On February 26, 2020, the National Labor Relations Board (NLRB) issued its final rule governing joint-employer status under the National Labor Relations Act (NLRA) in the federal register. The final rule will undo a more relaxed Obama-era joint-employer test by reinstating the joint-employer standard that the Board followed for several decades prior to its 2015 decision in Browning-Ferris Industries of California, Inc. According to the Board, its ruling provides “greater precision, clarity, and detail that rulemaking allows,” as to what constitutes a joint employer.

The Browning-Ferris decision held that a company could be deemed a joint employer if “its control over the essential terms and conditions of another business’s employees was merely indirect, limited and routine, or contractually reserved but never exercised.” However, with its final rule, the Board will reinstate a pre-Browning-Ferris test which holds that a business is only a joint employer if it “has substantial direct and immediate control” of one or more essential terms or condition of a worker’s job such that the business “meaningfully affects matters” pertaining to the employment relationship. In its ruling, the NLRB defined those “essential terms and conditions of employment” as “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.” It also defined “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 that the Board listed, while pointing out that any direct control that is “sporadic, isolated, or de minimus” is insufficient to warrant a finding of joint employment.

The NLRB’s ruling also specifies that “evidence of indirect and contractually reserved but never exercised control over essential terms and conditions, and of control over mandatory subjects of bargaining other than essential terms and conditions, is probative of joint-employer status, but only to the extent that it supplements and reinforces evidence of direct and immediate control.” Additionally, the Board stated that various common elements of third-party contracts will be insufficient to convert certain businesses into joint employers.

While the NLRB is not historically known for doing so, instead of tackling this joint-employer test through yet another formal decision, the Board decided to address this issue using the notice-and-comment rulemaking procedure. In making this decision, the Board reasoned that “[r]ulemaking provides a means to give this complex, nuanced, and vitally important issue the kind of comprehensive and detailed explication it deserves, and to which the public is entitled, resulting in greater clarity and certainty of the law under the NLRA.” It further iterated that it “possesses statutory authority to engage in rulemaking, and the current Board intends to exercise that authority where it believes … that doing so will enable it to provide more clarity and certainty in the law it administers.” The Board further reasoned that rulemaking is “strictly prospective.” Thus, employers, employees, and unions will know what is coming when they read the final rule and can prepare accordingly. Finally, the Board argued that the notice-and-comment rulemaking enables everyone who wants to weigh in on an issue the chance to do so, not only those that can afford to hire an attorney to file a brief, giving everyone a chance to let their voice be heard.

Overall, this refined joint-employer rule will have wide-ranging impacts in the labor and employment industry. A joint-employer finding in essence has significant implications and obligations under the NLRA relative to strike activity, collective bargaining, and unfair labor practice liability. For instance, if the employees are represented by a union, the joint employer must participate in collective bargaining over their terms and conditions of employment. Additionally, picketing directed at a joint employer that would otherwise be secondary and unlawful is primary and lawful. Also, each business comprising the joint employer may be found jointly and severally liable for the other’s unfair labor practices. These are only a few of the important consequence of the rule that the Board lays out.

The final joint-employer rule will become effective on April 27, 2020. Because of the far-reaching implications for employers, if you have any questions regarding the final joint-employer rule and how it will affect workplace decisions, consult your labor and employment attorney for proper guidance.