NLRB Issues new Final Rule on Joint Employment

Following several years of ping-ponging back and forth on the subject, on February 26, 2020, the National Labor Relations Board (NLRB) issued its much anticipated final rule on joint employment. The NLRB rule is separate from the Department of Labor’s final rule for the Fair Labor Standards Act issued in January.

Under the new rule, a business will only be considered a joint employer of another entity’s employees for the collective bargaining and other labor practice rules of the National Labor Relations Act (NLRA) if it “possess[es] and exercise[es] . . . substantial direct and immediate control over one or more essential terms or conditions of . . . employment” of the other entity’s workers. For this rule, “essential terms and conditions of employment” refers to employee wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

The rule further clarifies that, contrary to NLRB holdings under the Obama Administration, evidence that a business has “indirect control,” or has “contractually reserved but never exercised authority over essential terms of labor and employment,” will not, in and of itself, lead to the conclusion that the business is a joint employer. Instead, evidence of such indirect authority to control workers’ terms and conditions of employment will only be considered to the extent that it “supplements and reinforces” other evidence that the business directly exercises that authority.

Practically speaking, the rule will make it more challenging for labor groups to establish that two entities are sufficiently linked to determine that they are joint employers under the NLRA. Given this, labor groups are expected to challenge this new standard.  Due to upcoming challenges and the fact that different law treat joint employment differently,  employers should continue to monitor developments in this area and not hesitate to call with any questions.