By Nelson Cary and Amanda Kuehner
Today, the NLRB announced their final rule on how to analyze joint-employer status under the NLRA. This is good news for employers, as the final rule makes it harder to prove that workers are jointly employed by affiliated businesses. By publishing this final rule, the NLRB is revitalizing the joint-employer standard that the NLRB applied for several decades prior to the 2015 decision in Browning-Ferris, which relaxed the test for determining joint employment.
Joint employment is typically found when a business possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment of another business’ employees. The final rule expands on the definition of essential terms and condition to not only include hiring, firing, discipline, supervision, and direction, but also wages, benefits, and hours worked. The final rule also defines what constitutes substantial direct and immediate control and makes clear that control exercised on a sporadic, isolated, or de minimis basis is not substantial enough to prove joint employment.
Unlike the holding in Browning-Ferris, the final rule does not allow for a finding of joint employment by showing indirect control over the essential terms and conditions of the worker’s employment. Rather, indirect control may be a factor to consider when analyzing a joint employer status, but that factor alone will not prove a joint employer relationship exists. Additionally, the NLRB’s discussion of the final rule expresses its intent that an arm’s-length contract alone cannot turn a contractor into a joint employer.
In a press release, NLRB Chairman, John F. Ring (R), expressed confidence that the final rule will provide much needed clarity to businesses: “This final rule gives our joint-employer standard the clarity, stability, and predictability that is essential to any successful labor-management relationship and vital to our national economy.” He added, “With the completion of today’s rule, employers will now have certainty in structuring their business relationships, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with whom they have a collective-bargaining relationship.”
The final rule comes after the NLRB issued a proposed version back in late 2018 and subsequently reviewed and considered nearly 30,000 public comments before settling on the final version. The rule will be published in the federal register on February 26, 2020, with an effective date of April 27, 2020.
Labor professionals, particularly important those working for employers who have relationships with other employers to use or provide employees, will certainly want to review the regulations. But the regulation is also important in a number of different contexts, including franchise operations, industries with frequent subcontracting, and where an employer has another employer’s employees on the employer’s premises and involved in the employer’s productive work.