tell you how to do your work, have to approve vacation time, and you can't hire an assistant if you want, you're an employee.

There's a handy-dandy form the IRS has called the SS-8 that you can fill out and the IRS will do the work for you. If you think you're really an employee, fill it out, send it in and the IRS will figure out if you're an employee or not. If you are an employee, the employer will owe back taxes and you'll be covered by employment laws.

You can also talk to an employment lawyer in your state. If you file with EEOC, you need to be prepared for a fight on the issue of whether you're an employee or not, so either do the SS-8 form or make sure you have your legal arguments and proof ready for EEOC.

If you're a contract employee and not an independent contractor, then you're covered. However, it's your actual employer, not the company you're providing services for, who is primarily liable. If you haven't reported it to your actual employer, then you should. If the company you're providing services for controls your work and you enough, they may be a joint employer that would also be liable for the sexual harassment.

While the company doesn't have to fire the offender, if he/she does it again they could be liable since they are now on notice of his inclination to sexually harass.

This certainly sounds like a retaliation situation, so if you are misclassified then you should definitely file with EEOC and/or look at your state's whistleblower laws.