The National Labor Relations Board issued its final rule governing joint-employer status under the National Labor Relations Act. The final rule restores the joint-employer standard applied prior to the 2015 decision in Browning-Ferris, but with greater clarity.

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 what are considered “essential terms and conditions of employment,” and what does, and what does not, constitute “direct and immediate control” as to each of these 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 de minimis basis is not “substantial.”

Evidence of indirect and/or contractually reserved control over essential employment terms may be a consideration for finding joint-employer status under the final rule, but it cannot give rise to such status without substantial direct and immediate control. Importantly, the final rule also makes clear that the routine elements of an arm’s-length contract cannot turn a contractor into a joint employer.

The joint-employer standard under the NLRA determines whether a business is an employer of employees directly employed by another employer altogether. If two entities are joint employers, both must bargain with a union that represents the jointly employed employees, both are potentially liable for unfair labor practices committed by the other, and both are subject to union picketing or other economic pressure in the event of a labor dispute.

“With the completion of today’s rule, employers will now have certainty in structuring their business relationships, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with whom they have a collective-bargaining relationship,” NLRB Chairman John F. Ring stated.

Click here to view the rule’s Fact Sheet.

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