New NLRB Rule Defines the Standard for Joint Employer Status

After a series of employer friendly rule changes published in December 2019, on January 26, 2020 the National Labor Relations Board (“NLRB”) published a rule establishing a standard to be used when determining joint employer status under the National Labor Relations Act. The NLRB published this new rule to foster predictability and consistency in determining joint employer status which it believes will enhance labor-management stability. This rule is critical in that it returns a more traditional interpretation of joint employer status which the previous Board had attempted to expand upon.

Under the final rule an entity may be considered a joint employer of a separate employer’s employees only if the two employers share or co-determine the employee’s essential terms and conditions of employment. The essential terms and conditions of employment are wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. An employer will not be considered a joint-employer if it does not possess and exercise substantial direct and immediate control over one or more of the essential terms and conditions of employment to the extent that the employer’s involvement meaningfully affects matters related to the employment relationship. Joint-employer status can only be based on evidence of direct and immediate control. Evidence of an employer’s indirect control, or contractually reserved but never exercised right to control, over the essential terms and conditions of employment or mandatory subjects of bargaining may only supplement evidence of substantial direct and immediate control.

Even though the NLRB specifies what constitutes direct and immediate control over each essential term of employment, direct and immediate control over one or more essential terms of employment does not automatically mean an employer is a joint employer for the purposes of the NLRA. The level of control must be substantial, a determination that will be based on the totality of all relevant facts in each particular case.

Joint employer status can result in additional obligations and liability on the putative employer. If it is determined that an employer is a joint employer, it must participate in collective bargaining (when applicable) and may be held jointly and severally liable for any other joint employer’s unfair labor practices.

While the NLRB’s final rule relies on a factor-based analysis, it places the burden of proving joint employer status on the party asserting it and focuses on an employer’s control of the employees and their essential terms and conditions of employment. The rule provides plenty of room for employers to negotiate and work with other employers before exposing themselves to liability on their behalf. Going forward, employers should have more control over whether they are deemed to be joint employers under the NLRB’s new rule.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.