This article was first published in the Winter 2024 issue of the Oregon Restaurant & Lodging Magazine.
The National Labor Relations Board (NLRB) under the Biden administration has developed a decidedly anti-employer, pro-union philosophy that spells significant trouble for all employers—union or non-union. Two recent actions by the Board eliminate any doubt regarding the Board’s pro-union agenda. In the first of those actions this past August, the Board issued an administrative decision making it far easier for unions to obtain recognition without first prevailing in an NLRB-sponsored employee secret ballot election. In the second action this October, the Board issued its Final Rule on joint employer status which significantly changes the legal standards under which joint employer relationships are analyzed, and in doing so, makes it significantly easier to find employees that are employed by more than one company. These changes will greatly increase the pressure on employers when responding to union organizing efforts and when coordinating with other employers for labor and services, such as staffing agencies and independent contractors. These rules also dramatically complicate the ways in which employers must remain separate to avoid being responsible for each other’s unfair labor practices, picketing, hand billing, corporate campaigns, or other union-organizing activities.
Cemex Case—A New Standard When Presented with Authorization Cards
On August 25, 2023, the Board issued a decision, Cemex Construction Materials Pacific LLC, making it substantially easier for unions to obtain recognition without requiring them to first succeed in a secret ballot election. In doing so, the Board overturned 52 years of legal precedent and ignored the Supreme Court’s decision in Linden Lumber Division, Summer & Co. In the Linden Lumber case, the Board held that employers were allowed to refuse to accept evidence of majority support of a union based upon the reasoning that NLRB-sponsored elections were favored over card check or other methods of union recognition.
The Cemex decision makes two significant changes that heavily favor unions seeking recognition and upsets the previous framework. These changes include the following:
1. The Board shifted the burden from the union to the employer to “promptly” request an election.
The National Labor Relations Act (NLRA) provides two methods for unions to obtain recognition as the exclusive bargaining representative for a unit of employees: 1) a secret ballot election; or 2) the union’s collection of authorization cards from a majority of employees in the potential bargaining unit (also known as card check). Under the second option, the employer has the choice between either accepting the authorization cards and recognizing the union or refusing to recognize and requiring the union to petition for an election.
Historically, upon employer refusal to recognize the union, the burden has always been on the union to then request an election. The Board’s decision in Cemex shifts that burden to the employer, contrary to the Supreme Court’s decision in Linden Lumber. In addition, the Board’s decision limits the timeframe for the employer to petition for an election to a mere two-week window or risk losing the right to have an election. These changes appear to be a transparent effort to increase the likelihood that an election does not occur and that a bargaining order is issued.
2. The Board lowered the standard to issue a bargaining order (instead of re-running the election) if the employer commits any unfair labor practice during an election campaign.
The other dramatic change created by the Cemex decision is the NLRB’s effort to eliminate elections all together when finding that an employer has committed a minor or routine unfair labor practice during the period preceding a scheduled union election. This will have the effect of forcing employers to bargain with the union, even if a majority of the employees do not want union representation. This stands despite the fact that current NLRB statistics show unions winning more than 80% of regular election petitions. In essence, any time an employer commits a routine unfair labor practice during a union election, the Board took the extraordinary step of deciding it would issue an order requiring the employer to recognize and bargain with the union, rather than scheduling another election. In the past, the Board has rarely imposed such orders and only utilized such an extreme remedy in those rare cases where the employers’ actions were so egregious that it was impossible to hold a fair election. In Cemex, however, the Board appears to have greatly relaxed the legal standard for determining when such a drastic remedy is imposed. The new NLRB bargaining standards will likely be challenged vigorously by employers, with such challenges eventually reaching the circuit courts of appeals, and perhaps even the Supreme Court in light of these changes created by this decision.
Key Employer Takeaways from Cemex
Under these new standards, employers must be prepared to act quickly if union organizing begins, and if they are ever presented with a majority of signed authorization cards, including being prepared to file a petition for election within two weeks. A failure to do so will result in loss of the right to an election and the receipt of an order to bargain.
Under the Board’s new relaxed standard for issuing a bargaining order, it is now even more critical to avoid committing any unfair labor practices during an organizing campaign. Employers should consider consulting with an employment and labor attorney to proactively train managers and leadership teams on how to avoid unfair labor practice charges, including providing guidance on what the employer is permitted to do, and communicate, during an organizing campaign. Employers will need to immediately and carefully review their handbooks and policies to ensure they do not violate any existing NLRB standard, especially those involving social media and employee criticisms of management. It must be stressed that every statutory supervisor is an agent of the employer and even if upper management is unaware of, or does not support or condone the actions of the lower-level personnel, the employer will nevertheless be found liable for the unfair labor practice charge and potentially be required to bargain without having the right to a secret ballot election.
New Joint Employer Rules—NLRB Continues to Overturn Longstanding Precedent
On October 26, 2023, the Board released its final rule regarding the standard for determining joint employers under the NLRA. Under the new standard, it is now easier to find that workers are employees of more than one company. This means that the joint entities share all the same liabilities and obligations under labor law—including liability for violations of labor law and the obligation to bargain with unions. The new standard describes that joint employment among a particular group of employees exists when either one or both companies have the express right to determine essential terms and conditions of employment, regardless of whether either entity actually exercised the control directly or indirectly. In other words, it is the potential existence of the right to influence essential terms and conditions of employment that will result in a finding of a joint employer relationship, even if that “implied” right is never exercised. It is also unclear from this case exactly what it will take for the “implied” right to exist, thus triggering the joint employer relationship. While it certainly includes the traditional standards such as wages, hours, or working conditions, it may be broad enough to include uniform policies, consistency standards, or any other standard typically found in franchise agreements which are designed to provide a consistent customer experience across all employer locations. This case is also likely to generate significant litigation as employers attempt to ascertain the limits of the implied control of essential terms, as that term is used by the NLRB in this case.
History of the Joint Employer Standard
The joint employment standard has gone through several iterations in recent years. In Browning-Ferris (2015), the Board overturned the previous longstanding precedent that a company could only be considered a joint employer if it actually exercised both direct and immediate control over the terms and conditions of employment. The Browning-Ferris standard for joint employment was determined by the right to control an employee’s essential terms and conditions of employment, and the mere existence of that right was sufficient to find joint employment.
In 2020, the Board used its rulemaking authority to again change the joint employment standard. The rule issued in 2020 stated that for companies to be considered joint employers, they must have and use the right to control essential terms and conditions of employment. The Board also broadened the definition of terms and conditions of employment to include, “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”
The New Standard
The new final rule just decided by the Board returns to a standard similar to Browning-Ferris. Now two entities may be joint employers if they have the right to control essential terms and conditions of employment, regardless of whether they choose to exercise that right in either a direct or indirect way. The rule is:
“if the employers share or codetermine those matters governing employees’ essential terms and conditions of employment. To ‘share or codetermine those matters governing employees’ essential terms and conditions of employment’ means 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’ essential terms and conditions of employment.”
The most salient changes from the previous 2020 rule concern the control aspect of the essential terms and conditions of employment. Now, an entity could be found to be a joint employer whether or not they exercise control over the terms and conditions of employment, and whether they exercise their control in a direct or indirect way. Additionally, the rule further expands the definition of “essential terms and conditions of employment,” which now include:
- Wages, benefits, and other compensation;
- Hours of work and scheduling;
- The assignment of duties to be performed;
- The supervision of the performance of duties;
- Work rules and directions governing the manner, means, and methods of the performance of the duties and the grounds for discipline;
- The tenure of employment, including hiring and discharge; and
- Working conditions related to the safety and health of employees.
Key Takeaways for Employers Related to the New Joint Employer Rules
The release of this new broad joint employment standard makes it easier for entities to be considered joint employers. The far-reaching implications of this rule may have significant consequences for employers, especially for entities that use staffing companies, have temporary employees, contractors or subcontractors, or franchisor-franchisee agreements. The finding for joint employer status may obligate both entities to participate in negotiations with unions, while also making both entities responsible for any labor law liabilities, such as unfair labor practice charges.
Employers should consider consulting with an employment attorney to review any situations that may involve joint employer status, so as to provide guidance and practical advice regarding these issues, including updating employment practices, policies, handbooks, and contracts.
The legal issues impacting workplaces are ever changing (Employment Law in Motion!), and since publication, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
