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National Labor Relations Board Finalizes Rule on Joint Employer Status

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On February 26, 2020, the National Labor Relations Board (NLRB) will issue its finalized rule that will make it more difficult to hold companies liable for unlawful labor practices by franchisees and contractors.  The long awaited “joint employer rule” was first proposed in September 2018 in direct response to a 2015 decision by NLRB members appointed by President Barack Obama, which held that indirect control over working conditions could create a joint-employment relationship.  This is an important decision for franchisors like McDonalds or Burger King, but will also greatly impact many companies that utilize staffing agencies.

According to the Final Rule, “an entity may be considered a joint employer of a separate employer’s employees only if the two share or codetermine the employees’ essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”  According to the NLRB’s press release, “The final rule restores the joint-employer standard that the Board applied for several decades prior to the 2015 decision in Browning-Ferris, but with greater precision, clarity, and detail that rulemaking allows.”

The Final Rule makes clear that in order to be a joint employer, a business must not only possess, but actually exercise “substantial direct and immediate control over one or more essential terms and conditions of employment.”  Evidence a business has indirect and “contractually reserved but never exercised control” over essential terms and conditions is probative, but not determinative of joint employer status.  Finally, the Rule makes clear that “joint-employer status cannot be based solely on indirect influence or a contractual reservation of a right to control that has never been exercised.”

The Final Rule will go into effect on April 27, 2020.  A copy of the Final Rule can be found here:  https://www.federalregister.gov/documents/2020/02/26/2020-03373/joint-employer-status-under-the-national-labor-relations-act

If you have any questions or concerns regarding the Final Rule on Joint Employer Status, please contact Joel Aziere at JAziere@buelowvetter.com or (262)364-0250 or your Buelow Vetter attorney.

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