This morning the National Labor Relations Board (the “Board”) unveiled the final rule setting forth the new legal test it will apply in analyzing whether affiliated businesses are “joint employers”. The final rule, which will be effective on April 27, 2020, can be found here.


On September 13, 2018 the Board published its proposed rule for modifying the existing joint employer standard. An extensive notice and comment period followed, which yielded approximately 29,000 comments before the January 28, 2019 deadline. Now, over a year after the comment period closed, the final rule is ready.

Under the existing standard, the Board would find an affiliated company to be a joint employer of another employer’s employees merely because the affiliated company possessed the authority to control those employees’ terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. In other words, an entity could be found to be a joint employer even if that entity did not actually exercise such control or authority over the employees in question.

The New Joint Employer Rule

Under the Board’s new final rule, in order to be found a joint employer an affiliated company must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment that meaningfully affects another employer’s employees. While the possession of indirect control or contractually reserved control over workers (i.e., retaining the right to exercise control over workers at a later date) can be a factor in determining joint employer status, evidence showing that a company actually exercised its authority or control is now required in order for the new standard to be met.

The final rule clarifies that “essential terms and conditions of employment” are specifically limited to the rights related to determining wages, benefits, and hours of work as well as those dealing with the hiring, discharge, discipline, supervision, and direction of employees. Equally important is the Board’s definition of “direct and immediate control” that is “substantial.” Essentially, in future joint employer cases, the Board will assess whether the company actually possessed and exercised control on a regular or continuous basis. Evidence of control that is merely sporadic or isolated will be insufficient to justify finding an affiliated company to be a joint employer.

In his announcement of the final rule, NLRB Chairman John Ring stated, “With the completion of today’s rule, employers will now have certainty in structuring their business relationships, employees will have a better understanding of their employment circumstances, and unions will have clarity regarding with whom they have a collective-bargaining relationship.” The final rule’s enhanced clarity may allow companies to reevaluate their current arrangements with their business partners, particularly those that rely on franchisees and subcontracting work.

Looking Forward

Although the final rule provides employers, unions, and employees with much needed clarity as to whether certain business relationships will rise to the level of being a joint employer relationship, some questions still remain. How will the rule be interpreted and applied in future cases? Will the rule be subjected to legal challenges? Proskauer will continue to monitor any developments on these, and other related questions.

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Photo of Steven Porzio Steven Porzio

Steven J. Porzio is a partner in the Labor & Employment Law Department and a member of the Labor-Management Relations Group. Steve assists both unionized and union-free clients with a full range of labor and employee relations matters. He represents employers in contract…

Steven J. Porzio is a partner in the Labor & Employment Law Department and a member of the Labor-Management Relations Group. Steve assists both unionized and union-free clients with a full range of labor and employee relations matters. He represents employers in contract negotiations, arbitrations, and representation and unfair labor practice cases before the National Labor Relations Board.

Steve has experience conducting vulnerability assessments and providing management training in union and litigation avoidance, leave management, wage and hour, and hiring and firing practices. He provides strategic and legal advice in certification and decertification elections, union organizing drives, corporate campaigns, picketing and union contract campaigns. Steve has represented employers in a number of different industries, including higher education, health care, construction and manufacturing in successful efforts against unions in election and corporate campaigns.

In addition to his traditional labor law work, Steve assists companies with handbook and personnel policy drafting and review, daily management of employee disciplines and terminations, and general advice and counsel on compliance with federal and state employment laws.

Steve’s litigation experience includes work on matters before state and federal courts, the Equal Employment Opportunity Commission, the Connecticut Commission on Human Rights and Opportunities, the New York State Division of Human Rights and various other administrative agencies. He has litigated matters involving age, race, national origin, gender and disability discrimination, wage and hour, whistleblower and wrongful termination claims.

While attending the Syracuse University College of Law, Steve served as the editor-in-chief of the Syracuse Science and Technology Law Reporter. He also received the Robert F. Koretz scholarship, awarded in recognition of excellence in the study of labor law.