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National Labor Relations Board reverses Obama-era joint employer standards

The National Labor Relations Board on Dec. 14 voted to reverse joint employer standards adopted under the Obama administration that retail groups argued increased the industry's exposure to legal action and unionization efforts.

The NLRB voted 3-2 to overturn its 2015 ruling that a company could be a joint employer even if it had only indirect control over employees. The ruling reinstates rules from prior to 2015 requiring direct control for a company to be considered a joint employer.

NLRB officials said that two entities will be considered a joint employer if there is proof that one has exercised control over employment terms of the other's employees and has done so "directly and immediately."

"Proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship," NLRB officials said.

National Retail Federation Senior Vice President for Government Relations David French said Dec. 14 that the previous standards created an "impossible" environment where one business could be unfairly held accountable for the actions of another. The NRF said it welcomed the NLRB's vote of reversal.

"Today's vote puts an end to those harmful and unnecessary changes that exposed companies to almost limitless liability," French said.

The original case involved waste management company Browning-Ferris Industries and staffing firm Leadpoint Business Services, and the decision left retailers and other companies liable for contractor and franchisee violations, industry groups argued. The NLRB ruled in August 2015 that BFI was a joint employer with Leadpoint, which had been contracted to clean and sort recycled products.

Because many retailers use janitors, construction companies, or other independent contractors in their operations, the NRF as well as the Retail Industry Leaders Association have said the Obama-era regulations were burdensome and unfair.

The NLRB vote comes after the house on Nov. 7 voted to pass the Save Local Business Act, which would consider a company a joint employer only if it directly controls hiring and firing, pay, and compensation. That bill, introduced in July by Rep. Bradley Byrne, R-Ala., was received in the Senate on Nov. 8.

Despite the NLRB reversal, the NRF said it will still push for passed legislation as well to conclude the joint employer issue.