By Jessi L. Ziska*
On February 26, 2020, the National Labor Relations Board (the “NLRB”) issued a final rule governing the determination of joint-employer status under the National Labor Relations Act (“NLRA”). The pro-employer rule provides that a business must possess and exercise “substantial direct and immediate control over one or more essential terms or conditions” of the employment of a separate employer’s employees for the NLRB to classify them as a joint-employer. The final rule makes it less likely that the NLRB will classify a company as joint-employer liable for labor law violations or bargaining obligations involving workers the company engages at arm’s length, such as subcontractors or franchisees.
The NLRB defined key terms in the final rule which provides that “essential terms and conditions of employment” includes “wages, benefits, hours of work, hiring, discharge, discipline, supervisions, and direction.” The NLRB also explained that “substantial direct and immediate control” includes actions that have “a regular or continuous consequential effect” on the core aspects of a worker’s job noting that “sporadic, isolated or de minimis” actions are insufficient to create a joint-employer relationship.
This final rule restores the standard in place prior to the controversial 2015 Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015) (“Browning-Ferris”) decision which based joint employer status on potential control of another employer’s employees even where no actual control is exercised. In September 2018, the NLRB published a Notice of Proposed Rulemaking outlining a joint-employer standard mirroring the final rule. This final joint employer rule closes this chapter of the ever-changing joint-employer test odyssey. A more detailed summary of the years-long saga surrounding the joint-employer standard, including the pre-2015 rule, the Browning-Ferris standard, and the move to return to the pre-2015 standard can be found here.
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.”
Although the final rule is arguably more favorable for employers than the pre-2015 standard, employers must remain cognizant of the control they exert over subcontractors, independent contractors, etc., and analyze whether it creates an employment relationship with such individuals, giving rise to related liability.
*Jessi L. Ziska practices in all areas of labor and employment law. If you have questions regarding the NLRB’s proposed joint-employer rule, please contact Jessi at jlz@zrlaw.com or 216.696.4441.
