On February 26, 2020, the National Labor Relations Board (NLRB) published the final version of its rule for determining whether affiliated businesses are joint employers as defined in Section 2(2) of the National Labor Relations Act (NLRA). The new rule reverts to an earlier and more stringent standard for determining whether affiliated businesses are joint employers, and requires that, in order to be considered a joint employer, the business must exercise “substantial direct and immediate control” over another company’s workers.
The new rule replaces the test adopted in the NLRB’s 2015 decision Browning Ferris Industries, 362 NLRB No. 186 (2015). Under the Browning Ferris standard “[t]he Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.” Under Browning Ferris, the primary question is whether the purported joint-employer possesses the actual or potential authority to exercise control over the primary employer’s employees, regardless of whether the company has in fact exercised such authority. Further, the Browning Ferris standard provided that a business could be deemed a joint employer if it exhibited “indirect control” over the primary employer’s employees. Many employers viewed the liberal construction of the Browning Ferris standard as friendly to employees and employee organizations.
Following months of rulemaking, the NLRB’s new joint employer rule reverts to a more employer-friendly standard. The rule applies the common law test for determining whether an employer-employee relationship exists as a predicate to finding a joint-employer relationship. The rule also requires that the purported joint-employer must possess and exercise substantial direct and immediate control over the employees’ essential terms of employment. The NLRB stated that these essential terms are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.
The standard used to determine joint employer status constitutes a significant issue for both labor and management because the determination will affect not only bargaining obligations, but also liability for potential labor violations.
The new rule, which is classified as a major rule, will take effect on April 27, 2020.