NLRB Issues Joint-Employer Final Rule

New regulations reduce joint-employer liability.

February 27, 2020

WASHINGTON—The National Labor Relations Board has released details of a new rule that restricts the circumstances in which business operators and franchisers, which use employees hired by third parties, can be held jointly liable for federal labor law violations.

The new rule, which takes effect April 27, requires that a company exercise “substantial direct and immediate” control over the most important elements of an employee’s job—such as discipline, hiring and firing—in order to be considered the worker’s employer, reports Bloomberg.

This has economic implications for some of the major U.S. businesses that rely on franchised or subcontracted workers, such as McDonald’s. The rule immediately reduces a company’s list of litigation and related costs for unfair labor practices and likely eliminates the company’s responsibility to bargain with a franchisee or subcontracted work if workers form a union.

“This final rule gives our joint-employer standard the clarity, stability and predictability that is essential to any successful labor-management relationship and vital to our national economy,” said John Ring, NLRB chairman. However, labor unions are expected to challenge the regulation in court.

The Trump Administration plans to reduce joint employer liability under other labor and employment laws. A U.S. Department of Labor regulation that would narrow joint employment for minimum wage and overtime pay is scheduled to go into effect next month, and the EEOC is working to update joint-employer liability for workplace discrimination and harassment.