New Rule with Employer-Friendly "Joint-Employer" Definition Issued by NLRB

By Dan Ernst

On February 26, 2020, the National Labor Relations Board (NLRB) issued its final ruleFN1 on the standard for determining “joint-employer” status under the National Labor Relations Act (NLRA).FN2 Under the NLRA, a “joint-employer” is required to participate in collective bargaining if employees are represented by a union, may be subject to picketing that would otherwise be deemed an unlawful secondary boycott, and may be held jointly and severally liable for the other joint-employer’s unfair labor practices.

A “joint-employer” is a person who codetermines the essential terms and conditions of workers’ employment. The standard had been broadened under the Obama-era NLRB by including companies within the category of “joint-employers” who merely have a contractual right to determine terms and conditions – even if that right is not actually exercised. BFI further broadened the standard to include not only “direct and immediate” control of terms and conditions but “indirect” control. And even further, it broadened the standard to make the traditional list of “essential terms and conditions of employment” non-exhaustive.

The NLRB’s new Rule (effective April 27, 2020) reverses this expansion and provides that to be a “joint-employer,” a business must possess and exercise direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees. Furthermore, the Rule specifies an exhaustive list of essential terms and conditions: wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction.FN3

Takeaway

The new Rule is a big win for employers who contract with third parties for full-time, part-time and temporary workers as well as for franchise businesses. Companies can now contract with other business that employ workers with more confidence that doing so will not subject them to liability for those other business’ labor practices and/or various NLRA requirements. It should be noted however, that the new Rule is likely to face legal challenges and any business should consult carefully with counsel before changing its own policies, contracts and agreements.

Footnotes:

FN1:   https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-03373.pdf

FN2:    The new Rule overturns the standard announced in the 2015 NLRB case Browning-Ferris
Industries of California, Inc., 362 NLRB No. 186 (BFI), and in large part reinstates the Laerco Transportation standard that held sway for the prior three decades. See Laerco Transportation, 269 NLRB 324 (1984).