The National Labor Relations Board recently proposed a rule that dictates that two entities will be joint employers only if each exercises substantial direct and immediate control over employees. The NLRB seeks to establish a stricter joint employer standard by regulation. Doing so would add more permanence to the joint employer standard than interpreting it through case law, which often changes from one presidential administration to the next.
The NLRB’s proposed rule enunciates the following tests for joint employer status:
An employer, as defined by Section 2(2) of the National Labor Relations Act, may be considered a joint employer of separate employer’s employees only if the two employers share or co-determine the employees’ essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial, direct, and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.
The Board included several examples with its proposed rule to help clarify what constitutes direct and immediate control over essential terms and conditions of employment. For example, Company A supplies labor to Company B and, pursuant to the contract between them, Company A is required to pay a particular wage rate. In that situation, Company B exercises direct and immediate control over wage rates. In another example, a franchisor requires its franchisee to operate the franchisee’s store between specified hours. The franchisor does not exercise direct and immediate control over the essential terms and conditions of employment of the franchisee’s employees because the franchisor is not involved in scheduling the franchisee’s employees or in determining shift duration.
Assuming this become the new standard, and thus the law, it will take many cases and years to fully flush out the details of when companies are and are not joint employers.
Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can reach Matt by calling him at (614) 843-3041 or emailing him at Matt@MattAustinLaborLaw.com.