The National Labor Relations Board (NLRB) released a final rule clarifying the standard of determining whether two employers are joint employers of a group of workers under the National Labor Relations Act. The NLRB's final rule restores the standard that had been applied for decades prior to the organization's 2015 ruling in the Browning-Ferris Industries case.
In its 2015 decision involving Browning-Ferris Industries of California, the NLRB ruled that two or more entities are joint employers of a single workforce if they are both employers within the meaning of the common law and they share or co-determine those matters governing the essential terms and conditions of employment. As a result of the decision, the NLRB weighed whether an employer exercised control over terms and conditions of employment indirectly through an intermediary in its evaluation of joint employer qualification.
To be a joint employer under the final rule, 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, according to the NLRB. The final rule defines what is considered "essential terms and conditions of employment," and the factors that constitute "direct and immediate control." The rule also provides a definition of what constitutes "substantial" direct and immediate control and clarifies that control exercised on a sporadic, isolated, or minimal basis does not qualify as "substantial."
Evidence of indirect or contractually reserved control over essential employment terms may be a consideration for finding joint-employer status under the final rule, but such conditions cannot give a joint-employer status without meeting the criteria for substantial direct and immediate control. Routine elements of an "arm's length" contract cannot turn a contractor into a joint employer, according to the NLRB.
"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," NLRB chairman John Ring said in the announcement of the final joint-employer 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.”
If two entities are joint employers, both are potentially liable for unfair labor practices committed by the other and both are subject to economic pressure if there is a labor dispute.
The National Association of Home Builders (NAHB) said the ruling was a "positive development" because it provides small businesses with clarity and certainty by restoring the traditional definition of joint employment. The Associated Builders and Contractors (ABC) also applauded the joint employer rule for providing "clear criteria" for companies to apply. ABC said with the rule, contractors will be better able to work and coordinate with multiple employers without fear of being unexpectedly found to be joint employers.
The final joint-employer rule will be effective April 27, 2020.