The National Labor Relations Board will publish a proposed rule Friday aimed at rolling back its controversial decision during the Obama administration to expand the so-called “joint employer” doctrine.
By striking the rule, the NLRB will undo a potentially vast expansion of corporate legal liability by limiting the circumstances in which one company can be held legally liable for the workplace violations of another related company, such as a corporate headquarters and one of its franchise operations.
The NLRB will publish a “Notice of Proposed Rulemaking” Friday announcing its intent to limit the circumstances for when a company can be held liable under joint employer to cases of “substantial, direct and immediate control” over another business’s policies. That would revert the rule to the standard used for decades prior to 2014, when the then-Democrat majority board moved to expand the standard to include the much more vague concept of “indirect control.”
Public hearings will be required before any change can be made. “I look forward to receiving the public’s comments and to working with my colleagues to promulgate a final rule that clarifies the joint-employer standard in a way that promotes meaningful collective bargaining and advances the purposes of the Act,” NLRB Chairman John Ring said in a statement.
Business groups have lobbied Congress and the administration hard on the issue, arguing that the Obama standard could severely damage the franchising business model by making it too costly for corporations. The NLRB used the Obama-era rule to pursue a major case against McDonald’s, alleging it was responsible for workplace violations at its franchise restaurants even though most are privately-owned business that rent the corporate brand. A proposed settlement in the case was rejected by an administrative law judge in July.
The Obama rule was applauded by unions, who argued that the direct control standard allowed companies to skirt the law. It also made it potentially easier for unions to organize franchises by allowing them to target the corporate headquarters rather than individual businesses.
The board, which now has a Republican majority appointed by President Trump, has previously attempted to rollback the standard. In a December case, the current board overturned the Joint employer standard. However, the NLRB then abruptly reversed that decision after the board’s inspector general determined that NLRB member William Emanuel should have recused himself from voting the case, alleging it involved a conflict of interest with his former law firm. Emanuel has disputed that he was obligated to recuse himself.
The reversal has left the Obama-era rule still technically in effect. The board subsequently announced its intention to rewrite the rule entirely, a process that will take several months at least.
“The NLRB’s announcement is good news for franchises and franchise employees across the country,” said Interal Franchise Association President Robert Cresanti. “Franchise owners have been confused about the vague and uncertain legal minefield created by the NLRB joint employer standard since it was expanded in 2015.”
