NLRB Issues Joint Employer Rule | Practical Law

NLRB Issues Joint Employer Rule | Practical Law

The National Labor Relations Board (NLRB) has issued a final joint employer rule under the National Labor Relations Act (NLRA).

NLRB Issues Joint Employer Rule

Practical Law Legal Update w-024-2036 (Approx. 8 pages)

NLRB Issues Joint Employer Rule

by Practical Law Labor & Employment
Law stated as of 08 Mar 2024 • USA (National/Federal)
The National Labor Relations Board (NLRB) has issued a final joint employer rule under the National Labor Relations Act (NLRA).
On February 26, 2020, the NLRB published its final rule establishing the standard for determining whether two employers are joint employers under the NLRA. The rule is subject to Congressional review but is scheduled to be effective April 27, 2020 and apply prospectively. (Joint Employer Status Under the National Labor Relations Act, 85 FR 11184 (Feb. 26, 2020).)
Under the rule, an employer may be considered a joint employer of a separate employer's employees only if the two employers share or codetermine the employees' essential terms and conditions of employment. More specifically, a party asserting that an entity is a joint employer must prove that the alleged joint employer possesses and exercises substantial direct and immediate control over one or more of the essential terms or conditions of employment, where:
  • The essential terms and conditions of employment are exclusively defined as:
    • wages;
    • benefits;
    • hours of work;
    • hiring;
    • discharge;
    • discipline;
    • supervision; and
    • direction.
  • The substantial direct and immediate control:
    • must consist of direct and immediate control that has a regular or continuous consequential effect on another employer's employee's essential terms or conditions of employment; and
    • may not consist of rights to control that are exercised only on a sporadic, isolated, or de minimis basis.
Under the rule, an entity exercises direct and immediate control over another employer's employees':
  • Wages if it actually determines the wage rates, salary, or other rate of pay paid to those individual workers or job classifications.
  • Benefits if it actually determines the fringe benefits to be provided or offered to those workers, including selecting:
    • the benefit plans (such as health insurance plans and pension plans); or
    • the level of benefits provided.
  • Hours of work if it actually determines:
    • work schedules; or
    • work hours, including overtime.
  • Hiring if it actually determines which particular workers will and will not be hired.
  • Discharge if it actually decides to terminate another employer's employee.
  • Discipline if it actually decides to suspend or otherwise discipline another employer's employee.
  • Supervision by actually:
    • instructing those workers how to perform their work; or
    • issuing employee performance appraisals.
  • Direction by assigning particular workers their individual:
    • work schedules;
    • positions; and
    • tasks.
Conversely, an entity does not exercise direct and immediate control over another employer's employees':
  • Wages by entering into a cost-plus contract, with or without a maximum reimbursable wage rate.
  • Benefits by permitting another employer, under an arm's-length contract, to participate in its benefit plans.
  • Hours of work by establishing:
    • an enterprise's operating hours; or
    • when it needs the services provided by another employer.
  • Hiring by:
    • requesting changes in staffing levels to accomplish tasks; or
    • setting minimal hiring standards such as those required by government regulation.
  • Discharge by:
    • bringing misconduct or poor performance to the attention of another employer that makes the actual discharge decision;
    • expressing a negative opinion of another employer's employee;
    • refusing to allow another employer's employee to continue performing work under a contract; or
    • setting minimal standards of performance or conduct, such as those required by government regulation.
  • Discipline by:
    • bringing misconduct or poor performance to the attention of another employer that makes the actual disciplinary decision;
    • expressing a negative opinion of another employer's employee; or
    • refusing to allow another employer's employee to access its premises or perform work under a contract.
  • Supervision by providing limited and routine instructions consisting primarily of telling another employer's employees:
    • what work to perform; or
    • where and when to perform the work, but not how to perform it.
  • Direction by:
    • setting schedules for a project's completion; or
    • describing the work to be accomplished on a project.
The rule also notes that:
  • Evidence of the following types of control may supplement or reinforce evidence of direct and immediate control, but cannot, standing alone, prove joint-employer status:
    • indirect control over essential terms or conditions of employment;
    • contractually reserved control over essential terms or conditions of employment that has not been exercised; or
    • control over mandatory subjects of bargaining other than essential terms and conditions of employment.
  • The NLRB determines joint-employer status based on the totality of relevant facts in each employment setting.
The final rule provides more definitions and examples of how facts are to be analyzed than the rule initially proposed on September 14, 2018 and recognizes that evidence of indirect control has probative value in the joint-employer analysis while not being dispositive (for more on the dramatic changes to the joint-employment law between 2015-2019, see Legal Update, NLRB Proposes Rule to Define Joint Employer).
With the new rule, the NLRB restores the direct and immediate control joint-employer standard it applied before the NLRB's 2015 decision in Browning Ferris Industries of California, Inc. (362 N.L.R.B. 1599, 1600 (2015) affirmed in part, reversed in part and remanded by 911 F.3d 1195 (D.C. Cir. 2018)). It attempts to reset and clarify the law by defining previously undefined terms and clarifying the value of evidence of indirect control, most notably through entities' contractually reserved but unexercised authority over other entities' employees.
Through this final rule, the NLRB has sought to resolve ongoing uncertainty in the legal landscape surrounding the joint-employment doctrine under the NLRA, and to promote greater predictability and consistency with respect to these critical determinations. With a narrower reading of joint employment, companies are less likely to be deemed joint employers.
The NLRB has noted the importance of setting a clearer joint-employer standard as a joint employment determination affects whether an entity may be:
  • Required to engage in collective bargaining with a union representing the employees.
  • Subjected to lawful strike, picketing, or boycott activity to the same extent as the other entity.
  • Jointly and severally liable for the other entity's unfair labor practices.

UPDATE:

On September 7, 2022, the NLRB published a Notice of Proposed Rulemaking (NPRM) for public inspection concerning the agency's standard for determining joint-employer status under the NLRA. The NPRM proposes to rescind and replace the agency's joint-employer rule that took effect on April 27, 2020. A majority of the NLRB proposes that the agency should consider direct evidence of a putative employer's control over employees' employment terms and conditions or evidence of the putative employer's reserved or indirect control over those terms when analyzing joint-employer status. (Standard for Determining Joint-Employer Status, 87 Fed. Reg. 54641 (Sept. 7, 2022); for more information, see 2022 Traditional Labor Law Developments Tracker: National Labor Relations Board (NLRB).)

UPDATE:

On October 14, 2022, the NLRB extended the deadline for initial comments on the NPRM to December 7, 2022. Comments replying to comments submitted during the initial comment period are now due by December 21, 2022. (87 Fed. Reg. 63465-01 (Oct. 19, 2022); for more information on the proposal, see 2022 Traditional Labor Law Developments Tracker: National Labor Relations Board (NLRB).)

UPDATE:

On October 27, 2023, the NLRB issued a final rule rescinding the 2020 rule and establishing a new standard for determining joint-employer status under the NLRA (88 Fed. Reg. 73946 (Oct. 27, 2023); for more information on the final rule, see 2023 Traditional Labor Law Developments Tracker: National Labor Relations Board (NLRB)).

UPDATE:

On February 22, 2024, the US District Court for the Eastern District of Texas issued an order staying the effective date of the rule for two weeks, until March 11, 2024.

UPDATE:

On March 8, 2024, the US District Court for the Eastern District of Texas granted the Chamber of Commerce's motion for summary judgment and issued a declaratory judgment vacating the NLRB's 2023 Joint-Employer Rule (Chamber of Com. of the USA v. NLRB, (E.D. Tex. Mar. 8, 2024)). For more information, see 2024 Traditional Labor Law Developments Tracker: Federal Administrative Agency Regulations and Rulemaking: National Labor Relations Board (NLRB).