NLRB Issues Final Joint Employer Rule

States Sue DOL Over Its Recent Joint Employer Final Rule

The National Labor Relations Board (NLRB) released a final rule that determines if companies are classified as joint employers under the law. Under the final rule, a company is considered a joint employer of another company's employees only if the two share or co-control the employees’ “essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.” In a statement, NLRB Chairman John Ring said that the final rule “gives our joint-employer standard the clarity, stability, and predictability that is essential to any successful labor-management relationship and vital to our national economy.” The final rule is set to take effect on April 27, 2020.

The announcement comes one month after the Department of Labor (DOL) issued a similar rule to revise and update its regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA). The DOL final rule provides updated guidance for determining joint employer status when an employee performs work for his or her employer that simultaneously benefits another individual or entity, including guidance on factors that are not relevant when determining joint employer status. The effective date of the rule is March 16, 2020.

As expected, DOL's rule established a "high bar" for joint-employment under the FLSA, which is supported by PMAA and is an important shift away from Obama-era policy.

The final rule:

• Specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee;
• Provides a four-factor test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee, by weighing whether the business, with regard to its franchisee or contractor, maintains the power to hire and fire; to supervise schedules and “conditions of employment;” to set pay; and to keep employment records; and
• Clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA; and specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely.

The final rule also provides several examples applying the Department’s guidance for determining FLSA joint employer status in a variety of different factual situations. Click here for more information.

However, this week, seventeen states and the District of Columbia filed a lawsuit to overturn the joint employer final rule issued by the DOL. In the complaint, the state attorneys general argued that the final rule is “arbitrary and capricious.”

From PMAA