New "Joint Employer" Federal Rule Proposed

The National Labor Relations Board (NLRB) has proposed a new federal rule to solve the controversial issue of whether one employer is considered a "joint employer" of another's employees.  Under the proposed rule, an employer may be found to be a joint employer of another employer's employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine.  Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint employer relationship.

The proposed rule reflects the NLRB majority's view that the Labor Act's intent is best supported by a joint employer doctrine that does not draw third parties, who have not played an active role in deciding wages, benefits or other essential terms and conditions of employment, into a collective-bargaining relationship for another employer's employees.  The "poster child" for the issues is considered by many to be McDonald's, who is fighting a case in which a complaint alleges it has enough control of the franchisees and their workers to share legal responsibility in an unfair labor practice case.  The concept applies to potentially a large portion of American employers, including those in the GIG economy, and those that rely on contracting or subcontracting out some of their work. 

The bottom line is that the proposed new rule would require companies to exercise substantial, "direct and immediate" control over the most important terms of a worker's job, like discipline or the power to hire and fire, to be considered joint employers.  During the Obama Administration the then-NLRB majority introduced a new standard, under which a business could be considered a joint employer even if its control over another business's employees was only indirect and limited. 

Public comments are invited on all aspects of the proposed rule and must be submitted within sixty (60) days of the notice's publication in the Federal Register on September 14.  Comments may be submitted either electronically to www.regulations.gov, or by mail or hand-delivery to Roxanne Rothschild, Deputy Executive Secretary, National Labor Relations Board, 1015 Half Street, S.E., Washington, D.C.  20570-0001.