On Feb. 26, the National Labor Relations Board (NLRB) issued a new rule regarding the standard for determining the status of a joint employer under the National Labor Relations Act (NLRA). The new rule effectively disposes of the NLRB's previous standard, defined in Browning-Ferris Industries, 362 NLRB No. 186 (2015), which stated that a business qualifies as a joint employer if it exhibits "indirect" control or the ability to exert such control over employees.

Under the new rule, a business will only be considered a joint employer of another employer's employees if the business possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of the employees' employment. The rule also defines the term "substantial direct immediate control" as control that has a regular or continuous consequential effect on an essential term or condition of employment of another employer's employees. Such control is not "substantial" if it is only exercised on a sporadic, isolated, or de minimis basis.

The NLRB further clarified the list of essential terms and conditions it will consider when making a determination regarding whether a joint-employer status exists. This list includes wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. Additionally, evidence of indirect and contractually-reserved-but-unexercised control over essential terms and conditions of employment is still considered probative, but only to the extent that it supplements and reinforces evidence of direct and immediate control.

New Rule Provides Clear Guidance

Recognizing that a joint-employer finding has significant implications for employers under the NLRA regarding collective bargaining, strike activity, and unfair labor practice liability, the NLRB concluded that the purposes of the NLRA were not furthered under the Browning-Ferris standard. Specifically, the NLRB found that the previous standard improperly exposed an employer's direct business partner to joint-and-several liability even though the business partner did not actively participate in decisions regarding employees' wages, benefits, or other essential terms and conditions of employment. The new rule provides clear guidance for businesses regarding the essential factors that may give rise to joint-employer status. It further reduces businesses' risk of litigation and costs for unfair labor practices, and may eliminate their responsibility to bargain with subcontracted workers who form a union.

The NLRB previously attempted to overrule its decision in Browning-Ferris and return to the "direct and immediate" control standard through the issuance of a subsequent decision—Hy-Brand Industrial Contractors and Brandt Construction, 365 NLRB No. 156 (2017). However, following the issuance of the decision, the charging party in Hy-Brand filed a motion to recuse one of the NLRB's presiding board members who participated in the decision based on an alleged conflict of interest. The NLRB's Inspector General investigated the charging party's allegations and issued a report that concluded that the board member should not have participated in the decision due to a conflict of interest based on the board member's prior employment with a law firm that previously represented one of the alleged joint employers in Browning-Ferris. Based on the Inspector General's report, the NLRB elected to vacate its decision in Hy-Brand, thereby reinstating the Browning-Ferris standard.

Narrowing the Scope of Liability

The issuance of the NLRB's new rule represents the most recent instance of the Trump administration's objective to narrow the scope of liability for joint employers under federal law. Notably, on Jan. 16, the Department of Labor (DOL) issued a new rule that revised its interpretation of joint employer status under the Fair Labor Standards Act (FLSA), marking the first revision to its regulations in over 50 years. The stated intent of the DOL's new rule was to promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy.

Similarly, in November 2019, the Equal Employment Opportunity Commission (EEOC) announced that it planned to clarify its interpretation of joint-employer status under federal equal opportunity employment laws. The EEOC issued a notice of proposed rulemaking in December 2019 and the comment period was scheduled to expire in February 2020. The EEOC's final rule is expected to narrow the definition of joint employers like those issued by the NLRB and the DOL.

The NLRB's final rule is set to go into effect on April 27. Businesses that are subject to the NLRA should immediately review their staffing structures to determine the impact of the NLRB's new rule.

Barron Dickinson is an attorney with the Miami-based law firm Allen Norton & Blue, P.A., the statewide firm devoted exclusively to the practice of Labor and Employment Law. Contact him at [email protected].