Feb 25, 2020 - 12:00pm

NLRB Announces Joint Employer Final Rule


Executive Director, Labor Policy

The National Labor Relations Board (NLRB) today announced that it would issue tomorrow its final joint employer rule, which observers of labor policy have anticipated since it was first proposed in September 2018.

As expected, the Board’s final rule establishes a straightforward standard for joint employment stating that “an entity may be considered a joint employer of a separate employer’s employees only if the two share or codetermine the employees’ essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”

The crux of the new standard is that the exercise of control must be of such a significant nature that it meaningfully impacts terms and conditions of employment.  Moreover, it also “makes evidence of indirect control and contractually reserved but unexercised authority probative of joint-employer status insofar as it supplements and reinforces evidence of direct and immediate control over essential terms and conditions of employment.” In other words, indirect or unexercised control on their own will not establish joint employment.

In setting this standard, the NLRB rejected the theory of joint employment adopted by the agency’s dubious 2015 ruling in Browning-Ferris. That decision—issued by a Board majority appointed by President Barack Obama—created a new standard that upended the decades-old understanding of joint employment. Instead, Browning-Ferris held employers engaged in numerous common businesses relationships—such as franchising and contracting—potentially liable for employees they did not actually employ and workplaces they did not actually control.

While Browning-Ferris created a new precedent as a matter of case law, the Board’s final rule was issued using the more rigorous rulemaking process under the Administrative Procedures Act (APA). As such, any effort to amend or rescind the new standard will be required to follow the same procedure, which is more difficult and can take years to complete.

That fact is significant given the tortured history of this issue at the NLRB. After the Board issued Browning-Ferris, employers struggled to grasp its amorphous and expansive definition of joint employment, which prompted significant efforts to reverse the Board’s overreach by way of judicial challenge and proposed legislation.

Compounding the unsettling effect of Browning-Ferris itself was the ping-pong match that the legal battle over it became. As the United States Court of Appeals for the District of Columbia Circuit considered the company’s challenge, the Board’s Republican majority issued a short-lived decision in a case called Hy-Brand that aimed to reverse Browning-Ferris, which then triggered a series of delaying events in court. The Board then vacated the Hy-Brand decision for procedural reasons, thus restoring Browning-Ferris. The D.C. Circuit subsequently upheld that decision in part on December 28, 2018, after the new rule had been proposed. 

The NLRB’s final rule comes on the heels of another joint employer rule issued by the U.S. Department of Labor’s Wage & Hour Division (WHD). Taken together, the pair reflects an effort by the current administration to reverse the ill effects of the Obama-era WHD director, David Weil, who spearheaded an effort among various agencies to broaden the scope of what defines joint employment based on a cynical academic theory he concocted.

Given the significant damage caused by Weil's joint employer theory and the NLRB's application of it, the new rule restoring common sense is cause for celebration, to be sure. 

 

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About the Author

About the Author

Sean P. Redmond
Executive Director, Labor Policy

Sean P. Redmond is Executive Director, Labor Policy at the U.S. Chamber of Commerce.