Today, February 26, 2020, the National Labor Relations Board (NLRB) published its final rule for whether affiliated businesses are “joint employers” for purposes of labor law. This rule has broad reach in the franchising and staffing industries.

The new rule replaces a test created by the NLRB under the Obama Administration in 2015 in Browning-Ferris Industries. Under Browning-Ferris Industries, a company could face joint employer liability if it had “indirect control” over another company’s employees or reserved the right to exert control over another company’s employees.

This new rule replaces the Browning-Ferris Industries test with the joint employment test that was in place before  2015. Companies are only joint employers if the second company has “substantial direct and immediate control” over another company’s employees. That substantial direct and immediate control must be over one or more essential terms and conditions of employment, such as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

If a company is found to be a joint employer, it can be held liable for the labor law violations of the employing company, regardless of who committed the violation.

The rule will take effect on April 27, 2020. The significance of this rule is that it cannot be simply undone by a subsequent Board under another administration with a decision in a case. A different administration would have to go through the notice-and-comment rulemaking process.

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