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New NLRB Rule Defining Joint-Employer Status to Take Effect

The National Labor Relations Board has announced the issuance of its final rule governing joint-employer status. The new rule, which was first proposed in September 2018 and has been the subject of extensive public comment, will become effective April 27, 2020.

The critical elements for finding a joint-employer relationship under the new rule is the possession and the exercise of substantial direct and immediate control over the terms and conditions of employment of those employed by another employer.  The essence of the new rule is described in the Board’s February 25, 2020 press release:

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 key terms, including what are considered “essential terms and conditions of employment,” and what does, and what does not, constitute “direct and immediate control” as to each of these essential employment terms. The final rule also defines what constitutes “substantial” direct and immediate control and makes clear that control exercised on a sporadic, isolated, or de minimis basis is not “substantial.”

Evidence of indirect and/or contractually reserved control over essential employment terms may be a consideration for finding joint-employer status under the final rule, but it cannot give rise to such status without substantial direct and immediate control. Importantly, the final rule also makes clear that the routine elements of an arm’s-length contract cannot turn a contractor into a joint employer.

The new rule marks a return to a standard similar to that which the Board followed from 1984 until 2015.  In 2015, in Browning-Ferris Industries, the Board adopted a much more liberal test under which a finding that the putative joint employer possessed indirect influence and the ability (including through a reserved contractual right) to influence terms and conditions, regardless of whether the putative joint employer actually exercised such influence or control, could result in it being held to be a joint-employer of a second employer’s employee.

As a practical matter, the standard under the Board’s new rule should make it much more difficult to establish that a company is a joint-employer of a supplier, contractor, franchisee, or other company’s employees. The new rule will mean that a party claiming joint-employer status to exist will need to demonstrate with evidence that the putative joint-employer doesn’t just have a theoretical right to influence the other employer’s employees’ terms and conditions of employment, but that it has actually exercised that right in a substantial, direct and immediate manner.

This new rule is likely to make it much more difficult for unions to successfully claim that franchisors are joint-employers with their franchisees, and that companies are joint-employers of personnel employed by their contractors and contract suppliers of labor, such as leasing and temporary agencies.

©2020 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 56

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About this Author

Steven M. Swirsky labor employment lawyer health care and life sciences attorney
Member of the Firm

STEVEN M. SWIRSKY is a Member of the Firm in the Labor and Employment and Health Care and Life Sciences practices, in the firm's New York office. He regularly represents employers in a wide range of industries, including retail, health care, manufacturing, banking and financial services, manufacturing, transportation and distribution, electronics and publishing. He frequently advises and represents United States subsidiaries and branches of Asian, European and other foreign-based companies.

Mr. Swirsky:

  • Advises employers on a full range of labor and...
212-351-4640
Adam C. Abrahms Labor Management Relations attorney Healthcare law lawyer
Member

ADAM C. ABRAHMS is a Member of the Firm in the Labor and Employment and Health Care and Life Sciences practices, in the firm's Los Angeles office, where he serves as a member of the firm's Labor Management Relations practice group. He has devoted his practice almost exclusively to aiding employers in developing strategies to remain union-free and, in organized operations, to securing and expanding management rights.

Mr. Abrahms:

  • Represents clients before the National Labor Relations Board and other federal and state agencies, and in federal and state courts
  • Counsels and represents management on maintaining non-union status including union organizing and representation elections, corporate campaigns, supervisory education and training, preventative programs, and response strategies
  • Negotiates initial and successor collective bargaining agreements, mid-term negotiations, effects negotiations, and closing agreements, including strong pro-employer management rights, arbitration, successorship, and zipper clauses, and multi-unit, multi-location, multi-employer, and multi-union bargaining
  • Represents employers in unfair labor practices proceedings and arbitrations
310-557-9559
Mike Ferrell Employment Lawyer Epstein Becker Green
Associate

MICHAEL (“MIKE”) S. FERRELL is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the Chicago office of Epstein Becker Green. Mr. Ferrell provides clients with skilled, practical counseling on labor and employment matters to achieve their business and litigation objectives. And he helps clients identify risks in the context of business decisions in order to minimize unnecessary exposure and be in the best position for a successful outcome in the event of litigation or a labor dispute. His practice extends nationwide and includes employers...

312-499-1480