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NLRB reverses precedent on employer dress codes and joint employer standard

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Consistent with its pro-union agenda, the National Labor Relations Board recently reversed precedent established under the prior administration with respect to employer dress codes and the joint employer standard. Specifically, on August 29, 2022, the Board held that an employer’s dress code policies preventing employees from wearing pro-union apparel were unlawful. Furthering its agenda, on September 6, 2022, the Board released a new proposed joint employer standard, which would roll back the current standard established under the prior administration, making it much easier for companies to be deemed joint employers.

Dress code and uniform policies

In Tesla, Inc., 370 NLRB No. 131 (2022), the Board considered a dress-code policy that required employees to wear employer-provided apparel or all black clothing while at work. After workers at one of the employer’s facilities began wearing pro-union apparel, the employer informed the workers that they were in violation of the dress code. The union challenged the dress code and the Board issued a complaint against the employer.

Under the Board’s prior precedent in Republic Aviation, Stabilus, and Wal-Mart Stores, employees had the right under the National Labor Relations Act to wear union insignia. Under Republic Aviation, if an employer interfered with this right, the employer must show that its interference was “justified by special circumstances.” For example, an employer could show special circumstances by demonstrating restrictions are necessary for safety, to avoid product damage, employee dissension, and/or to protect its customer or public image. Further, in Stabilus, the Board found that employers could not “avoid the ‘special circumstances’ test” by requiring employees to wear uniforms or other designated clothing, “thereby precluding the wearing of clothing bearing union insignia.” In Wal-Mart, however, the Board did away with the “special circumstances” test, finding it did not apply where an employer did not ban all union insignia, but instead allowed employees to wear union insignia that was limited in size and not distracting. In such circumstances, the Board held, the Boeing test for facially neutral-rules would apply.

In Tesla, the Board overturned its decision in Wal-Mart, reinstating the special circumstances test and finding it applies “[w]hen an employer interferes in any way with its employees’ right to display union insignia.” (emphasis added). In other words, the special circumstances test now applies to any policy governing dress codes or uniforms. In light of this, the Board found that the employer did not meet the special circumstances, notwithstanding its facially neutral dress code.

Given the Board’s recent decision, employers should review their dress code and uniform policies and revise them to comply with the new standard. Indeed, under this decision, unions and employees can bring unfair labor practice charges challenging an employer’s policy that prevents employees from wearing union insignia, and place the burden on the employer to prove that “special circumstances” exist to maintain such a policy.

Proposed new joint employer standard

Under the NLRB’s current joint employer standard, an employer must “possess and exercise substantial, direct and immediate control” over another employer’s workers to be deemed a joint employer. Under this standard, “limited and routine” instructions consisting of telling another employer’s employees what work to perform or when and where to perform it (but not how to perform the work) would not rise to the level of direct and immediate control necessary to establish that a business is a joint employer.

In a complete reversal of the current joint employer standard, direct and immediate control is no longer required. Under the Board’s new proposed rule, two or more employers would be considered “joint employers” if they “share or codetermine” employees’ essential terms and conditions of employment, including wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules. Notably, the Board would consider both direct evidence of control and evidence of reserved and/or indirect control over the essential terms and conditions of employment when analyzing joint employer status. Meaning indirect or reserved control alone could be sufficient to establish a joint employer relationship.

Joint employers before the NLRB may share liability for unfair labor practices and have a joint responsibility to bargain with a union. If the proposed rule is finalized, the rule could immensely affect how companies do business, including the franchising model and outsourcing labor through contracting, temporary staffing, and other business-to-business arrangements. In the meantime, businesses should evaluate their level of control of non-employees (including indirect or reserved control), and determine whether they are comfortable with the risk of being deemed a joint employer or if they need to make changes to the arrangement to avoid a joint employer finding.

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