The National Labor Relations Board has issued a final rule governing joint-employer status under the National Labor Relations Act. This rule, published in the Federal Register on February 26, 2020, will take effect in late April 2020.
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.
The final rule defines certain key terms contained therein, including what are “essential terms and conditions of employment,” (such as wages, benefits, hours of work, hiring and discharge) explains what constitutes, and what does not constitute, “direct and immediate control” over these terms, and what “substantial” control means (more than control exercised on a sporadic, isolated or de minimis basis). It goes on to specify 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 of joint-employer status, but only to the extent that it supplements and reinforces evidence of direct and immediate control.
The previous standard established by the Board’s 2015 decision in Browning-Ferris unsettled the law in this area by holding that a company could be deemed a joint employer if its control over the essential terms and conditions of another business’s employees was merely indirect, limited and routine, or contractually reserved but never exercised. The NLRB posed that one reason for addressing the issue via regulation as opposed to case adjudication, as in previous years, was that rulemaking allowed it to set a standard that will be less prone to change without warning.
In announcing the final rule, NLRB Chairman John F. Ring stated, “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.” Opponents of the new rule, such as AFL-CIO President Richard Trumka, believe the rule will open the door for businesses to “manipulate the system” to limit workers from being able to bargain for fair pay and benefits by “hiring contractors to serve as a shield between the companies and their obligations to employees.”
This rule has since been met with legal challenges – a coalition of state attorneys general, including seventeen states and the District of Columbia, have filed suit alleging that the new rule is arbitrary and capricious under the Administrative Procedure Act. The states, if able to establish standing, will allege harm including decreased worker wages, reduced tax revenue, and significant anticipated administrative expenses. New York v. Scalia, S.D.N.Y., No. 20-01689