The Standard for Determining Joint-Employer Status, 46681-46697 [2018-19930]

Agencies

• National Labor Relations Board

[Federal Register Volume 83, Number 179 (Friday, September 14, 2018)]
[Proposed Rules]
[Pages 46681-46697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19930]


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NATIONAL LABOR RELATIONS BOARD

29 CFR Chapter I

RIN 3142-AA13


The Standard for Determining Joint-Employer Status

AGENCY: National Labor Relations Board.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: In order to more effectively enforce the National Labor 
Relations Act (the Act or the NLRA) and to further the purposes of the 
Act, the National Labor Relations Board (the Board) proposes a 
regulation establishing the standard for determining whether two 
employers, as defined in Section 2(2) of the Act, are a joint employer 
of a group of employees under the NLRA. The Board believes that this 
rulemaking will foster predictability and consistency regarding 
determinations of joint-employer status in a variety of business 
relationships, thereby promoting labor-management stability, one of the 
principal purposes of the Act. Under the proposed regulation, 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, such as hiring, firing, 
discipline, supervision, and direction. More specifically, to be deemed 
a joint employer under the proposed regulation, an employer must 
possess and actually exercise substantial direct and immediate control 
over the essential terms and conditions of employment of another 
employer's employees in a manner that is not limited and routine.

DATES: Comments regarding this proposed rule must be received by the 
Board on or before November 13, 2018. Comments replying to comments 
submitted during the initial comment period must be received by the 
Board on or before November 20, 2018. Reply comments should be limited 
to replying to comments previously filed by other parties. No late 
comments will be accepted.

ADDRESSES: 
    Internet--Federal eRulemaking Portal. Electronic comments may be 
submitted through https://www.regulations.gov.
    Delivery--Comments should be sent by mail or hand delivery to: 
Roxanne Rothschild, Associate Executive Secretary, National Labor 
Relations Board, 1015 Half Street SE, Washington, DC 20570-0001. 
Because of security

[[Page 46682]]

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. The Board encourages 
electronic filing. It is not necessary to send comments if they have 
been filed electronically with regulations.gov. If you send comments, 
the Board recommends that you confirm receipt of your delivered 
comments by contacting (202) 273-2917 (this is not a toll-free number). 
Individuals with hearing impairments may call 1-866-315-6572 (TTY/TDD).
    Only comments submitted through https://www.regulations.gov, hand 
delivered, or mailed 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 https://www.regulations.gov and 
during normal business hours (8:30 a.m. to 5 p.m. EST) at the above 
address.
    The Board will post, as soon as practicable, all comments received 
on https://www.regulations.gov without making any changes to the 
comments, including any personal information provided. The website 
https://www.regulations.gov 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. 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 
https://www.regulations.gov website. It is the commenter's 
responsibility to safeguard his or her information. Comments submitted 
through https://www.regulations.gov will not include the commenter's 
email address unless the commenter chooses to include that information 
as part of his or her comment.

FOR FURTHER INFORMATION CONTACT: Roxanne Rothschild, Associate 
Executive Secretary, National Labor Relations Board, 1015 Half Street 
SE, Washington, DC 20570-0001, (202) 273-2917 (this is not a toll-free 
number), 1-866-315-6572 (TTY/TDD).

SUPPLEMENTARY INFORMATION: Whether one business is the joint employer 
of another business's employees is one of the most important issues in 
labor law today. There are myriad relationships between employers and 
their business partners, and the degree to which particular business 
relationships impact employees' essential terms and conditions of 
employment varies widely.
    A determination by the Board regarding whether two separate 
businesses constitute a ``joint employer'' as to a group of employees 
has significant consequences for the businesses, unions, and employees 
alike. When the Board finds a joint-employer relationship, it may 
compel the joint employer to bargain in good faith with a Board-
certified or voluntarily recognized bargaining representative of the 
jointly-employed workers. Additionally, each joint employer may be 
found jointly and severally liable for unfair labor practices committed 
by the other. And a finding of joint-employer status may determine 
whether picketing directed at a particular business is primary and 
lawful, or secondary and unlawful.
    The last three years have seen much volatility in the Board's law 
governing joint-employer relationships. As detailed below, in August 
2015, a divided Board overruled longstanding precedent and 
substantially relaxed the evidentiary requirements for finding a joint-
employer relationship. Browning-Ferris Industries of California, Inc., 
d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015) (Browning-
Ferris), petition for review docketed Browning-Ferris Indus. of Cal. v. 
NLRB, No. 16-1028 (D.C. Cir. filed Jan. 20, 2016). Then, in December 
2017, a different Board majority restored the prior, more stringent 
standard. In February 2018, the Board vacated its December 2017 
decision, effectively changing the law back again to the relaxed 
standard of Browning-Ferris. A petition for review challenging 
Browning-Ferris's adoption of the relaxed standard as beyond the 
Board's statutory authority is currently pending in the United States 
Court of Appeals for the District of Columbia Circuit. In light of the 
continuing uncertainty in the labor-management community created by 
these adjudicatory variations in defining the appropriate joint-
employer standard under the Act, and for the reasons explained below, 
the Board proposes to address the issue through the rulemaking 
procedure.

I. Background

    Under Section 2(2) of the Act, ``the term `employer' includes any 
person acting as an agent of an employer, directly or indirectly, but 
shall not include the United States or any wholly owned Government 
corporation, or any Federal Reserve Bank, or any State or political 
subdivision thereof, or any person subject to the Railway Labor Act [45 
U.S.C. 151 et seq.], as amended from time to time, or any labor 
organization (other than when acting as an employer), or anyone acting 
in the capacity of officer or agent of such labor organization.'' Under 
Section 2(3) of the Act, ``the term `employee' shall include any 
employee, and shall not be limited to the employees of a particular 
employer, unless this subchapter [of the Act] explicitly states 
otherwise . . . .''
    Section 7 of the Act grants employees ``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 . . . .'' Section 8(a)(1) 
of the Act makes it an unfair labor practice for an employer ``to 
interfere with, restrain, or coerce employees in the exercise of the 
rights guaranteed in [Section 7],'' and Section 8(a)(5) of the Act 
makes it an unfair labor practice for an employer ``to refuse to 
bargain collectively with the representatives of his employees . . . 
.'' (emphasis added).
    The Act does not contain the term ``joint employer,'' much less 
define it, but the Board and reviewing courts have over the years 
addressed situations where the working conditions of a group of 
employees are affected by two separate companies engaged in a business 
relationship. Boire v. Greyhound Corp., 376 U.S. 473 (1964) (holding 
that Board's determination that bus company possessed ``sufficient 
control over the work'' of its cleaning contractor's employees to be 
considered a joint employer was not reviewable in federal district 
court); Indianapolis Newspapers, Inc., 83 NLRB 407, 408-409 (1949) 
(finding that two newspaper businesses, Star and INI, were not joint 
employers, despite their integration, because ``there [wa]s no 
indication that Star, by virtue of such integration, t[ook] an active 
part in the formulation or application of the labor policy, or 
exercise[d] any immediate control over the operation, of INI'').
    When distinguishing between an ``employee'' under Section 2(3) of 
the Act and an ``independent contractor'' excluded from the Act's 
protection, the Supreme Court has explained that the Board is bound by 
common-law principles, focusing on the control exercised by one 
employer over a person performing work for it. NLRB v. United Insurance 
Co. of America, 390 U.S. 254, 256 (1968); see also Nationwide Mutual 
Insurance Co. v. Darden, 503 U.S. 318, 322-323 (1992)

[[Page 46683]]

(``[W]hen Congress has used the term `employee' without defining it, we 
have concluded that Congress intended to describe the conventional 
master-servant relationship as understood by common law agency 
doctrine.'') (citations omitted). Similarly, it is clear that the 
Board's joint-employer standard, which necessarily implicates the same 
focus on employer control, must be consistent with the common law 
agency doctrine.

The Development of the Joint-Employment Doctrine Under the NLRA

    Under the Act, there has been a longstanding consensus regarding 
the general formulation of the Board's joint-employer standard: Two 
employers are a joint employer if they share or codetermine those 
matters governing the employees' essential terms and conditions of 
employment. See CNN America, Inc., 361 NLRB 439, 441, 469 (2014), enf. 
denied in part 865 F.3d 740 (D.C. Cir. 2017); Southern California Gas 
Co., 302 NLRB 456, 461 (1991). The general formulation derives from 
language in Greyhound Corp., 153 NLRB 1488, 1495 (1965), enfd. 368 F.2d 
778 (1966), and was endorsed in NLRB v. Browning-Ferris Industries, 691 
F.2d 1117, 1122-1123 (3d Cir. 1982), where the United States Court of 
Appeals for the Third Circuit carefully explained the differences 
between the Board's joint-employer and single-employer doctrines, which 
had sometimes been confused.\1\
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    \1\ As the Third Circuit explained, a ``single employer'' 
relationship exists where two nominally separate employers are 
actually part of a single integrated enterprise so that, for all 
purposes, there is in fact only a ``single employer.'' The question 
in the ``single employer'' situation, then, is whether two nominally 
independent enterprises constitute, in reality, only one integrated 
enterprise. In answering that question, the Board examines four 
factors: (1) Functional integration of the operations; (2) 
centralized control of labor relations; (3) common management; and 
(4) common ownership. In contrast, the ``joint employer'' concept 
assumes that the two companies are indeed independent employers, and 
the four-factor standard is inapposite. Rather, as stated above, the 
Board has analyzed whether the two separate employers share or 
codetermine essential terms and conditions of employment.
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    At certain points in its history, the Board has discussed the 
relevance of an employer's direct control over the essential employment 
conditions of another company's employees, as compared with its 
indirect control or influence, in determining whether joint-employer 
status has been established. For example, in Floyd Epperson, 202 NLRB 
23, 23 (1973), enfd. 491 F.2d 1390 (6th Cir. 1974), the Board found 
that a dairy company (United) was the joint employer of truck drivers 
supplied to it by an independent trucking firm (Floyd Epperson) based 
on evidence of both United's direct control and indirect control over 
the working conditions of Epperson's drivers. The Board relied on ``all 
the circumstances'' of the case, including the fact that United 
dictated the specific routes that Epperson's drivers were required to 
take when transporting its goods, ``generally supervise[d]'' Epperson's 
drivers, and had authority to modify their work schedules. Id. at 23. 
The Board also relied in part on United's ``indirect control'' over the 
drivers' wages and discipline.\2\ Id. Importantly, in Floyd Epperson 
and like cases, the Board was not called upon to decide, and did not 
assert, that a business's indirect influence over another company's 
workers' essential working conditions, standing alone, could establish 
a joint-employer relationship.\3\
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    \2\ In Floyd Epperson, the Board found that United had indirect 
control over the drivers' wages because wage increases to Epperson's 
drivers came from raises given by United to Epperson, a sole 
proprietor. The Board found that United had indirect influence over 
discipline because Epperson replaced a certain driver on a route 
after United complained that the driver had been constantly late. 
202 NLRB at 23.
    \3\ See also Sun-Maid Growers of California, 239 NLRB 346 (1978) 
(finding that food-processing company was joint employer of 
maintenance electricians supplied by a subcontractor where company 
actually directed electricians by making specific assignments to 
individual electricians and determined which of those assignments 
took precedence when all could not be timely completed; the Board 
also relied on indirect impact on other terms), enfd. 618 F.2d 56 
(9th Cir. 1980); Hamburg Industries, Inc., 193 NLRB 67, 67 (1971) 
(finding remanufacturer of railroad cars was a joint employer of 
labor force supplied by subcontractor where remanufacturer used 
subcontractor's supervisors as conduit to convey work instructions 
while ``constantly check[ing] the performance of the workers and the 
quality of the work'' and where remanufacturer also indirectly 
affected employees' other terms) (emphasis added). The Board's 
decision in Clayton B. Metcalf, 223 NLRB 642 (1976), appears to be 
the closest the Board has come to finding a joint-employment 
relationship in the absence of some exercise of direct and immediate 
control over essential terms. There, the Board found that a mine 
operator did not exercise direct supervisory authority over the 
employees of a subcontractor engaged to remove ``overburden'' atop 
coal seams. However, the Board found that the subcontractor's entire 
operation in removing the overburden, as well as other collateral 
duties performed by it, depended entirely on the mine operator's 
site plan, and, ``[a]s a result, [the mine operator] exercised 
considerable control over the manner and means by which [the 
subcontractor] performed its operations.'' Id. at 644 (emphasis 
added).
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    In fact, more recently, the Board, with court approval, has made 
clear that ``the essential element'' in a joint-employer analysis ``is 
whether a putative joint employer's control over employment matters is 
direct and immediate.'' Airborne Express, 338 NLRB 597, 597 fn. 1 
(2002) (citing 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)); see also NLRB v. CNN America, Inc., 865 F.3d 740, 748-751 
(D.C. Cir. 2017) (finding that Board erred by failing to adhere to the 
Board's ``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)); 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); Laerco Transportation, 269 NLRB 324 (1984) 
(dismissing joint-employer allegation where user employer's supervision 
of supplied employees was limited and routine).
    Accordingly, for at least 30 years (from no later than 1984 to 
2015), evidence of indirect control was typically insufficient to prove 
that one company was the joint employer of another business's workers. 
Even direct and immediate supervision of another's employees was 
insufficient to establish joint-employer status where such supervision 
was ``limited and routine.'' Flagstaff Medical Center, Inc., 357 NLRB 
659, 667 (2011); AM Property Holding Corp., 350 NLRB 998, 1001 (2007), 
enfd. in relevant part sub nom. SEIU, Local 32 BJ v. NLRB, 647 F.3d 435 
(2d Cir. 2011); G. Wes Ltd. Co., 309 NLRB 225, 226 (1992). The Board 
generally found supervision to be limited and routine where a 
supervisor's instructions consisted mostly of directing another 
business's employees what work to perform, or where and when to perform 
the work, but not how to perform it. Flagstaff Medical Center, 357 NLRB 
at 667.
    The Board's treatment of a company's contractually reserved 
authority over an independent company's employees also evolved over the 
years. In the 1960s, the Board found that a contractual reservation of 
authority, standing alone, could establish a joint-employer 
relationship even where that reserved authority had never been 
exercised. For example, in Jewel Tea Co., 162 NLRB 508, 510 (1966), the 
Board found that a department store (the licensor) was a joint employer 
of the employees of two independent companies licensed to operate 
specific departments of its store. The text of the license agreements 
between the store and the departments provided, inter alia, that 
``employees shall be subject to the general

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supervision of the licensor,'' that the licensee ``shall at all times 
conform to a uniform store policy with reference to wages, hours and 
terms, and conditions of employment for all sales and stock 
personnel,'' that the licensor shall approve employees hired by the 
licensee, and that the licensor ``may request discharge and the 
licensee will immediately comply with such request.'' The Board found 
it ``clear beyond doubt'' that the license agreements gave the store 
the ``power to control effectively the hire, discharge, wages, hours, 
terms, and other conditions of employment'' of the other two companies' 
employees. According to the Board, ``[t]hat the licensor has not 
exercised such power is not material, for an operative legal predicate 
for establishing a joint-employer relationship is a reserved right in 
the licensor to exercise such control, and we find such right of 
control adequately established by the facts set out above.'' Id.; see 
also Thriftown, Inc., 161 NLRB 603, 607 (1966) (``Since the power to 
control is present by virtue of the operating agreement, whether or not 
exercised, we find it unnecessary to consider the actual practice of 
the parties regarding these matters as evidenced by the record.'').
    However, even during the same period, not all contractual 
reservations of authority were found sufficient to establish a joint-
employer relationship. For example, in Hy-Chem Constructors, Inc., 169 
NLRB 274 (1968), the Board found that a petrochemical manufacturer was 
not a joint employer of its construction subcontractor's employees even 
though their cost-plus agreement reserved to the manufacturer a right 
to approve wage increases and overtime hours and the right to require 
the subcontractor to remove any employee whom the manufacturer deemed 
undesirable. The Board found that the first two reservations of 
authority ``are consistent with the [manufacturer's] right to police 
reimbursable expenses under its cost-plus contract and do not warrant 
the conclusion that [the manufacturer] has thereby forged an employment 
relationship, joint or otherwise, with the [subcontractor's] 
employees.'' Id. at 276. Additionally, the Board found the 
manufacturer's ``yet unexercised prerogative to remove an undesirable . 
. . employee'' did not establish a joint-employment relationship. Id.
    Over time, the Board shifted position, without expressly overruling 
precedent, and held that joint-employer status could not be established 
by the mere existence of a clause in a business contract reserving to 
one company authority over its business partner's employees absent 
evidence that such authority had ever been exercised. For example, in 
AM Property Holding Corp., the Board found that a ``contractual 
provision giving [a property owner] the right to approve [its cleaning 
contractor's] hires, standing alone, is insufficient to show the 
existence of a joint employer relationship.'' 350 NLRB at 1000. The 
Board explained that ``[i]n assessing whether a joint employer 
relationship exists, the Board does not rely merely on the existence of 
such contractual provisions, but rather looks to the actual practice of 
the parties.'' Id. (citing TLI, 271 NLRB at 798-799). Because the 
record in AM Property failed to show that the property owner had ever 
actually participated in the cleaning contractor's hiring decisions, 
the Board rejected the General Counsel's contention that the two 
employers constituted a joint employer. See also Flagstaff Medical 
Center, 357 NLRB at 667 (finding that business contract's reservation 
of hospital's right to require its subcontractor to ``hire, discharge, 
or discipline'' any of the subcontractor's employees did not establish 
a joint-employer relationship absent evidence that the hospital had 
ever actually exercised such authority); TLI, 271 NLRB at 798-799 
(finding that paper company's actual practice of only limited and 
routine supervision of leased drivers did not establish a joint-
employer relationship despite broad contractual reservation of 
authority that paper company ``will solely and exclusively be 
responsible for maintaining operational control, direction and 
supervision'' over the leased drivers).
    The law governing joint-employer relationships changed 
significantly in August 2015. At that time, a divided Board overruled 
the then-extant precedent described above and substantially relaxed the 
requirements for proving a joint-employer relationship. Specifically, a 
Board majority explained that it would no longer require proof that a 
putative joint employer has exercised any ``direct and immediate'' 
control over the essential working conditions of another company's 
workers. Browning-Ferris, 362 NLRB No. 186, slip op. at 2, 13-16. The 
majority in Browning-Ferris explained that, under its new standard, a 
company could be deemed a joint employer even if its ``control'' over 
the essential working conditions of another business's employees was 
indirect, limited and routine, or contractually reserved but never 
exercised. Id., slip op. at 15-16.
    The Browning-Ferris majority agreed with the core of the Board's 
long-recognized joint-employer standard: whether two separate employers 
``share'' or ``codetermine'' those matters governing the essential 
terms and conditions of employment. Elaborating on the core ``share'' 
or ``codetermine'' standard, the Browning-Ferris majority noted that, 
in some cases, two companies may engage in genuinely shared decision-
making by conferring or collaborating directly to set an essential term 
or condition of employment. Alternatively, each of the two companies 
``may exercise comprehensive authority over different terms and 
conditions of employment.'' Id., slip op. at 15 fn. 80.
    While agreeing with the core standard, the Browning-Ferris majority 
believed that the Board's joint-employer precedents had become 
``increasingly out of step with changing economic circumstances, 
particularly the recent dramatic growth in contingent employment 
relationships.'' Id., slip op. at 1. The Browning-Ferris majority's 
expressed aim was ``to put the Board's joint-employer standard on a 
clearer and stronger analytical foundation, and, within the limits set 
out by the Act, to best serve the Federal policy of `encouraging the 
practice and procedure of collective-bargaining.' '' Id., slip op. at 2 
(quoting 29 U.S.C. 151).
    According to the Browning-Ferris majority, during the period before 
Laerco and TLI were decided in 1984, the Board had ``typically treated 
the right to control the work of employees and their terms of 
employment as probative of joint-employer status.'' Id., slip op. at 9 
(emphasis in original). Also during that time, ``the Board gave weight 
to a putative joint employer's `indirect' exercise of control over 
workers' terms and conditions of employment.'' Id. (citing Floyd 
Epperson, 202 NLRB at 23).
    The Browning-Ferris majority viewed Board precedent, starting with 
Laerco and TLI, that expressly required proof of some exercise of 
direct and immediate control as having unjustifiably and without 
explanation departed from the Board's pre-1984 precedent. Specifically, 
the Browning-Ferris majority asserted that, in cases such as Laerco, 
TLI, AM Property, and Airborne Express, the Board had ``implicitly 
repudiated its earlier reliance on reserved control and indirect 
control as indicia of joint-employer status.'' Id., slip op. at 10. 
Further, the Browning-Ferris majority viewed those decisions as 
``refus[ing] to assign any significance to contractual language 
expressly giving a putative employer the power to dictate

[[Page 46685]]

workers' terms and conditions of employment.'' Id. (emphasis added).
    In short, the Browning-Ferris majority viewed Board precedent 
between 1984 and 2015 as having unreasonably ``narrowed'' the Board's 
joint-employer standard precisely when temporary and contingent 
employment relationships were on the rise. Id., slip op. at 11. In its 
view, under changing patterns of industrial life, a proper joint-
employer standard should not be any ``narrower than statutorily 
required.'' Id. According to the Browning-Ferris majority, the 
requirement of exercise of direct and immediate control that is not 
limited and routine ``is not, in fact, compelled by the common law--
and, indeed, seems inconsistent with common-law principles.'' Id., slip 
op. at 13. The Browning-Ferris majority viewed the common-law concept 
of the ``right to control'' the manner and means of a worker's job 
performance--used to distinguish a servant (i.e., employee) from an 
independent contractor--as precluding, or at least counseling against, 
any requirement of exercise of direct and immediate control in the 
joint-employment context. Id.
    Browning-Ferris reflects a belief that it is wise, and consistent 
with the common law, to 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 Browning-Ferris majority 
believed that requiring such a business partner to take a seat at the 
negotiating table and to bargain over the terms that it indirectly 
impacts (or could, in the future, impact under a contractual 
reservation) best implements the right of employees under Section 7 of 
the Act to bargain collectively through representatives of their own 
choosing. The Browning-Ferris majority conceded that deciding joint-
employer allegations under its stated standard would not always be an 
easy task, id., slip op. at 12, but implicitly concluded that the 
benefit of bringing all possible employer parties to the bargaining 
table justified its new standard.
    In dissent, two members argued that the majority's new relaxed 
joint-employer standard was contrary to the common law and unwise as a 
matter of policy. In particular, the Browning-Ferris dissenters argued 
that by permitting a joint-employer finding based solely on indirect 
impact, the majority had effectively resurrected intertwined theories 
of ``economic realities'' and ``statutory purpose'' endorsed by the 
Supreme Court in NLRB v. Hearst Publications, 322 U.S. 111 (1944), but 
rejected by Congress soon thereafter. In Hearst, the Supreme Court went 
beyond common-law principles and broadly interpreted the Act's 
definition of ``employee'' with reference to workers' economic 
dependency on a putative employer in light of the Act's goal of 
minimizing industrial strife. In response, Congress enacted the Taft-
Hartley Amendments of 1947, excluding ``independent contractors'' from 
the Act's definition of ``employee'' and making clear that common-law 
principles control.
    Additionally, the Browning-Ferris dissenters disagreed with the 
majority's understanding of the common law of joint-employment 
relationships. The dissenters argued that the ``right to control'' in 
the joint-employment context requires some exercise of direct and 
immediate control.
    Then, accepting for argument's sake that the common law does not 
preclude the relaxed standard of Browning-Ferris, the dissenters found 
that practical considerations counseled against its adoption. They 
found the relaxed standard to be impermissibly vague and asserted that 
the majority had failed to provide adequate guidance regarding how much 
indirect or reserved authority might be sufficient to establish a 
joint-employment relationship. Additionally, the dissenters believed 
that the majority's test would ``actually foster substantial bargaining 
instability by requiring the nonconsensual presence of too many 
entities with diverse and conflicting interests on the `employer' 
side.'' Id., slip op. at 23.
    The Browning-Ferris dissenters also complained that the relaxed 
standard made it difficult not only to correctly identify joint-
employer relationships but also to determine the bargaining obligations 
of each employer within such relationships. Under the relaxed standard, 
an employer is only required to bargain over subjects that it controls 
(even if the control is merely indirect). The dissenters expressed 
concern that disputes would arise between unions and joint employers, 
and even between the two employers comprising the joint employer, over 
which subjects each employer-party must bargain. Further, the 
dissenters found such fragmented bargaining to be impractical because 
subjects of bargaining are not easily severable, and the give-and-take 
of bargaining frequently requires reciprocal movement on multiple 
proposals to ultimately reach a comprehensive bargaining agreement. 
Finally, the dissenters were suspicious about the implications of 
Browning-Ferris for identifying an appropriate bargaining unit in cases 
involving a single supplier employer that contracts with multiple user 
employers and with potential subversion of the Act's protection of 
neutral employers from secondary economic pressure exerted by labor 
unions. Accordingly, the dissenters would have adhered to Board 
precedent as reflected in cases such as Laerco, TLI, and Airborne 
Express.

Recent Developments

    In December 2017, after a change in the Board's composition and 
while Browning-Ferris was pending on appeal in the D.C. Circuit, a new 
Board majority overruled Browning-Ferris and restored the preexisting 
standard that required proof that a joint employer actually exercised 
direct and immediate control in a manner that was neither limited nor 
routine. Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 
(2017). Soon thereafter, the charging parties in Hy-Brand filed a 
motion for reconsideration. The Board granted that motion and vacated 
its earlier decision for reasons unrelated to the substance of the 
joint-employer issue, effectively returning the law to the relaxed 
joint-employer standard adopted in Browning-Ferris. Hy-Brand, 366 NLRB 
No. 26 (2018). Subsequently, the Board in Hy-Brand denied the 
respondents' motion for reconsideration and issued a decision finding 
it unnecessary to address the joint-employer issue in that case 
because, in any event, the two respondents constituted a single 
employer under Board precedent and were therefore jointly and severally 
liable for each other's unfair labor practices. 366 NLRB No. 93 (2018); 
366 NLRB No. 94 (2018). As stated above, a petition for review of the 
Board's Browning-Ferris decision remains pending in the court of 
appeals.

II. Validity and Desirability of Rulemaking; Impact Upon Pending Cases

    Section 6 of the Act, 29 U.S.C. 156, provides, ``The Board shall 
have authority from time to time to make, amend, and rescind, in the 
manner prescribed by subchapter II of chapter 5 of Title 5 [the 
Administrative Procedure Act, 5 U.S.C. 553], such rules and regulations 
as may be necessary to carry out the provisions of this Act.'' The 
Board interprets Section 6 as

[[Page 46686]]

authorizing the proposed rule and invites comments on this issue.\4\
---------------------------------------------------------------------------

    \4\ As previously stated, Secs. 2(2) and 2(3) of the Act define, 
respectively, ``employer'' and ``employee,'' but neither these 
provisions nor any others in the Act define ``joint employer.''
---------------------------------------------------------------------------

    Although the Board historically has made most substantive policy 
determinations through case adjudication, the Board has, with Supreme 
Court approval, engaged in substantive rulemaking. American Hospital 
Assn. v. NLRB, 499 U.S. 606 (1991) (upholding Board's rulemaking on 
appropriate bargaining units in the healthcare industry); see also 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.'').
    The Board finds that establishing the joint-employer standard in 
rulemaking is desirable for several reasons. First, given the recent 
oscillation on the joint-employer standard, the wide variety of 
business relationships that it may affect (e.g., user-supplier, 
contractor-subcontractor, franchisor-franchisee, predecessor-successor, 
creditor-debtor, lessor-lessee, parent-subsidiary, and contractor-
consumer), and the wide-ranging import of a joint-employer 
determination for the affected parties, the Board finds that it would 
be well served by public comment on the issue. Interested persons with 
knowledge of these widely varying relationships can have input on our 
proposed change through the convenient comment process; participation 
is not limited, as in the adjudicatory setting, to legal briefs filed 
by the parties and amici. Second, using the rulemaking procedure 
enables the Board to clarify what constitutes the actual exercise of 
substantial direct and immediate control by use of hypothetical 
scenarios, some examples of which are set forth below, apart from the 
facts of a particular case that might come before the Board for 
adjudication. In this way, rulemaking will provide unions and employers 
greater ``certainty beforehand as to when [they] may proceed to reach 
decisions without fear of later evaluations labeling [their] conduct an 
unfair labor practice,'' as the Supreme Court has instructed the Board 
to do. First National Maintenance Corp. v. NLRB, 452 U.S. 666, 679 
(1981). Third, by establishing the joint-employer standard in the 
Board's Rules & Regulations, employers, unions, and employees will be 
able to plan their affairs free of the uncertainty that the legal 
regime may change on a moment's notice (and possibly retroactively) 
through the adjudication process. NLRB v. Wyman-Gordon Co., 394 U.S. 
759, 777 (1969) (``The rule-making procedure performs important 
functions. It gives notice to an entire segment of society of those 
controls or regimentation that is forthcoming.'') (Douglas, J., 
dissenting).

III. The Proposed Rule

    Under the proposed rule, 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, such as hiring, firing, discipline, supervision, and 
direction. A putative joint employer must possess and actually exercise 
substantial direct and immediate control over the employees' essential 
terms and conditions of employment in a manner that is not limited and 
routine.
    The proposed rule reflects the Board's preliminary view, subject to 
potential revision in response to comments, that the Act's purposes of 
promoting collective bargaining and minimizing industrial strife are 
best served by a joint-employer doctrine that imposes bargaining 
obligations on putative joint employers that have actually played an 
active role in establishing essential terms and conditions of 
employment. Stated alternatively, the Board's initial view is that the 
Act's purposes would not be furthered by drawing into an employer's 
collective-bargaining relationship, or exposing to joint-and-several 
liability, a business partner of the employer that does not actively 
participate in decisions setting unit employees' wages, benefits, and 
other essential terms and conditions of employment. The Board's 
preliminary belief is that, absent a requirement of proof of some 
``direct and immediate'' control to find a joint-employment 
relationship, it will be extremely difficult for the Board to 
accurately police the line between independent commercial contractors 
and genuine joint employers. The Board is inclined toward the 
conclusion that the proposed rule will provide greater clarity to 
joint-employer determinations without leaving out parties necessary to 
meaningful collective bargaining.
    The proposed rule is consistent with the common law of joint-
employer relationships. The Board's requirement of exercise of direct 
and immediate control, as reflected in cases such as Airborne Express, 
supra, has been met with judicial approval . See, e.g., SEIU Local 32BJ 
v. NLRB, 647 F.3d at 442-443.
    The Board believes that the proposed rule is likewise consistent 
with Supreme Court precedent and that of lower courts, which have 
recognized that contracting enterprises often have some influence over 
the work performed by each other's workers without destroying their 
status as independent employers. For example, in NLRB v. Denver 
Building & Construction Trades Council, 341 U.S. 675, 689-690 (1951), 
the Supreme Court held that a contractor's exercise of supervision over 
a subcontractor's work ``did not eliminate the status of each as an 
independent contractor or make the employees of one the employees of 
the other,'' emphasizing that ``[t]he business relationship between 
independent contractors is too well established in the law to be 
overridden without clear language doing so.''
    The requirement of ``direct and immediate'' control seems to 
reflect a commonsense understanding that two contracting enterprises 
will, of necessity, have some impact on each other's operations and 
respective employees. As explained in Southern California Gas Co., 302 
NLRB at 461:

    An employer receiving contracted labor services will of 
necessity exercise sufficient control over the operations of the 
contractor at its facility so that it will be in a position to take 
action to prevent disruption of its own operations or to see that it 
is obtaining the services it contracted for. It follows that the 
existence of such control, is not in and of itself, sufficient 
justification for finding that the customer-employer is a joint 
employer of its contractor's employees. Generally a joint employer 
finding is justified where it has been demonstrated that the 
employer-customer meaningfully affects matters relating to the 
employment relationship such as hiring, firing, discipline, 
supervision, and direction.

    Notably, the Board is presently inclined to find, consistent with 
prior Board cases, that even a putative joint employer's ``direct and 
immediate'' control over employment terms may not give rise to a joint-
employer relationship where that control is too limited in scope. See, 
e.g., Flagstaff Medical Center, 357 NLRB at 667 (dismissing joint-
employer allegation even though putative joint employer interviewed 
applicants and made hiring recommendations, evaluated employees 
consistent with criteria established by its supplier employer, and 
disciplined supplied employees for unscheduled absences); Lee Hospital, 
300 NLRB 947, 948-950 (1990) (putative joint employer's ``limited 
hiring and disciplinary authority'' found insufficient to establish 
that it ``shares or codetermines those matters governing the essential 
terms and conditions of employment to an extent that it may be found to 
be a joint employer'') (emphasis added). Cases like Flagstaff Medical 
Center and Lee Hospital are

[[Page 46687]]

consistent with the Board's present inclination to find that a putative 
joint employer must exercise substantial direct and immediate control 
before it is appropriate to impose joint and several liability on the 
putative joint employer and to compel it to sit at the bargaining table 
and bargain in good faith with the bargaining representative of its 
business partner's employees.\5\
---------------------------------------------------------------------------

    \5\ Even the Browning-Ferris majority acknowledged that ``it is 
certainly possible that in a particular case, a putative joint 
employer's control might extend only to terms and conditions of 
employment too limited in scope or significance to permit meaningful 
collective bargaining.'' 362 NLRB No. 186, slip op. at 16.
---------------------------------------------------------------------------

    Accordingly, under the proposed rule, there must exist evidence of 
direct and immediate control before a joint-employer relationship can 
be found. Moreover, it will be insufficient to establish joint-employer 
status where the degree of a putative joint employer's control is too 
limited in scope (perhaps affecting a single essential working 
condition and/or exercised rarely during the putative joint employer's 
relationship with the undisputed employer).
    The proposed rule contains several examples, set forth below, to 
help clarify what constitutes direct and immediate control over 
essential terms and conditions of employment. These examples are 
intended to be illustrative and not as setting the outer parameters of 
the joint-employer doctrine established in the proposed rule.
    The Board seeks comment on all aspects of its proposed rule. In 
particular, the Board seeks input from employees, unions, and employers 
regarding their experience in workplaces where multiple employers have 
some authority over the workplace. This may include (1) experiences 
with labor disputes and how the extent of control possessed or 
exercised by the employers affected those disputes and their 
resolution; (2) experiences organizing and representing such workplaces 
for the purpose of collective bargaining and how the extent of control 
possessed or exercised by the employers affected organizing and 
representational activities; and (3) experiences managing such 
workplaces, including how legal requirements affect business practices 
and contractual arrangements. What benefits to business practices and 
collective bargaining do interested parties believe might result from 
finalization of the proposed rule? What, if any, harms? Additionally, 
the Board seeks comments regarding the current state of the common law 
on joint-employment relationships. Does the common law dictate the 
approach of the proposed rule or of Browning-Ferris? Does the common 
law leave room for either approach? Do the examples set forth in the 
proposed rule provide useful guidance and suggest proper outcomes? What 
further examples, if any, would furnish additional useful guidance? As 
stated above, comments regarding this proposed rule must be received by 
the Board on or before November 13, 2018. Comments replying to comments 
submitted during the initial comment period must be received by the 
Board on or before November 20, 2018.
    Our dissenting colleague, who was in the majority in Browning-
Ferris and in the dissent in the first Hy-Brand decision, would adhere 
to the relaxed standard of Browning-Ferris and refrain from rulemaking. 
She expresses many of the same points made in furtherance of her 
position in those cases. We have stated our preliminary view that the 
Act's policy of promoting collective bargaining to avoid labor strife 
and its impact on commerce is not best effectuated by inserting into a 
collective-bargaining relationship a third party that does not actively 
participate in decisions establishing unit employees' wages, benefits, 
and other essential terms and conditions of employment. 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.

VI. Dissenting View of Member Lauren McFerran

    Today, the majority resumes the effort to overrule the Board's 2015 
joint-employer decision in Browning-Ferris, which remains pending on 
review in the United States Court of Appeals for the District of 
Columbia Circuit.\6\ An initial attempt to overrule Browning-Ferris via 
adjudication--in a case where the issue was neither raised nor briefed 
by the parties \7\--failed when the participation of a Board member who 
was disqualified required that the decision be vacated.\8\ Now, the 
Board majority, expressing new support for the value of public 
participation, proposes to codify the same standard endorsed in Hy-
Brand I \9\ via a different route: rulemaking rather than adjudication. 
The majority tacitly acknowledges that the predictable result of the 
proposed rule would be fewer joint employer findings.\10\
---------------------------------------------------------------------------

    \6\ Browning-Ferris Industries of California, Inc., d/b/a BFI 
Newby Island Recyclery, 362 NLRB No. 186 (2015), petition for review 
docketed Browning-Ferris Indus. of Cal. v. NLRB, No. 16-1028 (D.C. 
Cir filed Jan. 20, 2016).
    \7\ See Hy-Brand Industrial Contractors, Ltd (Hy-Brand I), 365 
NLRB No. 156 (2017). In a departure from what had become established 
practice, the majority there also declined to issue a public notice 
seeking amicus briefing before attempting to reverse precedent. See 
id. at 38-40 (dissenting opinion).
    \8\ See Hy-Brand Industrial Contractors, Ltd., 366 NLRB No. 26 
(2018) (Hy-Brand II), granting reconsideration in part and vacating 
order reported at 365 NLRB No. 156 (2017) (Hy-Brand I). See also Hy-
Brand Industrial Contractors, Ltd., 366 NLRB No. 63 (2018) (Hy-Brand 
III) (order denying motion for reconsideration of order vacating).
    \9\ Hy-Brand I was decided by a majority comprising then-
Chairman Miscimarra, Member Kaplan, and Member Emanuel (who was 
later determined to have been disqualified). The majority today, 
proposing what is essentially an identical standard in rulemaking, 
comprises Chairman Ring, Member Kaplan, and Member Emanuel. Thus, a 
majority of today's majority has considered and endorsed the 
proposed outcome of this rulemaking process before.
    \10\ The majority observes that under the proposed rule, ``fewer 
employers may be alleged as joint employers, resulting in lower 
costs to some small entities.''
---------------------------------------------------------------------------

    The Board has recently made or proposed sweeping changes to labor 
law in adjudications going well beyond the facts of the cases at hand 
and addressing issues that might arguably have been better suited to 
consideration via rulemaking.\11\ Here, in contrast, the majority has 
chosen to proceed by rulemaking, if belatedly.\12\ Reasonable minds 
might question why the majority is pursuing rulemaking here and 
now.\13\

[[Page 46688]]

It is common knowledge that the Board's limited resources are severely 
taxed by undertaking a rulemaking process.\14\ But whatever the 
rationale, and whatever process the Board may use, the fact remains 
that there is no good reason to revisit Browning-Ferris, much less to 
propose replacing its joint-employer standard with a test that fails 
the threshold test of consistency with the common law and that defies 
the stated goal of the National Labor Relations Act: ``encouraging the 
practice and procedure of collective bargaining.'' \15\
---------------------------------------------------------------------------

    \11\ See The Boeing Company, 365 NLRB No.154, slip op. at 33-34 
(2017) (dissenting opinion); Caesars Entertainment Corp. d/b/a Rio 
All-Suites Hotel & Casino, Case 28-CA-060841, Notice & Invitation to 
File Briefs (Aug. 1, 2018) (dissenting opinion), available at 
www.nlrb.gov.
    \12\ After Hy-Brand I was vacated (in Hy-Brand II) and after 
reconsideration of the order vacating was denied (in Hy-Brand III), 
the Chairman announced that the Board was contemplating rulemaking 
on the joint-employer standard, as reflected in a submission to the 
Unified Agenda of Federal Regulatory and Deregulatory Actions. See 
NLRB Press Release, NLRB Considering Rulemaking to Address Joint-
Employer Standard (May 9, 2018), available at www.nlrb.gov. That 
step did not reflect my participation or that of then-Member Pearce, 
as the press release discloses.
    \13\ See, e.g., May 29, 2018 Letter from Senators Warren, 
Gillibrand, and Sanders to Chairman Ring, available at https://www.warren.senate.gov/imo/media/doc/2018.05.29%20Letter%20to%20NLRB%20on%20Joint%20Employer%20Rulemaking.pdf (expressing concern that the rulemaking effort could be an 
attempt ``to evade the ethical restrictions that apply to 
adjudications''). Chairman Ring has provided assurances ``that any 
notice-and-comment rulemaking undertaken by the NLRB will never be 
for the purpose of evading ethical restrictions.'' See June 5, 2018 
Letter from Chairman Ring to Senators Warren, Gillibrand, and 
Sanders at 1, available at https://www.nlrb.gov/news-outreach/news-story/nlrb-chairman-provides-response-senators-regarding-joint-employer-inquiry.
    Notably, under the Standards of Ethical Conduct for Executive 
Branch Employees, rulemaking implicates different recusal 
considerations than does case adjudication, because a rulemaking of 
general scope is not regarded as a ``particular matter'' for 
purposes of determining disqualifying financial interests. See 5 CFR 
2635.402. By pursuing rulemaking rather than adjudication with 
respect to the joint-employer standard, the Board is perhaps able to 
avoid what might otherwise be difficult ethical issues, as the Hy-
Brand case illustrates. See generally Peter L. Strauss, 
Disqualifications of Decisional Officials in Rulemaking, 80 Columbia 
L. Rev. 990 (1980); Administrative Conference of the United States, 
Decisional Officials' Participation in Rulemaking Proceedings, 
Recommendation 80-4 (1980).
    \14\ See Jeffrey M. Hirsch, Defending the NLRB: Improving the 
Agency's Success in the Federal Courts of Appeals, 5 FIU L. Rev. 
437, 457 (2010) (explaining that rulemaking at the Board would 
consume significant resources, especially ``given that the NLRB is 
banned from hiring economic analysts'').
     What is striking here is that the Board majority has opted to 
use this resource-intensive process to address an issue that has 
never been addressed through rulemaking before, and that the 
majority observes is implicated in fewer than one percent of Board 
filings and (by the majority's own analysis) directly affects only 
``.028% of all 5.9 million business firms.'' The majority observes 
that the number of employers affected is ``very small.'' In contrast 
for example, consider the standards governing employer rules and 
handbooks at issue in Boeing, supra, which presumably affect the 
overwhelming number of private-sector employers in the country, but 
which the Board majority chose to establish by adjudication and 
without public participation.
    \15\ National Labor Relations Act, Sec. 1, 29 U.S.C. 151.
---------------------------------------------------------------------------

A. The Majority's Justification for Revisiting Browning-Ferris Is 
Inadequate.

    Since August 2015, the joint-employer standard announced in 
Browning-Ferris has been controlling Board law. It remains so today, 
and the majority properly acknowledges as much.\16\ After laying out 
the checkered history of the effort to overrule Browning-Ferris, the 
majority points to the ``continuing uncertainty in the labor-management 
community created by these adjudicatory variations in defining the 
appropriate joint-employer standard'' as the principal reason for 
proposing to codify not Browning-Ferris (existing Board law) but the 
pre-Browning-Ferris standard resurrected in Hy-Brand I. The majority 
cites no evidence of ``continuing uncertainty in the labor-management 
community,'' \17\ and to the extent such uncertainty exists, it has 
only itself to blame for the series of missteps undertaken in seeking 
to hurriedly reverse BFI.
---------------------------------------------------------------------------

    \16\ As the Board recently observed in Hy-Brand II, because the 
original Hy-Brand decision and order was vacated, the ``overruling 
of the Browning-Ferris decision is of no force or effect.'' 366 NLRB 
No. 26, slip op. at 1. The majority here states that ``[i]n February 
2018, the Board vacated its December 2017 decision [in Hy-Brand], 
effectively changing the law back again to the relaxed standard of 
Browning-Ferris.''
    \17\ To the extent that the majority is relying on anything 
other than anecdotal evidence of this alleged uncertainty, it is 
required to let the public know the evidentiary basis of its 
conclusion. ``It is not consonant with the purpose of a rule-making 
proceeding to promulgate rules on the basis of inadequate data, or 
on data that, to a critical degree, is known only to the agency.'' 
Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375, 393 (D.C. Cir. 
1973).
---------------------------------------------------------------------------

    More to the point, the best way to end uncertainty over the Board's 
joint-employer standard would be to adhere to existing law, not to 
upend it. The majority's decision to pursue rulemaking ensures the 
Board's standard will remain in flux as the Board develops a final rule 
and as that rule, in all likelihood, is challenged in the federal 
courts. And, of course, any final rule could not be given retroactive 
effect, a point that distinguishes rulemaking from adjudication.\18\ 
Thus, cases arising before a final rule is issued will nonetheless have 
to be decided under the Browning-Ferris standard.
---------------------------------------------------------------------------

    \18\ See generally Bowen v. Georgetown University Hospital, 488 
U.S. 204 (1988). There is no indication in Sec. 6 of the National 
Labor Relations Act that Congress intended to give the Board 
authority to promulgate retroactive rules. Sec. 6 authorizes the 
Board ``to make . . . in the manner prescribed by [the 
Administrative Procedure Act] . . . such rules and regulations as 
may be necessary to carry out the provisions of'' the National Labor 
Relations Act. 29 U.S.C. 156. The Administrative Procedure Act 
defines a ``rule'' as an ``agency statement of general or particular 
applicability and future effect. . . .'' 5 U.S.C. 551(4) (emphasis 
added). See also See June 5, 2018 Letter from Chairman Ring to 
Senators Warren, Gillibrand, and Sanders at 2, available at https://www.nlrb.gov/news-outreach/news-story/nlrb-chairman-provides-response-senators-regarding-joint-employer-inquiry (acknowledging 
that ``final rules issued through notice-and-comment rulemaking are 
required by law to apply prospectively only'').
---------------------------------------------------------------------------

    The majority's choice here is especially puzzling given that 
Browning-Ferris remains under review in the District of Columbia 
Circuit. When the court's decision issues, it will give the Board 
relevant judicial guidance on the contours of a permissible joint-
employer standard under the Act. The Board would no doubt benefit from 
that guidance, even if it was not required to follow it. Of course, if 
the majority's final rule could not be reconciled with the District of 
Columbia Circuit's Browning-Ferris decision, it presumably would not 
survive judicial review in that court.\19\ The Board majority thus 
proceeds at its own risk in essentially treating Browning-Ferris as a 
dead letter.
---------------------------------------------------------------------------

    \19\ If the District of Columbia Circuit were to uphold the 
Board's Browning-Ferris standard (in whole or in part) as compelled 
by--or at least consistent with--the Act, but the Board, through 
rulemaking, rejected Browning-Ferris (in whole or in part) as not 
permitted by the Act, then the Board's final rule would be premised 
on a legal error. Moreover, insofar as the court might hold the 
Browning-Ferris standard to be permitted by the Act, then the 
reasons the Board gave for not adopting that standard would have to 
be consistent with the court's understanding of statutory policy and 
common-law agency doctrine insofar as they govern the joint-employer 
standard.
---------------------------------------------------------------------------

B. The Proposed Rule Is Inconsistent With Both the Common Law and the 
Goals of the NLRA

    No court has held that Browning-Ferris does not reflect a 
reasonable interpretation of the National Labor Relations Act. Nor does 
the majority today assert that its own, proposed joint-employer 
standard is somehow compelled by the Act. As the majority acknowledges, 
the ``Act does not contain the term `joint employer,' much less define 
it.'' The majority also acknowledges, as it must, that ``it is clear 
that the Board's joint-employer standard . . . must be consistent with 
common law agency doctrine.'' The joint-employer standard adopted in 
Browning-Ferris, of course, is predicated on common-law agency 
doctrine, as the decision explains in careful detail.\20\ As the 
Browning-Ferris Board observed:
---------------------------------------------------------------------------

    \20\ 362 NLRB No. 186, slip op. at 12-17. Notably, the Browning-
Ferris Board rejected a broader revision of the joint-employer 
standard advocated by the General Counsel because it might have 
suggested ``that the applicable inquiry is based on `industrial 
realities' rather than the common law.'' 362 NLRB No. 186, slip op. 
at 13 fn. 68. The General Counsel had urged the Board to find joint-
employer status:
    where, under the totality of the circumstances, including the 
way the separate entities have structured their commercial 
relationships, the putative joint employer wields sufficient 
influence over the working conditions of the other entity's 
employees such that meaningful collective bargaining could not occur 
in its absence.
    Id.

    In determining whether a putative joint employer meets [the] 
standard, the initial inquiry is whether there is a common-law 
employment relationship with the employees in question. 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.

362 NLRB No. 186, slip op. at 2 (emphasis added).\21\
---------------------------------------------------------------------------

    \21\ This approach, as the Browning-Ferris Board explained, was 
consistent with the Board's traditional joint-employer doctrine, as 
it existed before 1984. 362 NLRB No. 186, slip op. at 8-11. In 
tracing the evolution of the Board's joint-employer standard, the 
Browning-Ferris Board observed that:
    Three aspects of that development seem clear. First, the Board's 
approach has been consistent with the common-law concept of control, 
within the framework of the National Labor Relations Act. Second, 
before the current joint-employer standard was adopted, the Board 
(with judicial approval) generally took a broader approach to the 
concept of control. Third, the Board has never offered a clear and 
comprehensive explanation for its joint-employer standard, either 
when it adopted the current restrictive test or in the decades 
before.
    Id. at 8.

---------------------------------------------------------------------------

[[Page 46689]]

    In contrast, the Board's prior standard (which the majority revives 
today) had never been justified in terms of common-law agency doctrine. 
For the 31 years between 1984 (when the Board, in two decisions, 
narrowed the traditional joint-employer standard) \22\ and 2015 (when 
Browning-Ferris was decided), the Board's approach to joint-employer 
cases was not only unexplained, but also inexplicable with reference to 
the principles that must inform the Board's decision-making. Common-law 
agency doctrine simply does not require the narrow, pre-Browning-Ferris 
standard to which the majority now seeks to return. Nor is the 
``practice and procedure of collective bargaining'' encouraged by 
adopting a standard that reduces opportunities for collective 
bargaining and effectively shortens the reach of the Act.
---------------------------------------------------------------------------

    \22\ TLI, Inc., 271 NLRB 798 (1984), enfd. mem. 772 F.2d 894 (3d 
Cir. 1985), and Laerco Transportation, 269 NLRB 324 (1984).
---------------------------------------------------------------------------

    Thus, it is not surprising that two labor-law scholars have 
endorsed Browning-Ferris as ``the better approach,'' ``predicated on 
common law principles'' and ``consistent with the goals of employment 
law, especially in the context of a changing economy.'' \23\ Browning-
Ferris, the scholars observe, ``was not a radical departure from past 
precedent;'' rather, despite ``reject[ing] limitations added to the 
joint employer concept from a few cases decided in the 1980s,'' it was 
``consistent with earlier precedents.'' \24\ The crux of the Browning-
Ferris decision, and the current majority's disagreement with it, is 
whether the joint-employer standard should require: (1) That a joint 
employer ``not only possess the authority to control employees' terms 
and conditions of employment, but also exercise that authority;'' (2) 
that the employer's control ``must be exercised directly and 
immediately;'' and (3) that control not be ``limited and routine.'' 
\25\ The Browning-Ferris Board carefully explained that none of these 
limiting requirements is consistent with common-law agency doctrine, as 
the Restatement (Second) of Agency makes clear.\26\ It is the 
Restatement on which the Supreme Court has relied in determining the 
existence of a common-law employment relationship for purposes of the 
National Labor Relations Act.\27\ The Court, in turn, has observed that 
the ``Board's departure from the common law of agency with respect to 
particular questions and in a particular statutory context, [may] 
render[] its interpretation [of the Act] unreasonable.'' \28\
---------------------------------------------------------------------------

    \23\ Charlotte Garden & Joseph E. Slater, Comments on 
Restatement of Employment Law (Third), Chapter 1, 21 Employee Rights 
& Employment Policy Journal 265, 276 (2017).
    \24\ Id. at 276-277.
    Id.
    \25\ Browning-Ferris, supra, 362 NLRB No. 186, slip op. at 2 
(emphasis in original).
    \26\ Id. at 13-14. See also Hy-Brand I, supra, 365 NLRB No. 156, 
slip op. at 42-45 (dissenting opinion).
     As to whether authority must be exercised, Section 220(1) of 
the Restatement (Second) of Agency defines a ``servant'' as a 
``person employed to perform services . . . who with respect to the 
physical conduct in the performance of the services is subject to 
the other's control or right to control'' (emphasis added). Section 
220(2), in turn, identifies as a relevant factor in determining the 
existence of an employment relationship ``the extent of control 
which, by the agreement, the master may exercise over the details of 
the work'' (emphasis added). See, e.g., Community for Creative Non-
Violence v. Reid, 490 U.S. 730, 751 (1989) (``In determining whether 
a hired party is an employee under the general common law of agency, 
we consider the hiring party's right to control the manner and means 
by which the product is accomplished.''); Singer Mfg. Co. v. Rahn, 
132 U.S. 518, 523 (1889) (observing 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 to whether control must be direct and immediate, the 
Restatement observes that the ``control needed to establish the 
relation of master and servant may be very attenuated.'' Restatement 
(Second) of Agency Section 220(l), comment d. The Restatement 
specifically recognizes the common-law ``subservant'' doctrine, 
addressing cases in which one employer's control is or may be 
exercised indirectly, while a second employer directly controls the 
employee. Restatement (Second) of Agency Sections 5, 5(2), comment 
e. See, e.g., Kelley v. Southern Pacific Co., 419 U.S. 3218, 325 
(1974) (recognizing subservant doctrine for purposes of Federal 
Employers' Liability Act); Allbritton Communications Co. v. NLRB, 
766 F.2d 812, 818-819 (3d Cir. 1985) (applying subservant doctrine 
under National Labor Relations Act), cert. denied, 474 U.S. 1081 
(1986).
     As to the issue of control that is limited and routine, the 
Restatement makes clear that if an entity routinely exercises 
control ``over the details of the work,'' it is more likely to be a 
common-law employer. See Restatement (Second) of Agency Section 
220(2)(a). That control might be routine, in the sense of not 
requiring special skill, does not suggest the absence of an 
employment relationship; to the contrary, an unskilled worker is 
more likely to be an employee, rather than an independent 
contractor. See id., Section 220(2)(d) and comment i.
    \27\ See, e.g., NLRB v. United Insurance Co. of America, 390 
U.S. 254, 256-258 (1968) (interpreting Act's exclusion of 
independent contractors from coverage).
    \28\ NLRB v. Town & Country Electric, Inc., 516 U.S. 85, 94 
(1995), citing United Insurance, supra, 390 U.S. at 256.
---------------------------------------------------------------------------

    Hy-Brand I impermissibly departed from the common law of agency as 
the dissent there demonstrated,\29\ and the majority's proposed rule 
does so again. Remarkably, the majority makes no serious effort here to 
refute the detailed analysis of common-law agency doctrine advanced in 
Browning-Ferris and in the Hy-Brand I dissent. The majority fails to 
confront the Restatement (Second) of Agency, for example, or the many 
decisions cited in Browning-Ferris (and then in the Hy-Brand I dissent) 
that reveal that at common law, the existence of an employment 
relationship does not require that the putative employer's control be 
(1) exercised (rather than reserved); (2) direct and immediate (rather 
than indirect, as through an intermediary); and not (3) limited and 
routine (rather than involving routine supervision of at least some 
details of the work). None of these restrictions, much less all three 
imposed together, is consistent with common-law agency doctrine.\30\
---------------------------------------------------------------------------

    \29\ See Hy-Brand I, supra, 365 NLRB No. 156, slip op. at 42-47 
(dissenting opinion).
    \30\ The majority observes that in some cases, courts have 
upheld the Board's application of the ``direct and immediate''-
control restriction. But as the Hy-Brand I dissent explained, no 
federal appellate court has addressed the argument that this 
restriction is inconsistent with common-law agency principles. 365 
NLRB No. 156, slip op. at 46.
     Nor, as the majority suggests, is the restriction supported by 
the Supreme Court's decision in NLRB v. Denver Building & 
Construction Trades Council, 341 NLRB 675 (1951). As the Hy-Brand I 
dissent explained:
    The issue in . . . Denver Building & Construction Trades Council 
. . . was whether (as the Board had found) a labor union violated 
Sec. 8(b)(4)(A) of the Act ``by engaging in a strike, an object of 
which was to force the general contractor on a construction project 
to terminate its contract with a certain subcontractor on the 
project.'' Id. at 677. The relevant statutory language prohibits a 
strike ``where an object thereof is . . . forcing or requiring . . . 
any employer or other person . . . to cease doing business with any 
other person.'' Id. at 677 fn. 1 (citing 29 U.S.C. 158(b)(4)(A), 
current version at 29 U.S.C. 158(b)(4)(i)(B)). The Court agreed with 
the Board's conclusion that the general contractor and the 
subcontractor were ``doing business'' with each other. Id. at 690.
    It was in that context that the Court observed that ``the fact 
that the contractor and the subcontractor were engaged on the same 
construction project, and that the contactor had some supervision 
over the subcontractor's work, did not eliminate the status of each 
as an independent contractor or make the employees of one the 
employees of the other,'' such that the ``doing business'' element 
could not be satisfied. Id. at 689-690. The Court's decision in no 
way implicated the common-law test for an employment relationship or 
the Board's joint-employer standard. As a general matter, to say 
that a general contractor and a subcontractor are independent 
entities (e.g., not a ``single employer'') is not to say that they 
can never be joint employers, if it is proven that the general 
contractor retains or exercises a sufficient degree of control over 
the subcontractor's workers to satisfy the common-law test of an 
employment relationship.
    Hy-Brand I, supra, 365 NLRB No. 156, slip op. at 46 fn. 63 
(dissenting opinion).

---------------------------------------------------------------------------

[[Page 46690]]

    Instead of demonstrating that its proposed rule is consistent with 
the common law (an impossible task), the majority simply asserts that 
it is--and then invites public comment on the ``current state of the 
common law on joint-employment relationships'' and whether the ``common 
law dictate[s] the approach of the proposed rule or of Browning-
Ferris'' or instead ``leave[s] room for either approach.'' The answers 
to these questions have been clear for quite some time: The restrictive 
conditions for finding joint-employer status proposed by the majority 
simply restore the pre-Browning Ferris standard, which the Board had 
never presented as consistent with, much less compelled by, common-law 
agency doctrine.\31\ The majority, in short, seeks help in finding a 
new justification for an old (and unsupportable) standard. But the 
proper course is for the Board to start with first principles, as the 
Browning-Ferris decision did, and then to derive the joint-employer 
standard from them.
---------------------------------------------------------------------------

    \31\ With respect to the issue of reserved control, the majority 
acknowledges that ``[o]ver time, the Board shifted position, without 
expressly overruling precedent, and held that joint-employer status 
could not be established by the mere existence of a clause in a 
business contract reserving to one company authority over its 
business partner's employees absent evidence that such authority had 
ever been exercised.'' The Board, however, is required to adhere to 
its precedent or to explain why it chooses to deviate from it. See, 
e.g., ABM Onsite Services-West, Inc. v. NLRB, 849 F.3d 1137, 1146 
(D.C. Cir. 2017). Here, too, the Board's pre-Browning-Ferris 
approach fell short of the standard for reasoned decision-making.
---------------------------------------------------------------------------

    Just as the majority fails to reconcile the proposed rule with 
common-law agency doctrine--a prerequisite for any viable joint-
employer standard under the National Labor Relations Act--so the 
majority fails to explain how its proposed standard is consistent with 
the actual policies of the Act. There should be no dispute about what 
those policies are. Congress has told us. Section 1 of the Act states 
plainly that:

    It is declared to be the policy of the United States to 
eliminate the causes of certain substantial obstructions to the free 
flow of commerce and to mitigate and eliminate those obstructions 
when they have occurred by encouraging the practice and procedure of 
collective bargaining and by protecting the exercise of workers of 
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 (emphasis added). The Supreme Court has explained that:

    Congress' goal in enacting federal labor legislation was to 
create a framework within which labor and management can establish 
the mutual rights and obligations that govern the employment 
relationship. ``The theory of the act is that free opportunity for 
negotiation with accredited representatives of employees is likely 
to promote industrial peace and may bring about the adjustments and 
agreements which the act in itself does not attempt to compel.''

NLRB v. J. Weingarten, Inc., 420 U.S. 251, 271 (1975) (emphasis added), 
quoting NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 45 (1937).
    The Browning-Ferris standard--current Board law--clearly 
``encourage[s] the practice and procedure of collective bargaining'' 
(in the words of the Act) by eliminating barriers to finding joint-
employer relationships that have no basis in the common-law agency 
doctrine that Congress requires the Board to apply. The predictable 
result is that more employees will be able to engage in ``free 
opportunities for negotiation'' (in the Supreme Court's phrase) with 
the employers who actually control the terms and conditions of their 
employment--as Congress intended--and that orderly collective 
bargaining, not strikes, slowdowns, boycotts, or other ``obstructions 
to the free flow of commerce'' will prevail in joint-employer settings.
    The question for the majority is why it would preliminarily choose 
to abandon Browning-Ferris for a standard that, by its own candid 
admission, is intended to--and will--result in fewer joint employer 
findings and thus in a greater likelihood of economically disruptive 
labor disputes. Where collective bargaining under the law is not an 
option, workers have no choice but to use other means to improve their 
terms and conditions of employment. Economic pressure predictably will 
be directed at the business entities that control a workplace, whether 
or not the Board recognizes them as employers. History shows that when 
employees' right to have effective union representation is obstructed, 
they engage in alternative and more disruptive means of improving their 
terms of employment.\32\ Resort to such economic weapons is hardly a 
relic of the past. Recent examples include nationwide strikes by 
employees unable to gain representation in fast food, transportation, 
retail, and other low-pay industries, often directed at parent 
companies, franchisors, investors, or other entities perceived by the 
workers as having influence over decisions that ultimately impact the 
workers' well-being.\33\ Congress enacted the NLRA in order to minimize 
the disruption of commerce and to provide employees with a structured, 
non-disruptive alternative to such action. In blocking effective 
representation by unreasonably narrowing the definition of joint 
employer, the majority thwarts that goal and invites disruptive 
economic activity.
---------------------------------------------------------------------------

    \32\ Between 1936 and 1939, when the NLRA was in its infancy and 
still meeting massive resistance from employers, American employees 
engaged in 583 sit-down strikes of at least one day's duration. Jim 
Pope, Worker Lawmaking, Sit-Down Strikes, and the Shaping of 
American Industrial Relations, 1935--1938, Law and History Review, 
Vol. 24, No. 1 at 45, 46 (Spring 2006). See also NLRB v. Fansteel 
Metallurgical Corp., 306 U.S. 240 (1939). For many years after plant 
occupations were found illegal by the Supreme Court, employees 
resorted to wildcat, ``quickie,'' ``stop-and-go,'' and partial 
strikes; slowdowns; and mass picketing. Id at 108-111.
    \33\ E.g., Michael M. Oswalt, The Right to Improvise in Low-Wage 
Work, 38 Cardozo L. Rev. 959, 961-986 (2017); Steven Greenhouse and 
Jana Kasperkevic, Fight For $15 Swells Into Largest Protest By Low-
wage Workers in US History, The Guardian/U.S. News (April 15, 2015); 
Dominic Rushe, Fast Food Workers Plan Biggest US Strike to Date Over 
Minimum Wage, The Guardian/U.S. News (September 1, 2014). Strikes, 
walkouts, and other demonstrations of labor unrest have also been 
seen in recent years in the college and university setting among 
graduate teaching assistants and similar workers responding to their 
academic employers' refusal to recognize unions and engage in 
collective bargaining. See, e.g., Danielle Douglas-Gabrielle, 
Columbia Graduate Students Strike Over Refusal to Negotiate a 
Contract, The Washington Post (April 24, 2018); David Epstein, On 
Strike: In a showdown over TA unions at private universities, NYU 
grad students walk off the job, Inside Higher Ed (November 10, 
2005). Here, again, the common thread is workers resort to more 
disruptive channels when they are denied the ability to negotiate 
directly about decisions impacting their employment.
---------------------------------------------------------------------------

    The majority does not explain its choice in any persuasive way. It 
asserts that codifying the Hy-Brand I, pre-Browning-Ferris standard 
``will foster predictability and consistency regarding determinations 
of joint-employer status in a variety of business relationships, 
thereby promoting labor-management stability, one of the principal 
purposes of the Act.'' But, as already suggested, ``predictability and 
consistency'' with respect to the Board's joint-employer standard could 
be achieved just as well by codifying the Browning-Ferris standard--
which, crucially, is both consistent with common-law agency doctrine 
and promotes the policy of the Act (in contrast to the Hy-Brand I 
standard).
    As for ``labor-management stability,'' that notion does not mean 
the perpetuation of a state in which workers in joint-employer 
situations remain

[[Page 46691]]

unrepresented, despite their desire to unionize, because Board doctrine 
prevents it. ``The object of the National Labor Relations Act is 
industrial peace and stability, fostered by collective-bargaining 
agreements providing for the orderly resolution of labor disputes 
between workers and employe[r]s.'' \34\ Congress explained in Section 1 
of the Act that it is the ``denial by some employers of the right of 
employees to organize and the refusal by some employers to accept the 
procedure of collective bargaining'' that ``lead to strikes and other 
forms of industrial strife or unrest.'' \35\ A joint-employer standard 
that predictably and consistently frustrates the desire of workers for 
union representation is a recipe for workplace instability--for just 
the sort of conflict that Congress wanted to eliminate. Whether it 
proceeds by adjudication or by rulemaking, the Board is not free to 
substitute its own idea of proper labor policy for the Congressional 
policy embodied in the statute.
---------------------------------------------------------------------------

    \34\ Auciello Iron Works, Inc. v. NLRB, 517 U.S. 781, 785 (1996) 
(emphasis added).
    \35\ 29 U.S.C. 151.
---------------------------------------------------------------------------

    The majority expresses the ``preliminary belief . . . that absent a 
requirement of proof of some `direct and immediate' control to find a 
joint-employment relationship, it will be extremely difficult for the 
Board to accurately police the line between independent commercial 
contractors and genuine joint employers.'' But any such difficulty is a 
function of applying common-law agency doctrine, which the Board is not 
free to discard, whether in the interests of administrative convenience 
or a so-called predictability that insulates employers from labor-law 
obligations. In holding that Congress had made common-law agency 
doctrine controlling under the Act, the Supreme Court itself has noted 
the ``innumerable situations which arise in the context of the common 
law where it is difficult to say whether a particular individual is an 
employee or an independent contractor.'' \36\ To quote the Hy-Brand I 
majority, ``[t]he Board is not Congress.'' \37\ It is not free to 
decide that the common law is simply too difficult to apply, despite 
the Congressional instruction to do so.
---------------------------------------------------------------------------

    \36\ United Insurance, supra, 390 U.S. at 258. See also 
Restatement (Second) of Agency Section 220, comment c (``The 
relation of master and servant is one not capable of exact 
definition. . . . [I]t is for the triers of fact to determine 
whether or not there is a sufficient group of favorable factors to 
establish the relation.'').
    \37\ Hy-Brand I, supra, 365 NLRB No. 156, slip op. at 33.
---------------------------------------------------------------------------

    Notably, the majority's proposed inclusion of a ``direct and 
immediate'' control requirement in the joint-employer standard would 
hardly result in an easy-to-apply test. The majority takes pains to say 
that while the exercise of ``direct and immediate'' control is 
necessary to establish a joint-employer relationship, it is not 
sufficient.\38\ As for the ``examples'' set forth in the proposed rule, 
they are ``intended to be illustrative and not as setting the outer 
parameters of the joint-employer doctrine established in the proposed 
rule.'' \39\ Even with respect to those examples that illustrate the 
exercise of ``direct and immediate'' control, the proposed rule does 
not actually state that a joint-employer relationship is demonstrated. 
Here, too, the majority's ostensible goal of predictability is elusive. 
The proposed rule, if ultimately adopted by the Board, will reveal its 
true parameters only over time, as it is applied case-by-case through 
adjudication. What purpose, then, does codifying the Hy-Brand I 
standard via rulemaking actually serve?
---------------------------------------------------------------------------

    \38\ ``Direct and immediate'' control ``will be insufficient,'' 
the majority observes, ``where the degree of a putative employer's 
control is too limited in scope (perhaps affecting a single 
essential working condition and/or exercised rarely during the 
putative joint employer's relationship with the undisputed 
employer).'' In comparison, Browning-Ferris explained that a joint 
employer ``will be required to bargain only with respect to those 
terms and conditions over which it possesses sufficient control for 
bargaining to be meaningful.'' 362 NLRB No. 186, slip op. at 2 fn. 
7. The decision acknowledged that a ``putative joint employer's 
control might extend only to terms and conditions of employment too 
limited in scope or significance to permit meaningful collective 
bargaining.'' Id. at 16. The difference between the proposed rule 
and Browning-Ferris is that the former treats joint employment as an 
all-or-nothing proposition, while the latter permits joint-employer 
determinations that are tailored to particular working arrangements, 
allowing collective bargaining to the extent that it can be 
effective.
    \39\ Of course, illustrating a legal standard is not the same as 
explaining it: In this case, demonstrating that the proposed joint-
employer standard, as illustrated by a particular example, is 
consistent with common-law agency doctrine and promotes statutory 
policies.
---------------------------------------------------------------------------

    The majority's examples, rather than helping ``clarify'' what 
constitutes ``direct and immediate control,'' confirm that joint 
employment cannot be determined by any simplistic formulation, let 
alone the majority's artificially restrictive one. This is because 
additional circumstances in each of the provided examples could change 
the result. In example 1(a), the majority declares that under its 
proposed rule a ``cost-plus'' service contract between two businesses 
that merely establishes a maximum reimbursable labor expense does not, 
by itself, justify finding that the user business exercises direct 
control. But if, under that contract, the user also imposes hiring 
standards; prohibits individual pay to exceed that of the user's own 
employees; determines the provider's working hours and overtime; daily 
adjusts the numbers of employees to be assigned to respective 
production areas; determines the speed of the worksite's assembly or 
production lines; conveys productivity instructions to employees 
through the provider's supervisors; or restricts the period that 
provided employees are permitted to work for the user--all as in 
Browning-Ferris--does the result change? Would some but not all of 
these additional features change the result? If not, under common-law 
principles, why not?
    In example 2(a), the majority declares that under its proposed 
rule, a user business does not exercise direct control over the 
provider's employees simply by complaining that the product coming off 
its assembly line worked by those employees is defective. Does the 
result change if the user also indicates that it believes certain 
individual employees are partly responsible for the defects? Or if it 
also demands those employees' reassignment, discipline, or removal? Or 
if it demands that provided employees be allocated differently to 
different sections of the line?
    And in example 6(a), the majority declares that where a service 
contract reserves the user's right to discipline provided employees, 
but the user has never exercised that authority, the user has not 
exercised direct control. Again, does the result change if the user 
indicates to the supplier which employees deserve discipline, and/or 
how employees should be disciplined? And, assuming that the actual 
exercise of control is necessary, when is it sufficient to establish a 
joint-employer relationship? How many times must control be exercised, 
and with respect to how many employees and which terms and conditions 
of employment?
    The majority's simplified examples, meanwhile, neither address 
issues of current concern implicating joint employment--such as, for 
example--the recent revelation that national fast-food chains have 
imposed ``no poaching'' restrictions on their franchisees that limit 
the earnings and mobility of franchise employees \40\--nor accurately

[[Page 46692]]

reflect the complicated circumstances that the Board typically 
confronts in joint-employer cases, where the issue of control is raised 
with respect to a range of employment terms and conditions and a 
variety of forms of control.\41\
---------------------------------------------------------------------------

    \40\ ``AG Ferguson Announces Fast-Food Chains Will End 
Restrictions on Low-Wage Workers Nationwide,'' Press Release, Office 
of the Attorney General, Washington State (July 12, 2018) 
(explaining that ``seven large corporate fast-foods chains will 
immediately end a nationwide practice that restricts worker mobility 
and decreases competition for labor by preventing workers from 
moving among the chains' franchise locations''), available at 
www.atg.wa.gov/news/news-releases; ``AG Ferguson: Eight More 
Restaurant Chains Will End No-Poach Practices Nationwide,'' Press 
Release, Office of the Attorney General, Washington State (Aug. 20, 
2018), available at www.atg.wa.gov/news/news-releases. See also 
generally Rachel Abrams, ``Why Aren't Paychecks Growing? A Burger-
Joint Clause Offers a Clue,'' The New York Times (Sept. 27, 2017); 
Alan B. Krueger & Orley C. Ashenfelter, ``Theory and Evidence on 
Employer Collusion in the Franchise Sector,'' Princeton University 
Working Paper No. 614 (Sept. 28, 2017), available at https://arks.princeton.edu/ark:/88435/dsp014f16c547g.
    \41\ In Browning-Ferris, for example, the Board found that BFI 
Newby Island Recyclery (BFI) was a joint employer with Leadpoint 
Business Services (Leadpoint) of sorters, screen cleaners, and 
housekeepers at a recycling facility. That finding was based on a 
range of evidence reflecting both direct and indirect control, both 
reserved and exercised, over various terms and conditions of 
employment.
    First, the Board found that under its agreement with Leadpoint, 
BFI ``possesse[d] significant control over who Leadpoint can hire to 
work at its facility,'' with respect to both hiring and discipline, 
and at least occasionally exercised that authority in connection 
with discipline. 362 NLRB No. 16, slip op. at 18.
    Second, BFI ``exercised control over the processes that shape 
the day-to-day work'' of the employees, particularly with respect to 
the ``speed of the [recycling] streams and specific productivity 
standards for sorting,'' but also by assigning specific tasks that 
need to be completed, specifying where Leadpoint workers were to be 
positioned, and exercising oversight of employees' work 
performance.'' Id. at 18-19. (footnote omitted).
    Third, BFI ``played a significant role in determining employees' 
wages'' by (1) ``prevent[ing] Leadpoint from paying employees more 
than BFI employees performing comparable work; and (2) entering into 
a cost-plus contract with Leadpoint coupled with an ``apparent 
requirement of BFI approval over employee pay raises.'' Id. at 19.
     Example 1(a) of the proposed rule suggests that the majority 
would give no weight to BFI's cost-plus contract, but it is not 
clear how the majority would analyze BFI's veto power over pay 
raises. Example 1(b) suggests that this power might be material. 
Example 2(b), meanwhile, suggests that BFI's control over day-to-day 
work processes supports a joint-employer finding. Finally, Example 
6(b), apparently would support finding that BFI exercised direct and 
immediate disciplinary control over Leadpoint employees. Ironically, 
then, it is far from clear that adoption of the majority's proposed 
rule would lead to a different result in Browning-Ferris.
---------------------------------------------------------------------------

    The majority's examples and their possible variations therefore 
illustrate why the issue of joint employment is particularly suited to 
individual adjudication under common-law principles. As the majority 
acknowledges, ``[t]here are myriad relationships between employers and 
their business partners, and the degree to which particular business 
relationships impact employees' essential terms and conditions of 
employment varies widely.'' This being true, the majority's simplistic 
examples are of limited utility in providing guidance, and merely serve 
to illustrate the impossibility of predetermining with ``clarity'' all 
of the situations in which a joint employment relationship does or does 
not exist. This is why the Board's best course of action may well be to 
continue to define the contours of the correct standard, re-established 
in Browning-Ferris, through the usual process of adjudication. This 
process will provide a more nuanced understanding of the contours of 
potential joint employment relationships that is difficult to achieve 
in the abstract via rulemaking.

C. The Majority's Proposed Rulemaking Process Is Flawed

    For all of these reasons, I dissent from the majority's decision to 
issue the notice of proposed rulemaking (NPRM). To be sure, if the 
majority is determined to revisit Browning-Ferris, then permitting 
public participation in the process is preferable to the approach taken 
in the now-vacated Hy-Brand I, where the majority overruled Browning-
Ferris sua sponte and without providing the parties or the public with 
notice and an opportunity to file briefs on that question. Having 
chosen to proceed, however, the majority should at the very least 
encourage greater public participation in the rulemaking process, by 
holding one or more public hearings.
    There is no indication that the Board intends to hold a public 
hearing on the proposed rule, in addition to soliciting written 
comments. In the past, the Board has held such hearings to enhance 
public participation in the rulemaking process,\42\ and there is no 
good reason why it should not do so again. Despite the Chairman's 
publicly professed desire to hear from ``thousands of commentators . . 
. including individuals and small businesses that may not be able to 
afford to hire a law firm to write a brief for them, yet have valuable 
insight to share from hard-won experience,'' \43\ the process outlined 
by the majority--with limited time for public comment and no public 
hearings--seems ill-designed to provide the broad range of public input 
the majority purportedly seeks.
---------------------------------------------------------------------------

    \42\ See Representation-Case Procedures, 79 FR 74308 (2014) (the 
Board held four days of oral hearings with live questioning by Board 
members that resulted in over 1,000 pages of testimony); Union Dues 
Regulations, 57 FR 43635 (1992) (the Board held one hearing); 
Collective-Bargaining Units in the Health Care Industry, 53 FR 33900 
(1988), (the Board held four hearings--two in Washington, DC, one in 
Chicago, IL, and one in San Francisco, CA--that over the course of 
14 days resulted in the appearance of 144 witnesses and 3,545 pages 
of testimony).
    \43\ See June 5, 2018 Letter from Chairman Ring to Senators 
Warren, Gillibrand, and Sanders, available at https://www.nlrb.gov/news-outreach/news-story/nlrb-chairman-provides-response-senators-regarding-joint-employer-inquiry.
---------------------------------------------------------------------------

    Regardless of my views on the desirability of rulemaking on the 
joint-employer standard in the wake of Hy-Brand I, I will give careful 
consideration to the public comments that the Board receives and to the 
views of my colleagues. It is worth recalling that the Hy-Brand I 
majority, in overruling Browning-Ferris, asserted that the decision 
``destabilized bargaining relationships and created unresolvable legal 
uncertainty,'' ``dramatically changed labor law sales and successorship 
principles and discouraged efforts to rescue failing companies and 
preserve employment,'' ``threatened existing franchising 
arrangements,'' and ``undermined parent-subsidiary relationships.'' 
\44\ The Hy-Brand I majority cited no actual examples from the Board's 
case law applying BFI, or empirical evidence of any sort, to support 
its hyperbolic claims, instead recycling Member Miscimarra's dissent in 
Browning-Ferris practically verbatim.\45\ Browning-Ferris was issued 
more than 3 years ago, on August 27, 2015. Today's notice specifically 
solicits empirical evidence from the public: information about real-
world experiences, not desk-chair hypothesizing. And so the question 
now is whether the record in this rulemaking ultimately will support 
the assertions made about Browning-Ferris and its supposed 
consequences--or, instead, will reveal them to be empty rhetoric.
---------------------------------------------------------------------------

    \44\ Hy-Brand I, supra, 365 NLRB No.156, slip op. at 20, 26, 27, 
and 29.
    \45\ The relationship between Member Miscimarra's dissent in 
Browning-Ferris and the majority opinion in Hy-Brand is examined in 
a February 9, 2018 report issued by the Board's Inspector General, 
which is posted on the Board's website (``OIG Report Regarding Hy-
Brand Deliberations'' available at www.nlrb.gov).
---------------------------------------------------------------------------

V. Regulatory Procedures

The Regulatory Flexibility Act

A. Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980 (``RFA''), 5 U.S.C. 601, et 
seq. ensures that agencies ``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].'' \46\ 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

[[Page 46693]]

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.\47\ The RFA does not define 
either ``significant economic impact'' or ``substantial number of small 
entities.'' \48\ 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.'' \49\
---------------------------------------------------------------------------

    \46\ E.O. 13272, Sec. 1, 67 FR 53461 (``Proper Consideration of 
Small Entities in Agency Rulemaking'').
    \47\ 5 U.S.C. 605(b).
    \48\ 5 U.S.C. 601.
    \49\ Small Business Administration Office of Advocacy, ``A Guide 
for Government Agencies: How to Comply with the Regulatory 
Flexibility Act'' (``SBA Guide'') at 18, https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf.
---------------------------------------------------------------------------

    The Board has elected to prepare 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. Descriptions of this proposed rule, its purpose, 
objectives, and the legal basis are contained earlier in the Summary 
and Supplemental Information sections and are not repeated here.
    The Board believes that this rule will likely not have a 
significant economic impact on a substantial number of small entities. 
While we assume for purposes of this analysis that a substantial number 
of small employers and small entity labor unions will be impacted by 
this rule, we anticipate low costs of compliance with the rule, related 
to reviewing and understanding the substantive changes to the joint-
employer standard. There may be compliance costs that are unknown to 
the Board; perhaps, for example, employers may incur potential 
increases in liability insurance costs. The Board welcomes comments 
from the public that will shed light on potential compliance costs or 
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 approximately 5.9 million 
business firms with employees in 2015.\50\ Of those, the Census Bureau 
estimates that about 5,881,267 million were firms with fewer than 500 
employees.\51\ 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.\52\ Accordingly, the Board assumes for purposes of this 
analysis that the great majority of the 5,881,267 million small 
business firms could be impacted by the proposed rule.
---------------------------------------------------------------------------

    \50\ ``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 https://www.census.gov/programs-surveys/susb/about/glossary.html.
    \51\ 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, 2015 Statistics of U.S. 
Businesses (``SUSB'') Annual Data Tables by Establishment Industry, 
https://www.census.gov/data/tables/2015/econ/susb/2015-susb-annual.html (from downloaded Excel Table entitled ``U.S., 6-digit 
NAICS''). 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.
    \52\ 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).
     Employers subject to the Railway Labor Act, such as 
interstate railroads and airlines. 29 U.S.C. 152(2).
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    The proposed rule will only be applied as a matter of law when 
small businesses are alleged to be joint employers in a Board 
proceeding. Therefore, the frequency that the issue comes before the 
Board is indicative of the number of small entities most directly 
impacted by the proposed rule. 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 
Agency. During the five-year period between January 1, 2013 and 
December 31, 2017, a total of 114,577 representation and unfair labor 
practice cases were initiated with the Agency. In 1,598 of those 
filings, the representation petition or ULP charge filed with the 
Agency asserted a joint-employer relationship between at least two 
employers.\53\ Accounting for repetitively alleged joint-employer 
relationships in these filings, we identified 823 separate joint-
employer relationships involving an estimated 1,646 employers.\54\ 
Accordingly, the joint-employer standard most directly impacted 
approximately .028% of all 5.9 million business firms (including both 
large and small businesses) over the five-year period. Since a large 
share of our joint-employer cases involves large employers, we expect 
an even lower percentage of small businesses to be most directly 
impacted by the Board's application of the rule.
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    \53\ This includes initial representation case petitions (RC 
petitions) and unfair labor practice charges (CA cases) filed 
against employers.
    \54\ 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 joint-employer 
status is not in dispute.
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    Irrespective of an Agency proceeding, we believe the proposed rule 
may be more relevant to certain types of small employers because their 
business relationships involve the exchange of employees or operational 
control.\55\ In addition, labor unions, as organizations representing 
or seeking to represent employees, will be impacted by the

[[Page 46694]]

Board's change in its joint-employer standard. Thus, the Board has 
identified the following five types of small businesses or entities as 
those most likely to be impacted by the rule: Contractors/
subcontractors, temporary help service suppliers, temporary help 
service users, franchisees, and labor unions.
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    \55\ The Board acknowledges that there are other types of 
entities and/or relationships between entities that may be affected 
by a change in the joint-employer rule. Such relationships include 
but are not limited to: Lessor/lessee, and parent/subsidiary. 
However, the Board does not believe that entities involved in these 
relationships would be impacted more than the entities discussed 
below.
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    (1) Businesses commonly enter into contracts with vendors to 
receive a wide range of services that may satisfy their primary 
business objectives or solve discrete problems that they are not 
qualified to address. And there are seemingly unlimited types of 
vendors who provide these types of contract services. Businesses may 
also subcontract work to vendors to satisfy their own contractual 
obligations--an arrangement common to the construction industry. 
Businesses that contract to receive or provide services often share 
workspaces and sometimes share control over workers, rendering their 
relationships 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.\56\
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    \56\ The only data known to the Board relating to contractor 
business relationships involve businesses that contract with the 
Federal Government. In 2014, the Department of Labor reported that 
approximately 500,000 federal contractor firms were registered with 
the General Services Administration. Establishing a Minimum Wage for 
Contractors, 79 FR 60634, 60697. However, the Board is without the 
means to identify the precise number of firms that actually receive 
federal contracts or to determine what portion of those are small 
businesses as defined by the SBA. Even if these data were available, 
given that the Board does not have jurisdiction over government 
entities, business relationships between federal contractors and the 
federal agencies will not be impacted by the Board's joint-employer 
rule. The business relationships between federal contractors and 
their subcontractors could be subject to the Board's joint-employer 
rule. However, we also lack the means for estimating the number of 
businesses that subcontract with federal contractors or determine 
what portion of those would be defined as small businesses. Input 
from the public in this regard is welcome.
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    (2) Temporary help service suppliers (North American Industry 
Clarification System (``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 $27.5 million 
annually.\57\ In 2012, there were 13,202 temporary service supplier 
firms in the U.S.\58\ Of these business firms, 6,372 had receipts of 
less than $1,000,000; 3,947 had receipts between $1,000,000 and 
$4,999,999; 1,639 had receipts between $5,000,000 and $14,999,999; and 
444 had receipts between $15,000,000 and $24,999,999. In aggregate, at 
least 12,402 temporary help service supplier firms (93.9% of total) are 
definitely small businesses according to SBA standards. Since the Board 
cannot determine how many of the 130 business firms with receipts 
between $25,000,000-$29,999,999 fall below the $27.5 million annual 
receipt threshold, it will assume that these are small businesses as 
defined by the SBA. For purposes of this IRFA, the Board assumes that 
12,532 temporary help service suppliers firms (94.9% of total) are 
small businesses.
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    \57\ 13 CFR 121.201.
    \58\ The Census Bureau only provides data about receipts in 
years ending in 2 or 7. The 2017 data has not been published, so the 
2012 data is the most recent available information regarding 
receipts. See U.S. Department of Commerce, Bureau of Census, 2012 
SUSB Annual Data Tables by Establishment Industry, NAICS 
classification #561320, https://www2.census.gov/programs-surveys/susb/tables/2012/us_6digitnaics_r_2012.xlsx.
---------------------------------------------------------------------------

    (3) Entities that use temporary help services in order to staff 
their businesses are widespread throughout many types of industries, 
and include both large and small employers. A 2012 survey of business 
owners by the Census Bureau revealed that at least 266,006 firms 
obtained staffing from temporary help services in that calendar 
year.\59\ 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 
users of temporary services are small businesses.
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    \59\ See U.S. Department of Commerce, Bureau of Census, 2012 
Survey of Business Owners, https://factfinder.census.gov/bkmk/table/1.0/en/SBO/2012/00CSCB46.
---------------------------------------------------------------------------

    (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.\60\ Franchisors generally exercise some operational control 
over their franchisees, which 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. A 2012 survey of business owners by the Census Bureau revealed 
that at least 507,834 firms operated a portion of their business as a 
franchise. But, only 197,204 of these firms had paid employees.\61\ In 
our view, only franchisees with paid employees are potentially impacted 
by the joint-employer standard. Of the franchisees with employees, 
126,858 (64.3%)) had sales receipts totaling less than $1 million. 
Based on this available data and the SBA's definitions of small 
businesses, which generally define small businesses as having receipts 
well over $1 million, we assume that almost two-thirds of franchisees 
would be defined as small businesses.\62\
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    \60\ See International Franchising Establishments FAQs, found at 
https://www.franchise.org/faqs-about-franchising.
    \61\ See U.S. Department of Commerce, Bureau of Census, 2012 
Survey of Business Owners, https://factfinder.census.gov/bkmk/table/1.0/en/SBO/2012/00CSCB67.
    \62\ See 13 CFR 121.201.
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    (5) Labor unions, as defined by the NLRA, are entities ``in which 
employees participate and which exist for the purpose . . . of dealing 
with employers concerning grievances, labor disputes, wages, rates of 
pay, hours of employment, or conditions of work.'' \63\ By defining 
which employers are joint employers under the NLRA, the proposed rule 
impacts labor unions generally, and more directly impacts 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 $7.5 million in annual receipts.\64\ 
In 2012, there were 13,740 labor union firms in the U.S.\65\ Of these 
firms, 11,245 had receipts of less than $1,000,000; 2,022 labor unions 
had receipts between $1,000,000 and $4,999,999, and 141 had receipts 
between $5,000,000 and $7,499,999. In aggregate, 13,408 labor union 
firms (97.6% of total) are small businesses according to SBA standards.
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    \63\ 29 U.S.C. 152(5).
    \64\ 13 CFR 121.201.
    \65\ See U.S. Department of Commerce, Bureau of Census, 2012 
SUSB Annual Data Tables by Establishment Industry, NAICS 
classification #722513, https://www2.census.gov/programs-surveys/susb/tables/2012/us_6digitnaics_r_2012.xlsx.
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    Based on the foregoing, the Board assumes there are 12,532 
temporary help supplier firms, 197,204 franchise firms, and 13,408 
union firms that are small businesses; and further that all 266,006 
temporary help user firms are small businesses. Therefore, among these 
four categories of employers that are most interested in the proposed 
rule, 489,150 business firms are assumed to be small businesses as 
defined by the

[[Page 46695]]

SBA. We believe that all of these small businesses, and also those 
businesses regularly engaged in contracting/subcontracting, have a 
general interest in the rule and would be impacted by the compliance 
costs discussed below, related to reviewing and understanding the rule. 
But, as previously noted, employers will only be directly 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 employers in these five categories.

C. Recordkeeping, Reporting, and Other Compliance Costs

    The RFA requires an agency to consider the direct burden that 
compliance with a new regulation will likely impose on small 
entities.\66\ Thus, the RFA requires the Agency to determine the amount 
of ``reporting, recordkeeping and other compliance requirements'' 
imposed on small entities.\67\
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    \66\ 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.'').
    \67\ See 5 U.S.C. 603(b)(4), 604(a)(4).
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    We conclude that the proposed rule imposes no capital costs for 
equipment needed to meet the regulatory requirements; no costs of 
modifying existing processes and procedures to comply with the proposed 
rule; no lost sales and profits resulting from the proposed rule; no 
changes in market competition as a result of the proposed rule and its 
impact on small entities or specific submarkets of small entities; and 
no costs of hiring employees dedicated to compliance with regulatory 
requirements.\68\ The proposed rule also does not impose any new 
information collection or reporting requirements on small entities.
---------------------------------------------------------------------------

    \68\ See SBA Guide at 37.
---------------------------------------------------------------------------

    Small entities may incur some costs from reviewing the rule in 
order to understand the substantive changes to the joint-employer 
standard. We estimate that a labor compliance employee at a small 
employer who undertook to become generally familiar with the proposed 
changes may take at most one hour to read the summary of the rule in 
the introductory section of the preamble. It is also possible that a 
small employer may wish to consult with an attorney which we estimated 
to require one hour as well.\69\ Using the Bureau of Labor Statistics' 
estimated wage and benefit costs, we have assessed these labor costs to 
be $124.37.\70\
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    \69\ We do not believe that more than one hour of time by each 
would be necessary to read and understand the rule. This is because 
the new standard constitutes a return to the pre-Browning-Ferris 
standard with which most employers are already knowledgeable if 
relevant to their businesses, and with which we believe labor-
management attorneys are also familiar.
    \70\ For wage figures, see May 2017 National Occupancy 
Employment and Wage Estimates, found at https://www.bls.gov/oes/current/oes_nat.htm. 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 2017, 
average hourly wages for labor relations specialists (BLS #13-1075) 
were $31.51. The same figure for a lawyer (BLS #23-1011) is $57.33. 
Accordingly, the Board multiplied each of those wage figures by 1.4 
and added them to arrive at its estimate.
---------------------------------------------------------------------------

    As for other potential impacts, it is possible that liability and 
liability insurance costs may increase for small entities because they 
may no longer have larger entities with which to share the cost of any 
NLRA backpay remedies ordered in unfair labor practice proceedings. 
Such a cost may arguably fall within the SBA Guide's category of 
``extra costs associated with the payment of taxes or fees associated 
with the proposed rule.'' Conversely, fewer employers may be alleged as 
joint employers, resulting in lower costs to some small entities. The 
Board is without the means to quantify such costs and welcomes any 
comment or data on this topic.\71\ Nevertheless, we believe such costs 
are limited to very few employers, considering the limited number of 
Board proceedings where joint-employer status is alleged, as compared 
with the number of employers subject to the Board's jurisdiction. 
Moreover, the proposed rule may make it easier for employers to 
collectively bargain without the complications of tri-partite 
bargaining, and further provide greater certainty as to their 
bargaining responsibilities. We consider such positive impacts as 
either indirect, or impractical to quantify, or both.
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    \71\ The RFA explains that in providing initial and final 
regulatory flexibility analyses, ``an agency may provide either a 
quantifiable or numerical description of the effects of a proposed 
rule or alternatives to the proposed rule, or more general 
descriptive statements if quantification is not practicable or 
reliable.'' 5 U.S.C. 607 (emphasis added).
---------------------------------------------------------------------------

    As to the impact on unions, we anticipate they may also incur costs 
from reviewing the rule. We believe a union would consult with an 
attorney, which we estimate to require no more than one hour of time 
($80.26, see n.45) because union counsel should already be familiar 
with the pre-Browning-Ferris standard. Additionally, the Board expects 
that the additional clarity of the proposed rule will serve to reduce 
litigation expenses for unions and other small entities. Again, the 
Board welcomes any data on any of these topics.
    The Board does not find the estimated $124.37 cost to small 
employers and the estimated $80.26 cost to unions in order to review 
and understand the rule 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.\72\ Other criteria to be considered are the 
following:

    \72\ See SBA Guide at 18.
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--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.\73\
---------------------------------------------------------------------------

    \73\ 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 
$124.37 or $80.26 that may be incurred in reviewing and understanding 
the rule, we do not believe there will be a significant economic impact 
on a substantial number of small entities associated with this proposed 
rule.

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 Board considered two primary alternatives to the proposed rules.
    First, the Board considered taking no action. Inaction would leave 
in place the Browning-Ferris joint-employer standard to be applied in 
Board decisions. However, for the reasons

[[Page 46696]]

stated in Sections II and III above, the Board finds it desirable to 
revisit the Browning-Ferris standard and to do so through the 
rulemaking process. Consequently, we reject maintaining the status quo.
    Second, the Board considered creating exemptions for certain small 
entities. This was rejected as impractical, considering that an 
exemption for small entities would substantially undermine the purpose 
of the proposed rule because such a large percentage of employers and 
unions would be exempt under the SBA definitions. Moreover, 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.\74\ 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.'' \75\ As such, this alternative is contrary to the objectives 
of this rulemaking and of the NLRA.
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    \74\ 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 CFR 104.204.
    \75\ NLRB v. Nat. Gas Util. Dist. of Hawkins Cty., Tenn., 402 
U.S. 600, 603-04 (1971) (quotation omitted).
---------------------------------------------------------------------------

    Neither of the alternatives considered accomplished the objectives 
of proposing this rule while minimizing costs on small businesses. 
Accordingly, the Board believes that proceeding with this rulemaking is 
the best regulatory course of action. The Board welcomes public comment 
on any facet of this IRFA, including issues that we have failed to 
consider.

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. The PRA defines ``collection of information'' as ``the obtaining, 
causing to be obtained, soliciting, or requiring the 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; it instead clarifies the standard for 
determining joint-employer status. 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 Board 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 
NLRA as well as an investigation into an unfair labor practice under 
section 10 of the NLRA are administrative actions covered by this 
exemption. 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.\76\
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    \76\ 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).
---------------------------------------------------------------------------

    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.

Congressional Review Act

    The provisions of this rule are substantive. Therefore, the Board 
will submit this rule and required accompanying information to the 
Senate, the House of Representatives, and the Comptroller General as 
required by the Small Business Regulatory Enforcement Fairness Act 
(Congressional Review Act or CRA), 5 U.S.C. 801-808.
    This rule is a ``major rule'' as defined by Section 804(2) of the 
CRA because it will have an effect on the economy of more than $100 
million, at least during the year it takes effect. 5 U.S.C. 
804(2)(A).\77\ Accordingly, the rule will become effective no earlier 
than 60 days after publication of the final rule in the Federal 
Register.
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    \77\ A rule is a ``major rule'' for CRA purposes if it will (A) 
have an annual effect on the economy of $100 million or more; (B) 
cause a major increase in costs or prices for consumers, individual 
industries, government agencies, or geographic regions; or (C) 
result in significant adverse effects on competition, employment, 
investment, productivity, innovation, or the ability of United 
States-based enterprises to compete with foreign-based enterprises 
in domestic and export markets. 5 U.S.C. 804. The proposed rule is a 
``major rule'' because, as explained in the discussion of the 
Regulatory Flexibility Act above, the Board has estimated that the 
average cost of compliance with the rule would be approximately 
$124.37 per affected employer and approximately $80.26 per union. 
Because there are some 5.9 million employers and 13,740 unions that 
could potentially be affected by the rule, the total cost to the 
economy of compliance with the rule will exceed $100 million 
($733,783,000 + $1,102,772.4 = $734,885,772.4) in the first year 
after it is adopted. Since the costs of compliance are incurred in 
becoming familiar with the legal standard adopted in the proposed 
rule, the rule would impose no additional costs in subsequent years. 
Additionally, the Board is confident that the rule will have none of 
the effects enumerated in 5 U.S.C. 804(2)(B) and (C), above.
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List of Subjects in 29 CFR Part 103

    Colleges and universities, Health facilities, Joint-employer 
standard, Labor management relations, Military personnel, Music, 
Sports.

Text of 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.

0
2. Add Sec.  103.40 to read as follows:


Sec.  103.40:  Joint employers.

    An employer, as defined by Section 2(2) of the National Labor 
Relations Act (the Act), 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, such as hiring, firing, discipline, supervision, and 
direction. A putative joint employer must possess and actually exercise 
substantial direct and immediate control over the

[[Page 46697]]

employees' essential terms and conditions of employment in a manner 
that is not limited and routine.

    Example 1 to Sec.  103.40. Company A supplies labor to Company 
B. The business contract between Company A and Company B is a ``cost 
plus'' arrangement that establishes a maximum reimbursable labor 
expense while leaving Company A free to set the wages and benefits 
of its employees as it sees fit. Company B does not possess and has 
not exercised direct and immediate control over the employees' wage 
rates and benefits.
    Example 2 to Sec.  103.40. Company A supplies labor to Company 
B. The business contract between Company A and Company B establishes 
the wage rate that Company A must pay to its employees, leaving A 
without discretion to depart from the contractual rate. Company B 
has possessed and exercised direct and immediate control over the 
employees' wage rates.
    Example 3 to Sec.  103.40. Company A supplies line workers and 
first-line supervisors to Company B at B's manufacturing plant. On-
site managers employed by Company B regularly complain to A's 
supervisors about defective products coming off the assembly line. 
In response to those complaints and to remedy the deficiencies, 
Company A's supervisors decide to reassign employees and switch the 
order in which several tasks are performed. Company B has not 
exercised direct and immediate control over Company A's lineworkers' 
essential terms and conditions of employment.
    Example 4 to Sec.  103.40. Company A supplies line workers and 
first-line supervisors to Company B at B's manufacturing plant. 
Company B also employs supervisors on site who regularly require the 
Company A supervisors to relay detailed supervisory instructions 
regarding how employees are to perform their work. As required, 
Company A supervisors relay those instructions to the line workers. 
Company B possesses and exercises direct and immediate control over 
Company A's line workers. The fact that Company B conveys its 
supervisory commands through Company A's supervisors rather than 
directly to Company A's line workers fails to negate the direct and 
immediate supervisory control.
    Example 5 to Sec.  103.40. Under the terms of a franchise 
agreement, Franchisor requires Franchisee to operate Franchisee's 
store between the hours of 6:00 a.m. and 11:00 p.m. Franchisor does 
not participate in individual scheduling assignments or preclude 
Franchisee from selecting shift durations. Franchisor has not 
exercised direct and immediate control over essential terms and 
conditions of employment of Franchisee's employees.
    Example 6 to Sec.  103.40. Under the terms of a franchise 
agreement, Franchisor and Franchisee agree to the particular health 
insurance plan and 401(k) plan that the Franchisee must make 
available to its workers. Franchisor has exercised direct and 
immediate control over essential employment terms and conditions of 
Franchisee's employees.
    Example 7 to Sec.  103.40. Temporary Staffing Agency supplies 8 
nurses to Hospital to cover during temporary shortfall in staffing. 
Over time, Hospital hires other nurses as its own permanent 
employees. Each time Hospital hires its own permanent employee, it 
correspondingly requests fewer Agency-supplied temporary nurses. 
Hospital has not exercised direct and immediate control over 
temporary nurses' essential terms and conditions of employment.
    Example 8 to Sec.  103.40. Temporary Staffing Agency supplies 8 
nurses to Hospital to cover for temporary shortfall in staffing. 
Hospital manager reviewed resumes submitted by 12 candidates 
identified by Agency, participated in interviews of those 
candidates, and together with Agency manager selected for hire the 
best 8 candidates based on their experience and skills. Hospital has 
exercised direct and immediate control over temporary nurses' 
essential terms and conditions of employment.
    Example 9 to Sec.  103.40. Manufacturing Company contracts with 
Independent Trucking Company (``ITC'') to haul products from its 
assembly plants to distribution facilities. Manufacturing Company is 
the only customer of ITC. Unionized drivers--who are employees of 
ITC--seek increased wages during collective bargaining with ITC. In 
response, ITC asserts that it is unable to increase drivers' wages 
based on its current contract with Manufacturing Company. 
Manufacturing Company refuses ITC's request to increase its contract 
payments. Manufacturing Company has not exercised direct and 
immediate control over the drivers' terms and conditions of 
employment.
    Example 10 to Sec.  103.40. Business contract between Company 
and a Contractor reserves a right to Company to discipline the 
Contractor's employees for misconduct or poor performance. Company 
has never actually exercised its authority under this provision. 
Company has not exercised direct and immediate control over the 
Contractor's employees' terms and conditions of employment.
    Example 11 to Sec.  103.40.  Business contract between Company 
and Contractor reserves a right to Company to discipline the 
Contractor's employees for misconduct or poor performance. The 
business contract also permits either party to terminate the 
business contract at any time without cause. Company has never 
directly disciplined Contractor's employees. However, Company has 
with some frequency informed Contractor that particular employees 
have engaged in misconduct or performed poorly while suggesting that 
a prudent employer would certainly discipline those employees and 
remarking upon its rights under the business contract. The record 
indicates that, but for Company's input, Contractor would not have 
imposed discipline or would have imposed lesser discipline. Company 
has exercised direct and immediate control over Contractor's 
employees' essential terms and conditions.
    Example 12 to Sec.  103.40. Business contract between Company 
and Contractor reserves a right to Company to discipline 
Contractor's employees for misconduct or poor performance. User has 
not exercised this authority with the following exception. 
Contractor's employee engages in serious misconduct on Company's 
property, committing severe sexual harassment of a coworker. Company 
informs Contractor that offending employee will no longer be 
permitted on its premises. Company has not exercised direct and 
immediate control over offending employee's terms and conditions of 
employment in a manner that is not limited and routine.

    Dated: September 10, 2018.
Roxanne Rothschild,
Deputy Executive Secretary.
[FR Doc. 2018-19930 Filed 9-13-18; 8:45 am]
BILLING CODE 7545-01-P