Today, February 26, 2020, the National Labor Relations Board (“NLRB”) issued the final version of its new rule for determining joint-employer status (the “Rule”). The Rule restores the joint-employer standard that the Board applied for several decades prior to the 2015 decision in
, but with the greater precision, clarity, and detail that rulemaking allows. The Rule will go into effect on April 27, 2020.
To be considered a joint employer under the 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 Rule defines key terms, including:
- what constitutes “essential terms and conditions of employment”: “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction”; and
- what does, and what does not, constitute “direct and immediate control” as to each of these essential employment terms.
The Rule also defines what constitutes “substantial” direct and immediate control and makes clear that control exercised on a sporadic, isolated, or
basis is not “substantial.”
The Rule replaces the test adopted in 2015 that required only “indirect control” to establish joint-employer status. The 2015 test resulted in some previously-uninvolved employers being forced into costly labor disputes and negotiations. The 2015 test was widely criticized by the business community for creating a serious economic impact on some employers. As compared to the 2015 test, the new Rule does not classify businesses that exercise indirect control over third-party employees as joint employers.
The new Rule provides better guidelines for employers after several years of confusion regarding the joint-employer test. In announcing the 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.” Chairman Ring added that the new Rule provides guidance to employers, employees, and unions by giving:
- employers “certainty in structuring their business relationships”;
- employees “a better understanding of their employment circumstances”; and
- unions “clarity regarding with whom they have a collective-bargaining relationship.”
to view the NLRB’s Fact Sheet on the new Rule.
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