NLRB Finalizes Rule on Joint Employer Status Under the NLRA

February 28, 2020

On February 25, 2020, the National Labor Relations Board (the “Board”) finalized its rule narrowing the legal test used to determine whether two employers are a joint employer under the National Labor Relations Act (“NLRA”), putting an end to the former standard adopted in Browning-Ferris Industries, 362 NLRB No. 186 (2015).

The Board’s final rule reinstates a pre-Browning-Ferris Industries rule, which dictates that in order to qualify as a joint employer, businesses must have “substantial direct control” of at least one key term or condition of a worker’s job such that the business “meaningfully affects matters” pertaining to the employment relationship.

The new NLRB rule defines the “essential terms and conditions of employment” as consisting of the following eight core aspects of a worker’s job:

  • wages;
  • benefits;
  • hours of work;
  • hiring;
  • discharge;
  • discipline;
  • supervision; and
  • direction.

The Board defines “substantial direct control” as actions that have a “regular or continuous consequential effect” on one of the eight core aspects of a worker’s job, while noting that any direct control that is “sporadic, isolated or de minimis” will not be enough to warrant a finding of joint employment.

The final rule clarifies that examples of businesses indirectly controlling or maintaining an unexercised contractual ability to control the essential terms and conditions of employment, which could have led to a joint employer finding under the Browning-Ferris Industries decision, can be considered as part of the Board’s joint employer analysis only to lend support to evidence of direct control. They cannot by themselves lead to a finding of joint employment if no evidence of substantial direct control exists.

The Board states that various common elements of third-party contracts will not be enough to convert businesses into joint employers.  Examples of such common elements include: a business “setting minimal standards for hiring, performance, or conduct” for a contractor; requiring that a contractor maintain workplace safety or sexual-harassment policies; or a franchisor taking steps to protect its trademark.

The Board decided not to address particular industries or types of business relationships in the final rule, instead, providing definitions and clarifications that are intended to apply to a wide range of industries and business relationships.  The Board anticipates that any industry-specific refinements will be developed case by case through adjudication.

The final rule becomes effective on April 27, 2020.

Takeaway for Employers

Employers should review and evaluate their relationships with other companies and vendors to make sure that they do not treat workers in ways that signify joint employment under the Board’s final rule. Moreover, employers should be cognizant that this rule only applies to joint employer status in the context of the NLRA. The U.S. Department of Labor (“DOL”) recently issued its own rule in determining whether joint employment status exists under the Fair Labor Standards Act (“FLSA”).  This DOL’s standard is similar in some respects to the Board’s final rule.  The Equal Employment Opportunity Commission (“EEOC”) is also expected to issue a rule in determining whether joint employment exists under federal anti-discrimination laws. This standard may be similar or materially different to the Board’s standard under the NLRA.  In addition, there are varying tests for joint employer status under state law.

These materials were prepared by Putney, Twombly, Hall & Hirson LLP prior to their combination with Bond, Schoeneck & King for informational purposes only and are not intended as legal advice or advertisement of legal services. Transmission of the information is not confidential and is not intended to create an attorney-client relationship or an attorney-client privileged communication. You should not act upon any of the information contained in these materials without seeking the advice of your own professional legal counsel.