New NLRB Rule in Favor of Businesses

New NLRB Rule in Favor of Businesses

by Onyinyechi Muilenburg

The National Labor Relations Board, on Tuesday, February 25, 2020, released details on a new rule that restricts the circumstances in which franchisers and business that use employees hired by third parties can be held jointly liable for violations of federal employment laws.

The new rule requires that a company exercise “substantial direct and immediate control over the most important elements of a worker’s job,” like discipline or hiring and firing. The formal rule is scheduled to be published on Wednesday, February 26, 2020 in the Federal Register.

This is a big win for businesses across the country that rely on franchisees and subcontracted workers. It will immediately reduce the risk of significant litigation and related costs for unfair labor practices, and likely eliminates many of the companies’ responsibility to bargain with franchise or subcontracted workers.

Per John Ring, NLRB Chairman “This final rule gives our joint-employer clarity, stability and predictability that is essential to any successful labor-management relationship and vital to our national economy. Employers will now have certainty in structuring their business relationship, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with who they have a collective bargaining relationship.”

This new rule is in stark contrast to the more expansive test that has been in place since the 2015 decision known as the Browning-Ferris test. Under Browning-Ferris, it only required that a business have indirect control over working terms and conditions to be considered a joint employer. The new rule will define key terms like “direct and immediate control,” and what constitutes “substantial” direct control. This new rules comes as the Department of Labor is also moving to establish joint employer policies that are more favorable to businesses.

The new rule goes into effect on April 27, 2020, please read the official update at the Federal Register.


No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.

If you have any questions or would like more information about labor and employment, please contact Derek G. Flynn at 713.220.9197 or dflynn@hirschwest.com.