NLRB Issues Final Revised Joint Employer Rule

Posted February 28, 2020 at 10:44 am

The National Labor Relations Board (NLRB) recently released its final regulation defining when two employers would be joint employers for National Labor Relations Act (NLRA) purposes. The final regulation issued on Feb. 25 is very close to what was proposed and what TRSA supported. The main point of the regulation is to restore the longstanding definition of joint employment that was in place before the Browning-Ferris decision, i.e., it reverts to “direct and immediate” control of another employer’s employees as the requirement for a joint-employment relationship. However, the regulation, provides greater clarity and explanation than a decision from the NLRB could. The new rule takes effect on April 27.

Below are key points of the regulation from the NLRB:

Under the final rule, to be a joint employer, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees. The final rule defines key terms, including what are considered “essential terms and conditions of employment,” and what does, and doesn’t constitute “direct and immediate control” as to each of these essential employment terms. The final rule also defines what constitutes “substantial” direct and immediate control and makes clear that control exercised on a sporadic, isolated, or de minimis basis is not “substantial.”

Evidence of indirect and/or contractually reserved control over essential employment terms may be a consideration for a finding of joint-employer status under the final rule. But it cannot give rise to such status without substantial direct and immediate control. Importantly, the final rule also makes clear that the routine elements of an arm’s-length contract cannot turn a contractor into a joint employer.

The joint-employer standard under the NLRA is critical because it determines whether a business is an employer of employees directly employed by another employer altogether. If two entities are joint employers, both must bargain with the union that represents the jointly employed employees, both are potentially liable for unfair labor practices committed by the other, and both are subject to union picketing or other economic pressure if a labor dispute arises.

Specifically, the Joint Employer Final Rule:

  • Specifies that a business is a joint employer of another employer’s employees only if the two employers share or co-determine 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 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” or indicative 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 doesn’t 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’s never been exercised.

TRSA was active in clarifying the rule, including having a meeting with then-Department of Labor Secretary Alexander Acosta. Moreover, we worked closely with coalition partners to ensure the final rule wouldn’t have an adverse impact on the linen, uniform and facility services industry. Click here for details.