In a positive development for businesses, the National Labor Relations Board (NLRB) has published a final rule setting a new, stricter standard for determining joint employer status under the National Labor Relations Act (NLRA). The new rule, which takes effect on April 27, 2020, comes on the heels of a recent rule published by the Department of Labor narrowing the scope of joint employment under the Fair Labor Standards Act.

The new NLRB rule specifies that a business will be deemed a joint employer of another entity’s employees only if the business has “substantial direct and immediate control” over one or more essential terms of employment. Essential terms of employment are wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

The rule replaces a more expansive Obama-era standard adopted by the Board in its 2015 Browning-Ferris decision. Browning-Ferris required only indirect control of another entity’s employees to demonstrate joint employer status, and thus swept many businesses under the joint employer umbrella. Under the new rule, however, indirect control is relevant only if it supplements evidence of direct and immediate control of an essential term of employment. For example, under Browning-Ferris, contractually reserving but never exercising authority to control essential terms and conditions of another businesses’ employees may have been sufficient to establish joint employer status. The new rule, on the other hand, specifies that such contractual provisions are not evidence of direct and immediate control. Likewise, certain business practices such as setting minimal standards for hiring, performance, or conduct are now specifically excluded as evidence determinative of an employment relationship.

The NLRB rule is good news for businesses, and particularly those that rely on franchisees and subcontracted workers. In particular, under the NLRA, if two businesses are joint employers both must bargain with the union representing jointly employed employees and both would potentially be liable for unfair labor practice violations committed by either entity and subject to lawful boycott and picketing targeting either entity. With a stricter standard for joint employment, it will be more difficult for franchisee employees to unionize across franchises in the first place and more difficult to hold companies liable for unfair labor practices by their contractors and franchisees.

To view the NLRB’s fact sheet on the new rule, click here.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Carolyn Rashby Carolyn Rashby

Carolyn Rashby provides business-focused advice and counsel to companies navigating the constantly evolving and overlapping maze of federal, state, and local employment requirements. Carolyn’s approach is preventive, while recognizing the need to set clients up for the best possible defense should disputes arise.…

Carolyn Rashby provides business-focused advice and counsel to companies navigating the constantly evolving and overlapping maze of federal, state, and local employment requirements. Carolyn’s approach is preventive, while recognizing the need to set clients up for the best possible defense should disputes arise.

As a senior member of Covington’s Institutional Culture and Social Responsibility Practice Group, Carolyn has co-led significant investigations into workplace culture, DEI issues, and reports of sexual misconduct and workplace harassment.

As an employment lawyer with over two decades of experience, Carolyn focuses on a wide range of compliance and regulatory matters for employers, including:

  • Conducting audits regarding employee classification and pay equity
  • Advising on employment issues arising in corporate transactions
  • Strategic counseling on a wide range of issues including discrimination and harassment, wages and hours, worker classification, workplace accommodations and leave management, performance management and termination decisions, workplace violence, employment agreements, trade secrets, restrictive covenants, employee handbooks, and personnel policies
  • Drafting employment contracts and offer letters, separation agreements, NDAs, and other employment agreements
  • Advising on employee privacy matters, including under the California Consumer Privacy Act
  • Providing guidance on use of AI in the workplace and development of related policies
  • Leading anti-harassment and other workplace-related trainings, for employees, executives, and boards

Carolyn also works frequently with the firm’s white collar, privacy, employee benefits and executive compensation, corporate, government contracts, and cybersecurity practice groups to ensure that all potential employment issues are addressed in matters handled by these groups.

Photo of Michelle Barineau Michelle Barineau

Michelle Barineau counsels clients on a broad range of labor and employment issues. She helps clients navigate matters involving discrimination, harassment, family and medical leave, wage and hour compliance, non-competition, trade secrets, and other issues arising under state and federal employment laws. She…

Michelle Barineau counsels clients on a broad range of labor and employment issues. She helps clients navigate matters involving discrimination, harassment, family and medical leave, wage and hour compliance, non-competition, trade secrets, and other issues arising under state and federal employment laws. She routinely provides guidance pertaining to employee handbooks, employment agreements, and workplace policies. Michelle also has experience investigating employment complaints and she frequently partners with white collar colleagues to conduct internal workplace culture assessments and audits in the wake of the #MeToo movement.