National Labor Relations Board Issues Final Rule on Joint Employment

National Labor Relations Board Issues Final Rule on Joint Employment

On February 25, The National Labor Relations Board (NLRB) issued a final rule on what constitutes a joint employer. The new rule restricts the definition of joint employers to those that “share or codetermine” the conditions of an employee’s employment. This new rule is intended to “foster predictability and consistency regarding determinations of joint-employer status in a variety of business relationships” and supersedes the previous definition established by Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 (2015). In that case, an employer could be a joint employer “even if its control over the essential working conditions of another business’s employees was indirect, limited and routine, or contractually reserved but never exercised.” The final rule will go into effect on April 27, 2020.

The new rule thus places greater limits on the joint employer relationship than before. Under Browning-Ferris Industries, employers could be joint employers when one employer did not exercise control over the “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction” of an employee. Now, however, to be considered a joint employer, an employer must share or codetermine these essential job conditions.

In a press release, NLRB Chairman John F. Ring stated, “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.”

Unions

The new rule will notably affect union members. According to a fact sheet issued regarding the rule,

  • If the employees are represented by a union, the joint employer must participate in collective bargaining over their terms and conditions of employment.
  • Picketing directed at a joint employer that would otherwise be secondary and unlawful is primary and lawful.
  • Each business comprising the joint employer may be found jointly and severally liable for the other’s unfair labor practices.

Under the new rule, companies that do not exercise control over an employee’s conditions of employment will thus not be drawn into labor disputes. For example, if unionized employees of a company that provides janitorial services to another company engage in a labor dispute, the other company will not be involved unless it codetermines the essential working conditions of the employees. This should provide some relief to many companies that have such relationships with other companies.

The Final Rule

The fact sheet offers this summary:

The Final Rule:

  • Specifies that a business is a joint employer of another employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment;
  • Clarifies the list of essential terms and conditions: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction;
  • Provides that to be a joint employer, a business must possess and exercise such substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees as would warrant a finding that the business meaningfully affects matters relating to the employment relationship;
  • 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;
  • Defines the key terms used in the final rule, including what does and does not constitute “substantial direct and immediate control” of each essential employment term;
  • Makes clear that joint-employer status cannot be based solely on indirect influence or a contractual reservation of a right to control that has never been exercised.

History

According to the text of the final rule, which includes a summary of the legal history behind it, “the Board and reviewing courts have developed that concept in adjudication over the
years to address situations where two or more separate entities engaged in a business relationship jointly affect the terms and conditions of employment of a group of employees.” As the rule has been reviewed and refined over the years, the NLRB found “that two separate entities are joint employers of a single work force if the evidence shows that they ‘share or codetermine those matters governing the essential terms and conditions of employment.'” This seemingly simple concept, however, runs into complications when real-world conditions require court analysis.

For example, the rule observes that “Notably, however, the Board has never attempted to comprehensively define the ‘essential terms and conditions of employment’ that are relevant to the joint-employer inquiry,” and that “the joint-employer standard…does not specify the extent of control that must be shown before the two entities may be found to ‘share or codetermine’ that essential term or condition.”

It was Laerco Transportation, 269 NLRB 324 (1984), for example, that established that for a joint employer determination to be made, there must be “a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” While the rule’s history acknowledges consistency in its findings of such essential details, it also acknowledges that the “joint-employer determination of an entity’s contractually reserved but unexercised authority over another company’s employees has also changed over time.” While the new rule dispenses with “contractually reserved but unexercised authority” as an indication of joint employment, the history makes clear that the precise definition of the rule and its terms has been affected by different cases over the years, creating new interpretations of the joint employer rule.

For example, in 2015 in Browning-Ferris Industries, “The majority…explained that, under its new standard, a company could be deemed a joint employer even if its control over the essential working conditions of another business’s employees was indirect, limited and routine, or contractually reserved but never exercised.” The new rule reverses this standard and instead says that employers are joint employers only if they share or codetermine the essential terms and conditions of employment.

Conclusion

As stated in the press release, with this new rule determining joint employment, the NLRB “provides clear guidance” concerning the joint employer rule, applying it only to those employers that “possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees.”

About The Author

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Eric Howard is a legal editor who lives in Los Angeles.

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