Executive Summary
The National Labor Relations Board adopts a joint employer rule that negates indirect control and explicitly limits the terms and conditions of employment which may be analyzed when determining if two or more entities are joint employers.
Analysis
On February 26, 2020, the National Labor Relations Board (“NLRB”) released its final rule regarding the determination of joint employer status under the National Labor Relations Act (“NLRA”). The rule’s summary provides the following:
The National Labor Relations Board (NLRB or Board) has decided to issue this final rule for the purpose of carrying out the provisions of the National Labor Relations Act (NLRA or Act) by establishing the standard for determining whether two employers, as defined in Section 2(2) of the Act, are a joint employer under the NLRA. The Board believes that this rulemaking will foster predictability and consistency regarding determinations of joint-employer status in a variety of business relationships, thereby enhancing labor-management stability, the promotion of which is one of the principal purposes of the Act. Under this 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 or work, hiring, discharge, discipline, supervision, and direction.
In the final publication concerning the new rule, the Board mentioned the franchise industry more than 50 times and refuted various previous theories regarding joint employer liability that have been asserted against the franchise industry.
The rule will take effect on April 27, 2020.
Looking Forward
In a not so subtle nod to the instability that has run rampant through numerous industries due to the ever present threat of yet another union appeasing joint-employer test, the Board echoed the Department of Labor’s sentiments when it issued this new rule when it stated that this new rule will “foster predictability and consistency regarding determinations of joint-employer status.” While this is a positive development for the remainder of a Republican administration, the last two decades have demonstrated that the joint-employer analysis has swung with the political pendulum of each new administration both at the federal and state levels. Based thereon, we provide the same predictions that we did only a few weeks ago when the Department of Labor published its rule:
- labor-friendly states may broaden their own joint employer rules under state statutes;
- labor-friendly states may challenge the rule in court;
- labor organizations may challenge the rule in court;
- labor organizations (or their pawns) may file test cases in Circuits that already adopted a broader joint employer standard under the FLSA (i.e., the 4th Circuit with Salinas and DirecTV); and/or
- labor will increase their funding for the 2020 national races so that Congress can pass legislation negating this new rule.
Again, while we in the franchise industry shouldn’t always look for fault lines in an otherwise good result, it would also be unwise to take this as a total victory and make any changes to the conservative employment policies that franchisors or franchisees have put in place in response to the near endless joint employer assault on our industry.
This article was originally published on the California Franchise Network.
As always, our team stands ready to assist your business with all of its franchising needs. If you have questions or need assistance, please contact the authors listed below.
Thomas O’Connell – Tom O’Connell is a Shareholder at Buchalter APC, where he serves as Chair of the firm’s Franchise Law Practice and Chair of Litigation for the firm’s San Diego office.
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