Last month, as we reported, the Department of Labor (DOL) issued a Final Rule on the proper interpretation of joint employers within the meaning of the Fair Labor Standards Act (FLSA). Now, the National Labor Relations Board (NLRB) has followed suit and today announced its Final Rule on Joint Employer Status Under the National Labor Relations Act (NLRA). The NLRB has removed itself from the liberal interpretation it has afforded the joint employer concept over recent years and returns to a more restrictive position.
A joint employer finding has implications under the NLRA regarding collective bargaining, strike activity and unfair labor practice exposure, among others. For example, if the employees are represented by a union, the joint employer will be required to participate in collective bargaining over terms and conditions of employment. Each business that is part of the joint employment relationship can be jointly and severally liable for the other’s unfair labor practices.
As such, the NLRB has clarified and narrowed its position on joint employer status. As set out in the NLRB’s Fact Sheet, the Final Rule clarifies:
- A business is a joint employer of another employer’s employees only if the two employers share or jointly decide the employee’s essential terms and conditions of employment;
- The precise list of essential terms and conditions is wages, benefits, hours of work, training, discharge, discipline, supervision and direction (and each with their own definition);
- 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;
- 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 the joint employer status, but only if it supplements and reinforces evidence of direct and immediate control;
- Definitions of key terms used in the final rule, including “substantial direct and immediate control” “indirect control” and “contractually reserved authority” of each essential employment term;
- Joint-employer status cannot be based solely on indirect influence or a contractual reservation of right to control that was actually never invoked.
The Final Rule was a response to the NLRB’s decision in Browning-Ferris, 362 NLRB No. 186 (2015) that held a company could be deemed a joint employer if its control over the essential terms and conditions of another employer’s employees was indirect, limited and routine, or contractually reserved but never exercised. The Joint Employer Final Rule will take effect on April 27, 2020.