NLRB Issues Final Rule on Joint Employer Standard, Eliminates Browning-Ferris Test

The Browning-Ferris saga appears to be coming to a close. In 2015, the National Labor Relations Board (NLRB) issued a ruling saying that joint employer status can be determined based on control, direct or indirect, of the worker’s terms and conditions of employment. After some back and forth on the validity of this rule, the NLRB recently issued its final rule defining joint employer status under the National Labor Relations Act (NLRA), aligning it with the U.S. Department of Labor’s own rule, and invalidating the standard set forth in Browning.

Specifically, joint employer status is determined when two employers “share or codetermine the employees’ essential terms and conditions of employment.” In contrast to Browning, employers must exercise “substantial direct and immediate control” over one or more essential terms or conditions of their employment, including wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. “[C]ontrol is not ‘substantial’ if only exercised on a sporadic, isolated, or de minimis basis.”

Additionally, evidence of indirect control or a contractual right to control but never exercised is “probative of joint employer status,” but only to the “extent it supplements and reinforces evidence of the entity’s possession or exercise of direct and immediate control.” Further, there appears to be some relief for franchisors who do not exercise direct and immediate control over benefits by permitting another employer, under an arm’s-length contract, to participate in its benefit plans.

Finally, each relationship must be analyzed on a case-by-case basis based on their particular circumstances. The burden of proof is on the party claiming joint employer status. While this may set a new bright line rule, employers should still have their joint employer relationships reviewed by legal counsel for potential liability.

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