On Feb. 26, 2020, the National Labor Relations Board (“NLRB” or “Board”) released its final rule on joint employers. The rule restores a standard that had been in place until 2015, when the Board broadened the definition for joint employers in its Browning-Ferris decision. The final rule, which becomes effective April 27, 2020, also provides clarity and guidance on issues that had caused employers confusion in the past.

The Board released its proposed rule on joint employers in September 2018 and changed very little in the final rule. Under the final rule, a business must exercise “substantial direct and immediate control over one or more essential terms and conditions of employment” to be a joint employer. Importantly, the final rule delineates the “essential terms and conditions of employment,” which it defines as wages, benefits, hours of work, hiring, discharge, discipline, supervisions, and direction. The rule also explains factors that constitute “direct and immediate control,” clarifies the meaning of “substantial” control, and specifies that contractual control over certain employment terms does not mechanically create a joint employment relationship.

The Board’s Browning-Ferris­ decision in 2015 expanded the definition of joint employers to include businesses that exercised even indirect control over the terms or conditions of employment. This more liberal standard created potential liability for businesses such as franchisors and parent companies that had a contractual relationship with an employer, but that exercised little actual control over the employer’s employees. Such a standard caused confusion for such businesses, not only because the Browning-Ferris standard was vague, but also because it was a reversal of 30 years of Board guidance.

Employers will be relieved to have concrete guidance in the final rule that the Board was unlikely to provide in a case adjudication. Additionally, by using the rulemaking process and allowing for public comment, the Board made it unlikely the final rule will be overturned in the courts.