National Labor Relations Board to Issue Joint Employer Final Rule


The National Labor Relations Board (NLRB) on Feb. 26 is issuing its Final Rule governing joint-employer status under the National Labor Relations Act. The final rule reinstates the traditional joint-employer standard while further clarifying the standard by providing definitions for key terms.

NATSO advocated for the actual exercise of control as a prerequisite to a joint employer finding to enhance certainty and predictability to an area of the law that has in recent years been marred with ambiguity.

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 “essential terms and conditions of employment,” as well as what constitutes “direct and immediate control.” Essential terms and conditions of employment are further defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

NLRB determines in the final rule that an entity must exercise direct control over one or more of the defined essential terms and conditions of employment. NLRB goes on to explain that while an entity may show (1) indirect control of essential terms and conditions of employment, (2) contractually reserved but never exercised authority over the essential terms and conditions of employment, or (3) control over mandatory subjects of bargaining other than the essential terms and conditions of employment, that control can only serve to supplement proof that an entity directly and immediately controls an essential term and condition of employment.

The Coalition for a Democratic Workplace, of which NATSO is a member, applauded the Board for finding a comprehensive solution to this complex issue.

CDW said in a statement that the Final Rule “ensures employers have the stability and predictability necessary to run their businesses, continue to expand, and create more jobs. This bright line rule provides employers and employees alike with clear understanding of how the joint-employer standard will be implemented and interpreted. It successfully ensures employers are held accountable to their employees while protecting them from wrongful liability.”

The Department of Labor on Jan. 12 promulgated its Final Rule on Joint Employer Status under the Fair Labor Standards Act. The 164-page Final Rule consolidated a four-factor balancing test introduced in the April 2019 proposed rule. In comments filed with the Agency, NATSO supported the Department’s adoption of the four-factor test for determining if two or more entities are joint employers of a group of employees.  

Until August 2015, NLRB required joint employers to exercise “direct and immediate” control over the employment of another entity’s employees. NLRB ruled in Browning-Ferris, however, that an entity could be considered a joint employer even if its control was “indirect, limited and routine, or contractually reserved but never exercised.”

Subsequently, the United States Court of Appeals for the District of Columbia Circuit decided in December 2018 that NLRB failed to properly define “indirect control” over employment and remanded the case to NLRB. NLRB separately issued a proposed rule in September 2018 to clarify the requirements to determine joint-employer status.

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