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NLRB Issues Final Joint Employer Rule

February 26, 2020

The National Labor Relations Board (“NLRB”) has updated its joint employment rule (the “Final Rule”).  The Final Rule, which will be published in the February 26, 2020 Federal Register effectively overturns the joint-employer standard established in the 2015 Browning-Ferris Industries decision, which expanded the definition of joint employer based on indirect or limited control.  NLRB Chairman John Ring explained that “[t]his [F]inal [R]ule 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.”    

The Final Rule restores the prior joint employer test and provides that an entity may be considered a joint employer of a separate employer’s employees only if it possesses and exercises “substantial direct and immediate control” over the employees’ essential terms of employment.  These essential terms are “exclusively defined,” as wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction.  The Final Rule also explains that even if an employer exercises direct control over another employer’s workers, it will not be held to be a joint employer if such control is “limited and routine.”

The Final Rule will take effect April 27.

Key Takeaway

The pro-employer Final Rule will aid employers by reducing a companies’ risk of receiving unfair labor practice charges filed with the NLRB.  In many cases, it may also eliminate companies’ responsibility to bargain with franchise or subcontracted workers if the workers choose to form a union.

This article was drafted by Melissa Posner Jarrett, an associate in Spencer Fane’s Phoenix, Arizona office.