Today the National Labor Relations Board (the “Board”) issued the final version of its Rule rolling back an Obama-era standard that deemed “indirect control” over a contractor or franchisee and/or the reservation of the ability to exert such control as being sufficient to establish joint employment under the National Labor Relations Act.
The Board majority comprised of Trump appointees, Chairman John Ring and members Bill Emanuel and Marvin Kaplan, reinstated the pre-Obama Board test that said that a business would only be deemed a joint employer if it has “substantial direct and immediate control over another company’s workers.” The new Rule also provides definitions of key terms such as “essential terms and conditions of employment,” as well as what will constitute “direct and immediate control.” The mere existence of an arm’s length contractual relationship between two businesses will not, in and of itself, create a joint employer relationship.
The Board through Chairman Ring explained that returning to the pre-Obama standard would provide greater clarity for employers, employees and unions in determining true employment relationships. The determination of joint employer status is critical in determining bargaining obligations and potential liability for unfair labor practices of respective employers.
The Rule was the subject of extensive comments provided by both management and labor, and represents yet another significant reversal by the current Board of Obama Board precedents.