In 2015, the Democrat-controlled National Labor Relations Board (NLRB) adopted a new standard for determining when two employers are jointly covered under federal labor laws applicable to a single set of employees. The 2015 rule was purportedly based on common law standards, and held that two employers could be considered joint where both exercise control over the terms and conditions of work. However, the rule adopted by the NLRB allowed for a declaration of joint employment where the control was only “indirect or reserved,” and never actually applied by the second company. For example, a franchise agreement gives the franchisor certain rights to apply operational standards that impact the employees. Even if the franchisor never attempted to assert those rights, under the 2015 rule it could be deemed a joint employer.

After Republican appointees took control of the NLRB, they wasted little time issuing a new rule in 2020 that discarded the 2015 definition of joint employer in favor of one that requires demonstration of actual control by the second company over the workers’ terms and conditions of employment.

Democrats recently retook control over the agency, and earlier this week unsurprisingly proposed discarding the 2020 rule, reinstating one that is similar to the 2015 version. Bowing to federal court comments about the statutory definition of employer in the National Labor Relations Act (NLRA), the NLRB says that indirect or reserved control is enough to establish joint employment, but only where such control affects “essential” terms and conditions of employment. Exactly what terms are considered essential is not made clear in the proposal.

The NLRB is accepting comments on the proposed rulemaking through November 21. If finalized, the rule would expand the universe of companies subject to unfair labor practice claims, especially franchisors. This definition could also influence other federal agencies’ definitions of joint employment under different federal laws. The new rule is likely to face court challenges, and certainly would be subject to reversal if Republicans regain control of the NLRB in the future.

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