In a unionized workforce, employers generally cannot make unilateral changes to 鈥渕andatory subjects of bargaining鈥� relating to the terms and conditions of employment without first providing the union with notice and an opportunity to bargain. Unless the union waives its right to bargain, a failure to provide notice and an opportunity to bargain over changes to mandatory subjects may constitute an unfair labor practice in violation of the National Labor Relations Act (NLRA).

, the National Labor Relations Board (NLRB or the 鈥淏oard鈥�) raised the bar on an employer鈥檚 ability to make unilateral changes. The dispute before the Board involved a company鈥檚 decision to install cameras inside trucks for the purpose of monitoring employees. The Board considered whether the company violated the NLRA by failing to provide the union with notice and an opportunity to bargain over the decision to install the cameras. The case is Endurance Environmental Solutions, LLC, NLRB Case No. Case 09鈥揅A鈥�273873 (December 10, 2024).

In finding that the company violated the NLRA by unilaterally installing cameras, the Board鈥檚 Democratic majority overruled a prior Trump-era decision in MV Transportation, Inc., 368 NLRB No. 66 (2019). That prior decision granted employers more autonomy in making unilateral changes if consistent with management rights language in union contract, the so-called 鈥渃ontract coverage鈥� standard. In the more recent case, the Board held that a union鈥檚 alleged waiver of the right to bargain over a mandatory subject of bargaining must be 鈥渃lear and unmistakable,鈥� the standard that existed prior to the MV Transportation decision: 

We therefore overrule MV Transportation and restore the rule consistently followed by the Board for more than 70 years and endorsed by the Supreme Court in 1967. Under that standard, the Board will not lightly infer a contractual waiver of the statutory right to bargain and will instead require such a waiver to be 鈥渃lear and unmistakable.鈥�

Concluding that there was no 鈥渃lear and unmistakable waiver鈥� by the union, the Board found that the company violated the NLRA by failing to provide the Union notice, the opportunity to bargain, and refusing the union鈥檚 request to bargain over the decision to install cameras. The Board also noted that it has repeatedly held that the use of cameras to observe employees at work is a mandatory subject of bargaining, especially where such observation may be used to discipline employees.

The Board stated that, absent proof that a union clearly and unmistakenly waived the right to bargain, an employer violates the NLRA by making a change to a mandatory subject of bargaining without first providing the union with notice and an opportunity to bargain. Based on the revived 鈥渃lear and unmistakable waiver鈥� standard, employers should be cautious before relying on standard management rights provisions as a basis for claiming a union has waived its right to bargain over a particular mandatory subject of bargaining.

On June 13, 2024, the U.S. Supreme Court ruled in Starbucks鈥� favor in , holding that when seeking a Section 10(j) preliminary injunction under the National Labor Relations Act (NLRA), the National Labor Relations Board (NLRB or the 鈥淏oard鈥�) must satisfy the traditional four-factor test for a preliminary injunction.聽

By way of background, in 2020 several employees at a Starbucks in Memphis, Tennessee, announced plans to organize a union and invited local media to the store after hours to promote their union organizing effort. Starbucks investigated the media event and ultimately terminated several involved employees for violating company policy. The union, in coordination with the employees, filed unfair labor practice charges with the NLRB, alleging that Starbucks unlawfully interfered with the employees鈥� right to organize.

After issuing a complaint against Starbucks, the Board filed a Section 10(j) injunction petition in federal court, seeking a preliminary injunction requiring Starbucks to, among other things, reinstate the terminated employees. Section 10(j) of the NLRA grants the NLRB the authority to seek temporary relief (via a preliminary injunction) against an employer in federal court while an unfair labor practice charge is pending.     

The Supreme Court was tasked with deciding whether the NLRB was required to satisfy a more lenient two-part test for a preliminary injunction (established by the U.S. Sixth Circuit Court of Appeals) or the traditional and stricter four-part test for a preliminary injunction (previously articulated by the Supreme Court and followed by other courts). The two-part test merely asks (1) whether there is reasonable cause to believe an unfair labor practice has occurred and (2) whether injunctive relief is just and proper. 

The traditional four-part test, however, requires a party to make a clear showing that (1) he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest. In concluding that nothing in Section 10(j) displaces the presumption that the traditional preliminary injunction principals govern, the Supreme Court held that federal courts must use the traditional four-part test when evaluating the NLRB鈥檚 request for a Section 10(j) preliminary injunction.

Although the Supreme Court鈥檚 decision will make it more difficult for the NLRB to secure preliminary injunctions against employers, it does not mean the NLRB will not continue to pursue or successfully secure preliminary injunctions. The Board, however, must satisfy the same preliminary injunction standards as others seeking such temporary relief in court.

On October 26, 2023, the National Labor Relations Board (the NLRB or the 鈥淏oard鈥�) issued its heavily-anticipated final rule (the 鈥溾��) addressing the standard for determining joint-employer status under the National Labor Relations Act (NLRA). As we previously reported, the New Rule essentially expanded the criteria for establishing a joint-employer relationship under federal labor law.聽

Specifically, the New Rule re-instated the Board鈥檚 previous employee-friendly standard, as articulated in the 2015 Browning-Ferris decision, and went a step further, providing that 鈥渆vidence of the authority or reserved right to control, as well as evidence of the exercise of control (whether direct or indirect, including control through an intermediary鈥�) is probative evidence of the type of control over employees鈥� essential terms and conditions of employment that is necessary to establish joint-employer status.鈥� 

In general terms, under the New Rule, this means that businesses stand a greater risk of being held a 鈥渏oint employer鈥� over individuals over whom they exercise no direct oversight.

The New Rule, which was previously set to take effect on February 26, 2024, was met with criticism following its publishing. In particular, a coalition of business organizations from a number of industries challenged the new standard in the United States District Court for the Eastern District of Texas. In this case, the plaintiff organizations brought claims for declaratory and injunctive relief under the Administrative Procedure Act (APA), claiming that the New Rule is contrary to law as well as arbitrary and capricious 鈥� and, as a result, the New Rule should be blocked in its entirety.

On February 13, 2024, Judge J. Campbell Barker held a two-hour hearing on both parties鈥� dueling motions for summary judgment on the legality of the New Rule. Following the hearing, on February 22, 2024, Judge Barker issued an Order staying the implementation of the New Rule to March 11, 2024. We expect that Judge Barker will issue a substantive decision by that date. 

While the status of the New Rule remains in flux, we recommend that businesses continue taking steps to prepare for the new implementation date of March 11, 2024, as the NLRB will begin enforcing the New Rule as soon as it becomes effective. In particular, we recommend that businesses use the two-week delay to review their relationships and contracts with subcontractors, staffing and temp agencies, and other third parties whose employees may present a risk of joint employment. While contractual language is not dispositive under the New Rule, strong contractual language that clearly delineates each party鈥檚 roles and responsibilities (or lack thereof) with respect to specific workers is a first and critical step in fighting a claim of joint employment. In addition, we recommend that businesses critically evaluate whether the control they actually exercise over subcontractors and their employees varies from an otherwise clear contractual delineation of power.

We will continue to monitor the New Rule and the status of any legal challenges to the same. In the meantime, if you have any questions or need assistance to ensure compliance under the New Rule, please contact the attorneys at 麻豆直播 & Lardner LLP.

On October 26, 2023, the National Labor Relations Board (NLRB or the 鈥淏oard鈥�) issued its long-awaited final rule (the 鈥溾��) addressing the standard for determining joint-employer status under the National Labor Relations Act (NLRA). The new rule is effective December 26, 2023. By issuing the new rule, the Board rescinds and replaces the previous rule issued under the Board (when it was controlled by appointees of former President Donald Trump) entitled, 鈥淛oint Employer Status Under the National Labor Relations Act,鈥� which was published on February 26, 2020, and took effect on April 27, 2020.

Joint employment refers to situations in which two or more legal entities share control or influence over workers to the extent that each are deemed to be employers of the worker in question. Joint-employer status can have significant implications for labor relations and legal obligations. If two entities are joint employers, they may both be held responsible for unfair labor practices, bargaining obligations, and other legal liabilities concerning the employees in question.

The New Rule makes it much easier for a worker to be found that they are jointly employed.

The New Rule

Under the New Rule, two or more legal entities will be held to be joint employers of a group of employees if the entities share or codetermine one or more of the employees鈥� essential terms and conditions of employment, which the New Rule defines as: (1) wages, benefits, and other compensation; (2) hours of work and scheduling; (3) the assignment of duties to be performed; (4) the supervision of the performance of duties; (5) work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; (6) the tenure of employment, including hiring and discharge; and (7) working conditions related to the safety and health of employees.

Entities are joint employers when they share or codetermine at least one of the 鈥渆ssential terms and conditions.鈥� The key aspect of the New Rule is that 鈥渟hare or co-determine鈥� 鈥渕eans for an employer to possess the authority to control (whether directly, indirectly, or both), or to exercise the power to control (whether directly, indirectly, or both), one or more of the employees鈥� essential terms and conditions of employment.鈥� Thus, indirect or 鈥�reserved鈥� control alone may establish joint employer status. This is a major change from the 2020 Rule鈥檚 focus on 鈥渄irect and immediate control.鈥�

Background

The NLRB鈥檚 interpretation of what constitutes joint employment has fluctuated in recent years, with a focus on whether the alleged joint employer had direct or indirect control. Economic change in areas like subcontracting, franchising, and growth of the 鈥済ig鈥� economy have spurred this debate. Between 1984 to 2015, indirect control was typically insufficient to establish an entity as the joint employer of another employer鈥檚 workers. Instead, 鈥渄irect and immediate鈥� control was a necessary factor to prove joint-employer status.

Then, in 2015, the Board issued its decision in Browning-Ferris, 362 NLRB 1599 (2015). A majority of Board members held that an entity may be a joint employer, even if its control over the essential working conditions of another business鈥檚 employees was indirect, limited and routine, or contractually reserved but never exercised. Browning-Ferris marked a major shift for joint employer status.

The 2020 Rule, which followed the Board鈥檚 decision in Hy-Brand Industrial Contractors, Ltd. & Brandt Construction Co., 365 NLRB No. 156 (2017), reversed course by rejecting the analysis in Browning-Ferris and establishing that joint-employer status requires showing that the entity possesses and exercises 鈥渟ubstantial direct and immediate control over one or more essential terms or conditions鈥� of employment. The 2020 Rule therefore returned to the pre-Browning-Ferris precedent, where indirect control could not determine joint-employer status.

The New Rule restores the Browning-Ferris standard but, in some respects, goes even further. Thus, the New Rule provides that 鈥渆vidence of the authority or reserved right to control, as well as evidence of the exercise of control (whether direct or indirect, including control through an intermediary, as discussed further below) is probative evidence of the type of control over employees鈥� essential terms and conditions of employment that is necessary to establish joint-employer status.鈥�

Implications on Employers

The New Rule expands the criteria for establishing a joint-employer relationship. The Chairman of the NLRB, Lauren McFerran, states that the 鈥渘ew joint-employer standard reflects both a legally correct return to common-law principles and a practical approach to ensuring that the entities effectively exercising control over workers鈥� critical terms of employment respect their bargaining obligations under the NLRA.鈥� Board member Marvin Kaplan, an original appointee of former President Trump, dissented, arguing that 鈥淸i]t is difficult to imagine a better recipe than [the New Rule] for injecting chaos into the practice and procedure of collective bargaining that the majority claims to promote.鈥� Kaplan goes on to call the New Rule a 鈥渞adical expansion of the joint-employer doctrine鈥� and predicts that significant adverse consequences will flow from the New Rule.

Employers in industries where it is common to contact out some or all of the operation, such as healthcare, hospitality, or construction, just to name a few, will need to carefully review the New Rule and then scrutinize the agreements they have with such contractors. The contracts with the subcontractors are where the problematic reserved powers described above will be found. But remember, the New Rule only applies to issues arising under the National Labor Relations Act, and other agencies, such as the U.S. Department of Labor and the EEOC, will use different rules when analyzing if joint employment exists. More litigation and legal challenges may arise soon over the New Rule. One organization, the International Franchise Association, has  to 鈥渟top the rule through any measure available鈥� and some senators are exploring congressional action to reverse the New Rule. In the meantime, employers should carefully consider the shift in precedent and consider whether they are at risk. Employers should review and assess their relationships with outside vendors, independent contractors, or other third-party contracts to determine whether they may be deemed joint employers under the New Rule.

If you have any questions or need assistance to ensure compliance under the New Rule, please contact the attorneys at 麻豆直播 & Lardner LLP.