NLRB Issues Pro-Employer Joint Employment Rule

The joint employment scenario typically arises when an employee performs work on behalf of two or more businesses, usually those with a contractual relationship concerning the employees. Given the potential for joint employment status, companies have been wary about their relationships with franchisees, temporary employment agencies, janitorial and cafeteria services, and others. Joint employment has a profound impact in a unionized setting. For example, non-unionized joint employers must theoretically engage in collective bargaining over the terms and conditions of their workers’ employment. Further, each employer will be jointly and severally liable for the other’s unfair labor practices.

The NLRB’s new rule has made a finding of joint employer status considerably more unlikely. According to the NLRB, to be a joint employer, 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 does not, constitute “direct and immediate control” of 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 minimal basis will not be deemed “substantial.”

The definition of joint employment has been hotly contested depending on which administration controlled the NLRB. This has caused litigation for franchisors such as McDonald’s USA, LLC, which endured years of litigation when the NLRB tried to hold McDonald’s liable for the unfair labor practices of its franchisees. Another example is Cable News Network, which recently paid $76 Million to resolve a 15-year dispute in which the NLRB alleged, among other things, that CNN jointly employed camera crews working for a company in a contractual relationship with CNN.

More good news is on the horizon for employers. On January 12, 2020, the US Department of Labor (the DOL) announced that it will be issuing a final rule on joint employment under the Fair Labor Standards Act (the FLSA). The final FLSA rule will be effective on March 16, 2020. Please see our January 14, 2020 Alert on the new FLSA rule. DOL has asserted that its new rule is consistent with that of the NLRB. Finally, the Equal Employment Opportunity Commission (the EEOC) has announced plans to issue a revised joint-employer rule. The EEOC rule will impact federal laws such as Title VII, the Americans with Disabilities Act and the Age Discrimination in Employment Act. It is likely to be consistent with the rules issued by the NLRB and DOL.

DOL and the NLRB contend their final rules will provide stability and clarity for employers. That remains to be seen given the likely court challenges which will be brought by employee advocacy groups and the potential for a new administration’s control of the NLRB, DOL and the EEOC after the presidential election.