NLRB Issues Joint Employer Rule
Volume: 19 | Issue: 3
March 11, 2020
The National Labor Relations Board (NLRB) declared in September 2018 that it intended to revise the standard it will use to determine when two or more separate companies are a “joint employer” of employees for purposes of collective bargaining under the National Labor Relations Act (NLRA). The NLRB recently announced this revised standard.
The joint-employer standard is important to nearly all employers who use other companies, vendors, or contractors to assist them with their employees or business or who are in relationship with other companies. For example, the joint-employer standard asks whether a parent and a subsidiary company are truly separate employers or whether they should be considered one employer for purposes of collective bargaining. The joint-employer standard seeks to determine whether a staffing company that provides employees is a joint employer with its customer client, or whether a franchisee’s employees are also employees of the franchisor. If a company is found to be a joint employer with another company, both companies will be required to bargain with a union elected by the employees and both will be liable for each other’s unfair labor practices.
The NLRB’s new standard provides that 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.” Essential terms and conditions of employment are wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.
Evidence of indirect and/or contractually reserved control over essential employment terms may be a consideration for finding joint-employer status under the new standard, but it cannot give rise to such status without substantial direct and immediate control. Control exercised on a sporadic, isolated, or de minimis basis is not “substantial.”
Finally, the following business practices do not evidence joint-employer status: entering into a cost-plus contract (with or without a maximum reimbursable rate); setting minimal standards for hiring, performance, or conduct, such as those required by government regulation; requiring the contractor to institute safety or sexual-harassment policies; a franchisor’s protection of its trademark or service mark; or anything else that promotes legal compliance or sets the objectives, basic ground rules, or expectations for a contractor’s performance.
The new standard becomes effective April 27, 2020. If you have questions about joint-employer status, please contact a KZA attorney.
KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.