Rule2023-23573
Standard for Determining Joint Employer Status
Primary source
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Published
October 27, 2023
Effective
December 26, 2023
Issuing agencies
National Labor Relations Board
Abstract
The National Labor Relations Board has decided to issue this final rule for the purpose of carrying out the National Labor Relations Act (NLRA or Act) by rescinding and replacing the final rule entitled "Joint Employer Status Under the National Labor Relations Act," which was published on February 26, 2020, and took effect on April 27, 2020. The final rule establishes a new standard for determining whether two employers, as defined in the Act, are joint employers of particular employees within the meaning of the Act. The Board believes that this rule will more explicitly ground the joint-employer standard in established common-law agency principles and provide guidance to parties covered by the Act regarding their rights and responsibilities when more than one statutory employer possesses the authority to control or exercises the power to control particular employees' essential terms and conditions of employment. Under the final rule, an entity may be considered a joint employer of another employer's employees if the two share or codetermine the employees' essential terms and conditions of employment.
Full Text
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<title>Federal Register, Volume 88 Issue 207 (Friday, October 27, 2023)</title>
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[Federal Register Volume 88, Number 207 (Friday, October 27, 2023)]
[Rules and Regulations]
[Pages 73946-74018]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-23573]
[[Page 73945]]
Vol. 88
Friday,
No. 207
October 27, 2023
Part II
National Labor Relations Board
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29 CFR Part 103
Standard for Determining Joint Employer Status; Final Rule
Federal Register / Vol. 88 , No. 207 / Friday, October 27, 2023 /
Rules and Regulations
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NATIONAL LABOR RELATIONS BOARD
29 CFR Part 103
RIN 3142-AA21
Standard for Determining Joint Employer Status
AGENCY: National Labor Relations Board.
ACTION: Final rule.
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SUMMARY: The National Labor Relations Board has decided to issue this
final rule for the purpose of carrying out the National Labor Relations
Act (NLRA or Act) by rescinding and replacing the final rule entitled
``Joint Employer Status Under the National Labor Relations Act,'' which
was published on February 26, 2020, and took effect on April 27, 2020.
The final rule establishes a new standard for determining whether two
employers, as defined in the Act, are joint employers of particular
employees within the meaning of the Act. The Board believes that this
rule will more explicitly ground the joint-employer standard in
established common-law agency principles and provide guidance to
parties covered by the Act regarding their rights and responsibilities
when more than one statutory employer possesses the authority to
control or exercises the power to control particular employees'
essential terms and conditions of employment. Under the final rule, an
entity may be considered a joint employer of another employer's
employees if the two share or codetermine the employees' essential
terms and conditions of employment.
DATES: Effective December 26, 2023. This rule has been classified as a
major rule subject to Congressional review. However, at the conclusion
of the congressional review, if the effective date has been changed,
the National Labor Relations Board will publish a document in the
Federal Register to establish the new effective date or to withdraw the
rule.
FOR FURTHER INFORMATION CONTACT: Roxanne L. Rothschild, Executive
Secretary, National Labor Relations Board, 1015 Half Street SE,
Washington, DC 20570-0001, (202) 273-1940 (this is not a toll-free
number), 1-866-315-6572 (TTY/TDD).
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Background
Section 2(2) of the National Labor Relations Act defines an
``employer'' to include ``any person acting as an agent of an employer,
directly or indirectly.'' 29 U.S.C. 152(2) (emphasis added). In turn,
the Act provides that the ``term `employee' shall include any employee,
and shall not be limited to the employees of a particular employer,
unless [the Act] explicitly states otherwise . . . .'' Id. 152(3).
Section 7 of the Act provides that employees shall have the right
to self-organization, to form, join, or assist labor organizations,
to bargain collectively through representatives of their own
choosing, and to engage in other concerted activities for the
purpose of collective bargaining or other mutual aid or protection
and to refrain from any or all such activities.
Id. 157. Section 9(c) of the Act authorizes the Board to process a
representation petition when employees wish to be represented for
collective bargaining. Id. 159(c). And Section 8(a)(5) makes it an
unfair labor practice for an employer to refuse to bargain collectively
with the representatives of its employees. Id. 158(a)(5).
The Act does not specifically address situations in which statutory
employees are employed jointly by two or more statutory employers
(i.e., it is silent as to the definition of ``joint employer''), but,
as discussed below, the Board, with court approval, has long applied
common-law agency principles to determine when one or more entities
share or codetermine the essential terms and conditions of employment
of a particular group of employees.
B. The Development of Joint-Employment Law Under the National Labor
Relations Act
As set forth more fully in the Board's September 4, 2022 notice of
proposed rulemaking (the NPRM), in Boire v. Greyhound Corp., 376 U.S.
473, 481 (1964), a representation case involving the relationship
between a company operating a bus terminal and its cleaning contractor,
the Supreme Court explained that the question of whether Greyhound
``possessed sufficient control over the work of the employees to
qualify as a joint employer'' was ``essentially a factual question''
for the Board to determine.\1\ On remand, the Board held that Greyhound
and the cleaning contractor were joint employers of the employees at
issue because they ``share[d], or codetermine[d], those matters
governing essential terms and conditions of employment.'' Greyhound
Corp., 153 NLRB 1488, 1495 (1965), enfd. 368 F.2d 776 (5th Cir. 1966).
For nearly two decades following the Board's decision in Greyhound, the
Board regarded the right to control employees' work and their terms and
conditions of employment as determinative in analyzing whether entities
were joint employers of particular employees. Board precedent from this
time period generally did not require a showing that both putative
joint employers actually or directly exercised control.\2\ The
[[Page 73947]]
Board's reliance on reserved or indirect control in joint-employer
cases during this period was well within the mainstream of both Board
and judicial treatment of such control in the independent contractor
context, including in non-labor-law settings, and reviewing courts
broadly endorsed the Board's consideration of forms of reserved and
indirect control as probative in the joint-employer analysis.\3\
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\1\ See Standard for Determining Joint-Employer Status, 87 FR
54641 (Sept. 7, 2022).
\2\ See, e.g., Globe Discount City, 209 NLRB 213, 213-214 & fn.
3 (1974) (finding joint employer based on license agreements,
without reference to any exercise of authority); Lowery Trucking
Co., 177 NLRB 13, 15 (1969) (finding joint employer based in part on
unexercised right to reject other employer's employee), enfd. sub
nom. Ace-Alkire Freight Lines v. NLRB, 431 F.2d 280 (8th Cir. 1970)
(observing that ``[w]hile [putative joint employer] never rejected a
driver hired by [supplier], it had the right to do so''); United
Mercantile, Inc., 171 NLRB 830, 831-832 (1968) (finding joint
employer based on license agreements, without reference to any
exercise of authority); Floyd Epperson, 202 NLRB 23, 23 (1973)
(finding joint employer based in part on indirect control over wages
and discipline), enfd. 491 F.2d 1390 (6th Cir. 1974); Buckeye Mart,
165 NLRB 87, 88 (1967) (finding Buckeye joint employer of employees
of Fir Shoe based solely on contractually reserved authority over,
inter alia, discharge decisions and rules and regulations governing
employee conduct), enfd. 405 F.2d 1211 (6th Cir. 1969); Jewel Tea
Co., 162 NLRB 508, 510 (1966) (finding joint employer based on
contractually reserved, unexercised power to effectively control
hire, discharge, wages, hours, terms, ``and other conditions of
employment'' and observing: ``That the licensor has not exercised
such power is not material, for an operative legal predicated for
establishing a joint-employer relationship is a reserved right in
the licensor to exercise such control''); Value Village, 161 NLRB
603, 607 (1966) (finding joint employer based on operating agreement
and observing ``[s]ince the power to control is present by virtue of
the operating agreement, whether or not exercised, we find it
unnecessary to consider the actual practice of the parties regarding
these matters as evidenced by the record.''); Spartan Department
Stores, 140 NLRB 608, 608-610 & fn. 1, 4 (1963) (finding joint
employer based solely on uniform license agreements); Taylor's Oak
Ridge Corp., 74 NLRB 930, 938 (1947) (finding joint employer based
solely on contractually reserved authority over numerous essential
terms and conditions of employment, and observing: ``That the
Employer's power of control may not in fact have been exercised is
immaterial, since the right to control, rather than the actual
exercise of that right, is the touchstone of the employer-employee
relationship.''); General Motors Corp. (Baltimore, MD), 60 NLRB 81
(1945) (finding joint employer based on contractually reserved
authority, despite testimony that entity exercised no control in
practice); Anderson Boarding & Supply Co., 56 NLRB 1204, 1206 (1944)
(finding joint employer based on unexercised contractual authority);
Bethlehem-Fairfield Shipyard, Inc., 53 NLRB 1428, 1431 (1943)
(finding joint employer based on reserved rights to dismiss
employees and set wage scales, despite crediting testimony entity
actually exercised no control).
Our colleague observes that a number of these cases involve
department store licensing relationships. He argues that the Board
did not purport to apply general common-law agency principles in
these cases but instead applied a distinctive analysis focused on
``whether the department store was in a position to influence the
licensee's labor relations policies.'' We disagree. The cases we
cite above, including the department store cases, ultimately rest on
early post-Taft-Hartley Board decisions that are consistent with the
final rule's approach. For example, in one early case, the Board
held that ``an employer-employee relationship is established where
the [entity] for whom services are rendered possesses the right of
control over such fundamental matters as the employees' day-to-day
operations and their basic working conditions.'' Franklin Simon &
Co., 94 NLRB 576, 579 (1951). In that case, the Board found that a
department store and its licensee were joint employers because ``a
substantial right of control over matters fundamental to the
employment relationship is retained and exercised by both
[entities].'' Id. (emphasis in original). We find these statements
instructive and see no indication that the Board intended such
statements to apply solely in the department store context, as our
colleague implies. As for Buckeye Mart, supra, which our colleague
suggests is at odds with the broader principles we argue animated
the Board's early decisions, we note that in that case the Board
found a department store to jointly employ the employees of one of
its licensees but not the other. At most, this case shows that the
Board applied the relevant standard to find one joint-employment
relationship but not another based on the particular language of the
license agreements at issue. It does not call the relevant standard
or its underlying principles into question.
\3\ See, e.g., Carrier Corp. v. NLRB, 768 F.2d 778, 781 (6th
Cir. 1985) (finding joint employer based in part on entity's
consulting about wages and benefits with direct employer and
reserved authority to request removal or dismissal of employees);
International Chemical Workers Union Local 483 v. NLRB, 561 F.2d
253, 255 (D.C. Cir. 1977) (``Whether Cabot and P & K were joint
employers depends upon the amount of actual and potential control
that Cabot had over the replacement employees. This in turn, to a
certain extent, is dependent upon the amount and nature of control
that Cabot exercised and was authorized to exercise under the
contract.'') (emphasis added); Vaughn Bros., 94 NLRB 382, 383 (1951)
(``Under this [common-law] test an employment relationship exists
where the person for whom the services are performed reserves the
right, even though not exercised, to control the manner and means by
which the result is accomplished.''); Alaska Salmon Industry, Inc.
(Seattle Wash), 81 NLRB 1335, 1338 (1949) (``[A]n employee
relationship . . . is found to exist where the person for whom the
services are performed reserves the right (even if not exercised) to
control the manner and means by which the result is
accomplished.''); San Marcos Telephone Co., 81 NLRB 314, 317 (1949)
(``Under [common-law] doctrine, an employee relationship, rather
than that of an independent contractor, exists where the person for
whom the services are performed reserves the right (even if not
exercised) to control the manner and means by which the result is
accomplished.''); Steinberg and Co., 78 NLRB 211, 220-221, 223
(1948) (``Under [common-law] doctrine it has been generally
recognized that an employer-employee relationship exists where the
person for whom the services are performed reserves the right to
control the manner and means by which the result is
accomplished.''), enf. denied 182 F.2d 850 (5th Cir. 1950). See also
judicial decisions discussed in Sec. I.D., below.
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In NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691
F.2d 1117, 1123 (3d Cir. 1982), enfg. 259 NLRB 148 (1981), the United
States Court of Appeals for the Third Circuit endorsed the Board's
``share or codetermine'' formulation of the joint-employer standard.
While later Board decisions continued to adhere to this formulation,
they also began imposing new requirements that the Board now believes
lacked a clear basis in established common-law agency principles or
prior Board or judicial decisions. See TLI, Inc., 271 NLRB 798 (1984);
Laerco Transportation, 269 NLRB 324 (1984). In particular, these
decisions began requiring (1) that a putative joint employer
``actually'' exercise control, (2) that such control be ``direct and
immediate,'' and (3) that such control not be ``limited and routine.''
See, e.g., AM Property Holding Corp., 350 NLRB 998, 999-1003 (2007),
enfd. in relevant part sub nom. Service Employees International Union,
Local 32BJ v. NLRB, 647 F.3d 435 (2d Cir. 2011); Airborne Express, 338
NLRB 597, 597 (2002); Flagstaff Medical Center, 357 NLRB 659, 666-667
(2011).
In 2015, the Board restored and clarified its traditional, common-
law based standard for determining whether two employers, as defined in
Section 2(2) of the Act, are joint employers of particular employees
within the meaning of Section 2(3) of the Act. See Browning-Ferris
Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362
NLRB 1599 (2015) (BFI). Consistent with established common-law agency
principles, and rejecting the control-based restrictions that the Board
had previously established without explanation, the Board announced
that it would consider evidence of reserved and indirect control over
employees' essential terms and conditions of employment when analyzing
joint-employer status.
While BFI was pending on review before the United States Court of
Appeals for the District of Columbia Circuit, and following a change in
the Board's composition, a divided Board issued a notice of proposed
rulemaking with the goal of establishing a joint-employer standard that
departed in significant respects from BFI.\4\ During the comment
period, the District of Columbia Circuit issued its decision in
Browning-Ferris Industries of California, Inc. v. NLRB, 911 F.3d 1195,
1222 (D.C. Cir. 2018), upholding ``as fully consistent with the common
law the Board's determination that both reserved authority to control
and indirect control can be relevant factors in the joint-employer
analysis,'' and remanding the case to the Board to refine the new
standard.\5\
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\4\ See The Standard for Determining Joint Employer Status, 83
FR 46681 (Sept. 14, 2018). Then-Member McFerran dissented.
\5\ The court specifically required that on remand the Board
clarify its ``articulation and application of the indirect-control
element'' of the BFI joint-employer standard to the extent that the
Board had not ``distinguish[ed] between indirect control that the
common law of agency considers intrinsic to ordinary third-party
contracting relationships, and indirect control over the essential
terms and conditions of employment.'' 911 F.3d at 1222-1223. The
court further instructed the Board on remand to more explicitly
apply the second part of the BFI standard (``whether the putative
joint employer possesses sufficient control over employees'
essential terms and conditions of employment to permit meaningful
collective bargaining''), and specifically, to clarify ``which terms
and conditions are `essential' to permit `meaningful collective
bargaining,' '' and what such bargaining ``entails and how it works
in this setting.'' Id. at 1221-1222 (quoting 362 NLRB at 1600).
After accepting the court's remand, a newly constituted Board
declined to clarify the BFI standard in any respect, instead finding
that ``retroactive application of any clarified variant of [that
standard] in this case would be manifestly unjust.'' Browning-Ferris
Industries of California, Inc., 369 NLRB No. 139, slip op. 1 (2020),
vacated and remanded, 45 F.4th 38 (D.C. Cir. 2022). As discussed
below, and contrary to the view of our dissenting colleague, the
instant rule fully explicates the indirect-control element in
Section IV and V.
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Thereafter, on February 26, 2020, the Board promulgated a final
rule that again introduced control-based restrictions that narrowed the
joint-employer standard.\6\ In light of the District of Columbia
Circuit's decision in BFI v. NLRB, the Board modified the proposed rule
to ``factor in'' evidence of indirect and reserved control over
essential terms and conditions of employment, but only to the extent
such indirect and/or reserved control ``supplements and reinforces''
evidence that the entity also possesses or exercises direct and
immediate control over essential terms and conditions of employment.\7\
The final rule also explained that establishing that an entity ``shares
or codetermines the essential terms and conditions of another
employer's employees'' requires showing that the entity ``possess[es]
and exercise[s] such substantial direct and immediate control over one
or more essential terms or conditions of their employment as would
warrant finding that the entity meaningfully affects matters relating
to the employment
[[Page 73948]]
relationship with those employees.'' \8\ In turn, the final rule
defined ``substantial direct and immediate control'' to mean ``direct
and immediate control that has a regular or continuous consequential
effect on an essential term or condition of employment of another
employer's employees'' and ``substantial'' to exclude control that is
``only exercised on a sporadic, isolated, or de minimis basis.'' \9\
The final rule set forth an ``exhaustive'' list of essential terms and
conditions of employment comprised of ``wages, benefits, hours of work,
hiring, discharge, discipline, supervision, and direction'' and
discussed some examples of conduct that would or would not rise to the
level of direct and immediate control of each term or condition on the
list.\10\
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\6\ See Joint Employer Status Under the National Labor Relations
Act, 85 FR 11184 (Feb. 26, 2020).
\7\ Id. at 11185-11186, 11194-11198 & 11236. The final rule
defined ``indirect control'' as ``indirect control over essential
terms and conditions of employment of another employer's employees
but not control or influence over setting the objectives, basic
ground rules, or expectations for another entity's performance under
a contract.'' Id. at 11236.
\8\ Id. at 11235.
\9\ Id. at 11236.
\10\ Id. at 11235-11236.
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C. The Notice of Proposed Rulemaking
On September 7, 2022, the Board issued a new joint-employer NPRM.
87 FR 54641, 54663 (September 7, 2022). In the NPRM, the Board detailed
recent developments in its joint-employer law. The Board noted that the
Board's 2020 final rule (2020 rule) marked the first occasion when the
Board addressed joint-employer doctrine through rulemaking. The NPRM
stated the Board's preliminary view, subject to comments, that the 2020
rule's embrace of control-based restrictions unnecessarily narrowed the
common law and threatened to undermine the goals of Federal labor law.
The NPRM invited comments on these issues and on all aspects of the
proposed rule, seeking input from employees, employers, and unions
regarding their experience in workplaces where multiple entities have
authority over the workplace.
The Board set an initial comment period of 60 days with 14
additional days allotted for reply comments. Thereafter, the Board
extended these deadlines to allow interested parties to comment for an
additional 30 days.\11\
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\11\ The NPRM set the deadline for initial comments as November
7, 2022, and comments replying to comments submitted during the
initial comment period were due November 21, 2022. 87 FR at 54641.
On October 14, 2022, the Board extended the deadlines for submitting
initial and reply comments for 30 days, to December 7, 2022, and
December 21, 2022, respectively. 87 FR 63465 (October 19, 2022).
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D. Relevant Common Law Principles
As discussed in more detail below, the Board has concluded, after
careful consideration of relevant comments, that the 2020 rule must be
rescinded because it is contrary to the common-law agency principles
incorporated into the Act when it was adopted and, accordingly, is not
a permissible interpretation of the Act.\12\ Although we believe that
the Board is required to rescind the 2020 rule, we would do so even if
that rule were valid because it fails to fully promote the policies of
the Act, as explained below.
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\12\ Our dissenting colleague suggests that the 2020 rule is
defensible, as a discretionary choice, to decline to exert joint-
employer jurisdiction over entities who might be statutory employers
by virtue of reserved but unexercised control, but who have not
actually exercised their authority to control terms and conditions
of employment of another entity's employees. Assuming arguendo that
the Board could exercise its discretion to decline jurisdiction in
this manner, the 2020 rule nowhere presents that rationale as
underlying its actual-exercise requirement. Moreover, any such claim
is inconsistent with our dissenting colleague's additional
assertion, discussed further below, that the current final rule goes
``beyond the boundaries of the common law'' by eliminating the 2020
rule's actual-exercise requirement.
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First, it is well established--and our dissenting colleague
agrees--that the statutory terms ``employer'' and ``employee'' have
their common-law meaning, and that the common law accordingly governs
the Board's joint-employer analysis. See, e.g., BFI v. NLRB, 911 F.3d
at 1207-1208. In the preamble to the proposed rule, the Board (quoting
the District of Columbia Circuit, id. at 1208-1209) acknowledged that
``Congress has tasked the courts, and not the Board, with defining the
common-law scope of `employer' '' and that ``the common-law lines
identified by the judiciary'' thus delineate the boundaries of the
``policy expertise that the Board brings to bear'' on the question of
whether a business entity is a joint employer of another employer's
employees under the Act. 87 FR at 54648. Accordingly, in defining the
types of control that will be sufficient to establish joint-employer
status under the Act, the Board looks for guidance from the judiciary,
including primary articulations of relevant principles by judges
applying the common law, as well as secondary compendiums, reports, and
restatements of these common law decisions, focusing ``first and
foremost [on] the `established' common-law definitions at the time
Congress enacted the National Labor Relations Act in 1935 and the Taft-
Hartley Amendments in 1947.'' Id. at 1209 (citations omitted).\13\
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\13\ Our dissenting colleague implicitly criticizes us for
citing ``a plethora of decisions (including state law cases more
than a hundred years old), the majority of which focus on
independent contractor, workers' compensation, and tort liability
matters.'' We find it entirely appropriate, however, to seek
guidance on the meaning of common-law terms in the Act in judicial
opinions where common-law issues most frequently arise, written by
state judges primarily responsible for applying the common law, from
time periods that shed light on the meaning of those terms when
Congress used them.
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After consideration of relevant comments, the Board has concluded
that the actual-exercise requirement reflected in the 2020 rule is (as
described in relevant detail below) is contrary to the common-law
agency principles that must govern the joint-employer standard under
the Act and that the Board has no statutory authority to adopt such a
requirement. The Board has further concluded that the policies of the
Act, consistent with the common-law principles governing the Act's
interpretation, make it appropriate for the Board to give determinative
weight to the existence of a putative joint employer's authority to
control essential terms and conditions of employment, whether or not
such control is exercised, and without regard to whether any such
exercise of control is direct or indirect, such as through an
intermediary.\14\
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\14\ Contrary to our dissenting colleague, apart from
recognizing that the Board must follow common-law agency principles
in determining who is an ``employer'' and an ``employee'' under Sec.
2 of the Act, we do not conclude that the common law dictates the
specific details of the joint-employer standard we articulate
herein. Rather, as discussed in more detail above and below, the
final rule reflects our policy choices, within the bounds of the
common law, in furtherance of the policy of the United States, as
set forth in Sec. 1 of the Act, to encourage the practice and
procedure of collective bargaining, including by providing a
mechanism by which an entity's rights and obligations under the Act
may be accurately aligned with its authority to control employees'
essential terms and conditions of employment.
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1. Reserved Control
First, as previously set forth in the NPRM,\15\ long before the
1935 enactment of the Act, the Supreme Court recognized and applied a
common-law rule that ``the relation of master and servant exists
whenever the employer retains the right to direct the manner in which
the business shall be done, as well as the result to be accomplished,
or, in other words, `not only what shall be done, but how it shall be
done.' '' Singer Mfg. Co. v. Rahn, 132 U.S. 518, 523 (1889) (emphasis
added) (quoting Railroad Co. v. Hanning, 82 U.S. 649, 657 (1872)). The
Court in Singer affirmed the holding below that a worker was an
employee \16\ of a company because the Court concluded that the company
had contractually reserved such control over
[[Page 73949]]
the performance of the work that it ``might, if it saw fit, instruct
[the worker] what route to take, or even what speed to drive.'' Id. at
523. In reaching this conclusion, the Court relied solely on the
parties' contract and did not discuss whether or in what manner the
company had ever actually exercised any control over the terms and
conditions under which the worker performed his work. In other words,
the Court found a common-law employer-employee relationship based on
contractually reserved control without reference to whether or how that
control was exercised.\17\
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\15\ 87 FR at 54648-54650.
\16\ As we explained more fully in the NPRM, a ``servant'' is an
employee. 87 FR at 54645 fn. 28. See, e.g., 30 C.J.S. Employer--
Employee sec. 1 (2022) (``The terms `servant' and `employee' are
interchangeable.''); Horace Gray Wood, A Treatise on the Law of
Master and Servant; Covering the Relation, Duties and Liabilities of
Employers and Employees (1877).
\17\ See also Chicago Rock Island & Pac. Ry. Co. v. Bond, 240
U.S. 449, 456 (1916) (worker was not employee of railroad company
where contract provided ``company reserves and holds no control over
[worker] in the doing of such work other than as to the results to
be accomplished,'' and Court found company ``did not retain the
right to direct the manner in which the business should be done, as
well as the results to be accomplished, or, in other words, did not
retain control not only of what should be done, but how it should be
done.'') (emphasis added); Little v. Hackett, 116 U.S. 366, 376
(1886) (``[I]t is this right to control the conduct of the agent
which is the foundation of the doctrine that the master is to be
affected by the acts of his servant.'') (emphasis added) (quoting
Bennet v. New Jersey R.R. & Transp. Co., 36 N.J.L. 225 (N.J. 1873)).
We are puzzled by our colleague's suggestion that Singer somehow
fails to support the proposition that contractual authority to
control can establish a joint-employer relationship because the
company engaged the worker and compensated him for his work. As
discussed further below, ordinary contract terms providing generally
for engaging workers and setting general price terms are common
features of any independent-contractor arrangement, and are,
accordingly, not relevant to either the joint-employer analysis or
the common-law employer-employee analysis.
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Between the Court's decision in Singer and the relevant
congressional enactments of the NLRA in 1935 and the Taft-Hartley
amendments in 1947, Federal courts of appeals and State high courts
consistently followed the Supreme Court in emphasizing the primacy of
the right of control over whether or how it was exercised in decisions
that turned on the existence of a common-law employer-employee
relationship, including in contexts involving more than one potential
employer. For example, in 1934, the Supreme Court of Missouri examined
whether a worker was an ``employee'' of two companies under a State
workers' compensation statute--the terms of which the court construed
``in the sense in which they were understood at common law''--and
affirmed that ``the essential question is not what the companies did
when the work was being done, but whether they had a right to assert or
exercise control.'' \18\ And, in 1945, the Court of Appeals for the
District of Columbia Circuit explained that, in distinguishing
employees from independent contractors, ``it is the right to control,
not control or supervision itself, which is most important.'' \19\
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\18\ Maltz v. Jackoway-Katz Cap Co., 82 SW2d 909, 912, 918 (Mo.
1934). See also McDermott's Case, 186 NE 231, 232-233 (Mass. 1933)
(``One may be a servant though far away from the master, or so much
more skilled than the master that actual direction and control would
be folly, for it is the right to control, rather than the exercise
of it that is the test.''); Larson v. Independent School Dist No.
11J of King Hill, 22 P.2d 299, 301 (Idaho 1933) (``It is not
necessary that control be exercised, if the right of control
exists.''); Gordon v. S.M. Byers Motor Car Co., 164 A. 334, 335-336
(Pa. 1932) (``The control of the work reserved in the employer which
makes the employee a mere servant . . . means a power of control,
not necessarily the exercise of the power.'') (internal quotation
and citation omitted); Brothers v. State Industrial Accident
Commission, 12 P.2d 302, 304 (Or. 1932) (``[T]he true test of the
relationship of employer and employee is not the actual exercise of
control, but the right to exercise control.'') (internal quotation
and citation omitted); Murrays Case, 154 A. 352, 354 (Me. 1931)
(``Authorities are numerous and uniform that the vital test is to be
found in the fact that the employer has or not retained power of
control or superintendence over the employee or contractor. The test
of the relationship is the right to control. It is not the fact of
actual interference with the control, but the right to interfere
that makes the difference between an independent contractor and a
servant or agent. There is no conflict as to this general rule'')
(internal quotation and citation omitted); Van Watermeullen v.
Industrial Commission, 174 NE 846, 847-848 (Ill. 1931) (``One of the
principal factors which determine whether a worker is an employee or
an independent worker is the matter of the right to control the
manner of doing the work, not the actual exercise of that right.'');
Norwood Hospital v. Brown, 122 So. 411, 413 (Ala. 1929) (``[T]he
ultimate question . . . is not whether the employer actually
exercised control, but whether it had a right to control.'').
\19\ Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir. 1945). See
also Industrial Commission v. Meddock, 180 P.2d 580, 584 (Ariz.
1947) (``It is the right to control rather than the fact that the
employer does control that determines the status of the parties, and
this right to control is, in turn, tested by those standards
applicable to the facts at hand.''); D.M. Rose & Co. v. Snyder, 206
SW 2d 897, 904 (Tenn. 1947) (internal quotations and citations
omitted) (``[The] right of control is the distinguishing mark which
differentiates the relation of master and servant from that of
employer and independent contractor . . . . Wherever the defendant
has had such right of control, irrespective of whether he exercised
it or not, he has been held to be the responsible principal or
master.''); Green Valley Coop. Dairy Co. v. Industrial Comm'n, 27 NW
2d 454, 457 (Wis. 1947) (citation omitted) (``It is quite immaterial
whether the right to control is exercised by the master so long as
he has the right to exercise such control.''); Bobik v. Industrial
Comm'n, 64 NE 2d, 829, (Ohio 1946) (``[I]t is not, however, the
actual exercise of the right by interfering with the work but rather
the right to control which constitutes the test.''); Cimorelli v.
New York Cent. R. Co., 148 F.2d 575, 578 (6th Cir. 1945) (``The fact
of actual interference or exercise of control by the employer is not
material. If the existence of the right or authority to interfere or
control appears, the contractor cannot be independent.''); Dunmire
v. Fitzgerald, 37 A.2d 596, 599 (Pa. 1944) (in determining ``who was
the controlling master of the borrowed employe[e], . . . . The
criterion is not whether the borrowing employer in fact exercised
control, but whether he had the right to exercise it.''); Bush v.
Wilson & Co., 138 P.2d 457, 461 (Kan. 1943) (``[W]hether a person is
an employee of another depends upon whether the person who is
claimed to be an employer had a right to control the manner in which
the work was done. It has been pointed out many times that this
means not actually the exercise of control, but does mean the right
to control.''); Ross v. Schneider, 27 SE 2d 154, 157 (Va. 1943)
(quoting Murray's Case, 154 A. 352, 354 (Me. 1931)) (``Authorities
are numerous and uniform that the vital test is to be found in the
fact that the employer has or not retained power of control or
superintendence over the employee or contractor. `The test of the
relationship is the right to control. It is not the fact of actual
interference with the control, but the right to interfere that makes
the difference between an independent contractor and a servant or
agent.' Tuttle v. Embury-Martin Lumber Co., [158 NW 875, 879 (Mich.
1916)].''); Jones v. Goodson, 121 F.2d 176, 179 (10th Cir. 1941)
(``[T]he legal relationship of employer and employee . . . exists
when the person for whom services are performed has the right to
control and direct . . . the details and means by which [the
service] is accomplished. . . . it is not necessary that the
employer actually direct or control the manner in which the services
are performed; it is sufficient if he has the right to do so.'');
S.A. Gerrard Co. v. Industrial Accident Comm'n, 110 P.2d 377 (Cal.
1941) (``[T]he right to control, rather than the amount of control
which was exercised, is the determinative factor.'').
---------------------------------------------------------------------------
Unsurprisingly, early twentieth century secondary authority
similarly distills from the cases a common-law rule under which the
right of control establishes the existence of the common-law employer-
employee relationship, without regard to whether or how such control is
exercised. For example, in 1922, an American Law Report (A.L.R.)
annotation states as black-letter law that:
In every case which turns upon the nature of the relationship
between the employer and the person employed, the essential question
to be determined is not whether the former actually exercised
control over the details of the work, but whether he had a right to
exercise that control.\20\
---------------------------------------------------------------------------
\20\ General discussion of the nature of the relationship of
employer and independent contractor, 19 A.L.R. 226 at sec. 7 & fn. 1
(1922) (emphasis added) (citations omitted). A 1931 A.L.R.
annotation similarly reports that ``[i]t is not the fact of actual
interference or exercise of control by the employer which renders
one a servant rather than an independent contractor, but the
existence of the right or authority to interfere or control.'' Tests
in determining whether one is an independent contractor, 75 A.L.R.
725 (1931).
Other, earlier secondary authority was also consistent with this
view. For example, the second edition of The American & English
Encyclopedia of Law, published over several years spanning the turn
of the century, explains that ``[t]he relation of master and servant
exists where the employer has the right to select the employee; the
power to remove and discharge him; and the right to direct both what
work shall be done and the way and manner in which it shall be
done.'' 20 The American & English Encyclopedia of Law 12 Master and
Servant (2d ed. 1902) (emphasis added) (citations omitted).
Likewise, in 1907, the Cyclopedia of Law and Procedure defines
``master,'' inter alia, as ``[o]ne who not only prescribes the end,
but directs, or at any time may direct, the means and methods of
doing the work.'' 26 Cyclopedia of Law and Procedure 966 fn. 2
Master and Servant (1907) (emphasis added) (citations omitted). The
1925 first edition of Corpus Juris echoes the same definitions set
forth in the Cyclopedia, and additionally notes state high court
common-law authority holding that ``where the master has the right
of control, it is not necessary that he actually exercise such
control.'' 39 C.J. Master and Servant sec. 1 Definitions 33 fn. 8
(1st ed. 1925) (emphasis added) (quoting Tucker v. Cooper, 158 P.
181 (Cal. 1916)).
[[Page 73950]]
---------------------------------------------------------------------------
And, the first Restatement of Agency, published in 1933, defines
``master,'' and ``servant,'' thus:
(1) A master is a principal who employs another to perform
service in his affairs and who controls or has the right to control
the physical conduct of the other in the performance of the service.
(2) A servant is a person employed by a master to perform
service in his affairs whose physical conduct in the performance of
the service is controlled or is subject to the right of control by
the master.\21\
---------------------------------------------------------------------------
\21\ Restatement (First) of Agency sec. 2 (Am. Law Inst. 1933)
(emphasis added). See also id. at sec. 220 (``A servant is a person
employed to perform a service for another in his affairs and who,
with respect to his physical conduct in the performance of the
service, is subject to the other's control or right to control.'')
(emphasis added). As noted above, the District of Columbia Circuit
observed in BFI v. NLRB, 911 F.3d at 1211, that ``the `right to
control' runs like a leitmotif through the Restatement (Second) of
Agency,'' which, though published in 1958, is relevantly similar to
the first Restatement.
Finally, the first edition of American Jurisprudence, published
between 1936 and 1948, states that ``the really essential element of
the [employer-employee] relationship is the right of control--the right
of one person, the master, to order and control another, the servant,
in the performance of work by the latter, and the right to direct the
manner in which the work shall be done,'' and ``[t]he test of the
employer-employee relation is the right of the employer to exercise
control of the details and method of performing the work.'' \22\
---------------------------------------------------------------------------
\22\ 35 Am. Jur. Master and Servant sec. 3 (1st ed. 1941)
(emphasis added).
---------------------------------------------------------------------------
The Board believes, after careful consideration of relevant
comments as discussed further below, and based on consultation of this
and other judicial authority, that when Congress enacted the NLRA in
1935 and the Taft-Hartley Amendments in 1947, the existence of a
putative employer's reserved authority to control the details of the
terms and conditions under which work was performed sufficed to
establish a common-law employer-employee relationship without regard to
whether or in what manner such control was exercised.
From 1947 to today, innumerable judicial decisions and secondary
authorities examining the common-law employer-employee relationship
have continued to emphasize the primacy of the putative employer's
authority to control, without regard to whether or in what manner that
control has been exercised. For example, in 2014, the Supreme Court of
California affirmed that ``what matters under the common law is not how
much control a hirer exercises, but how much control the hirer retains
the right to exercise.'' \23\ As noted above, the Restatement (Second)
of Agency relevantly echoes the First Restatement's emphasis on the
right of control.\24\ Corpus Juris Secundum provides that ``[a]n
employee/servant is a type of agent whose physical conduct is
controlled or is subject to the right to control by the master; the
servant's principal, who controls or has the right to control the
physical conduct of the servant, is called the master.'' \25\ And, the
second edition of American Jurisprudence provides that ``the principal
test of an employment relationship is whether the alleged employer has
the right to control the manner and means of accomplishing the result
desired.'' \26\ Based on its examination of this and other judicial and
secondary authority, the Board agrees with the District of Columbia
Circuit that ``for what it is worth [the common-law rule in 1935 and
1947] is still the common-law rule today.'' \27\ The Board also notes
that, as set forth in greater detail above, this view is in keeping
with the Board's prior treatment of reserved control in the period
following the Greyhound decision and before the Board began imposing
additional control-related restrictions in TLI/Laerco and their
progeny.
---------------------------------------------------------------------------
\23\ Ayala v. Antelope Valley Newspapers, Inc., 327 P.3d 165,
169, 172 (Cal. 2014); see also, e.g., Garcia-Celestino v. Ruiz
Harvesting, Inc., 898 F.3d 1110, 1121 (11th Cir. 2018) (``We
emphasize that `it is the right to control, not the actual exercise
of control that is significant.' ''); Mallory v. Brigham Young
Univ., 332 P.3d 922, 928-929 (Utah 2014) (``If the principal has the
right to control the agent's method and manner of performance, that
agent is a servant whether or not the right is specifically
exercised.''); Shatto v. McLeod Regional Medical Center, 753 SE2d
416, 419, 420 (S.C. 2013) (``While evidence of actual control
exerted by a putative employer is evidence of an employment
relationship, the critical inquiry is whether there exists the right
and authority to control and direct the particular work or
undertaking.''); Anthony v. Okie Dokie Inc., 976 A.2d 901, 906 (D.C.
2009) (quoting Safeway Stores Inc. v. Kelly, 448 A.2d 856, 860 (D.C.
1982)) (``The determinative factor `is whether the employer has the
right to control and direct the servant in the performance of his
work and the manner in which the work is to be done . . . and not
the actual exercise of control or supervision.' ''); Universal Am-
Can Ltd. V. WCAB, 762 A.2d 328, 332-333 (Pa. 2000) (``[I]t is the
existence of the right to control that is significant, irrespective
of whether the control is actually exercised.''); Reed v. Glyn, 724
A.2d 464, 466 (Vt. 1998) (``It is to be observed that actual
interference with the work is unnecessary--it is the right to
interfere that determines.''); JFC Temps, Inc. v. W.C.A.B.
(Lindsay), 620 A.2d 862, 864-865 (Pa. 1996) (``The law governing the
``borrowed'' employee is well-established. . . . The entity
possessing the right to control the manner of the performance of the
servant's work is the employer, irrespective of whether the control
is actually exercised.''); Harris v. Miller, 438 SE 2d 731, 735
(N.C. 1994) (``The traditional test of liability under the borrowed
servant rule [provides that] a servant is the employe (sic) of the
person who has the right of controlling the manner of his
performance of the work, irrespective of whether he actually
exercises that control or not.'') (internal quotation and citation
omitted); Beddia v. Goodin, 957 F.2d 254, 257 (6th Cir. 1992) (``The
test is whether the employer retained control, or the right to
control, the modes and manner of doing the work contracted for. It
is not necessary that the control ever be exercised.''); Ex parte
Curry, 607 S.2d 230, 232 (Ala. 1992) (``In the last analysis, it is
the reserved right of control rather than its actual exercise that
provides the answer.''); ARA Leisure Services, Inc. v NLRB, 782 F.2d
456, 460 (4th Cir. 1986) (``It is the right to control, rather than
the actual exercise of control, that is significant.''); NLRB v.
Associated Diamond Cabs, Inc., 702 F.2d 912, 920 (11th Cir. 1983)
(``[I]t is the right to control, not the actual exercise of control,
that is significant.''); Glenmar Cinestate Inc. v. Farrell, 292 SE2d
366, 369 (Va. 1982) (``It is not the fact of actual interference
with the control, but the right to interfere, that makes the
difference between an independent contractor and a servant or
agent.''); Baird v. Sickler, 433 NE 2d 593, 594-595 (Ohio 1982)
(``For the relationship to exist, it is unnecessary that such right
of control be exercised; it is sufficient that the right merely
exists.''); Seafarers Local 777 (Yellow Cab) v. NLRB, 603 F.2d 862,
874 (D.C. Cir. 1978) (quoting Williams v. U.S., 126 F.2d 129, 132
(7th Cir. 1942)) (``[I]t is the right and not the exercise of
control which is the determining element.''); Combined Insurance Co.
of America v. Sinclair, 584 P.2d 1034, 1042 (Wyo. 1978) (``The base
determining factor is whether [putative employer] retained [t]he
right of control of the manner that [putative employee] operated his
vehicle and not whether such control was in fact exercised.''); NLRB
v. Deaton Inc., 502 F.2d 1221, 1225 (5th Cir. 1974) (``It is the
right and not the exercise of control which is the determining
element''); Dovell v. Arundel Supply Corp., 361 F.2d 543, 545 (D.C.
Cir. 1966) (quoting Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir.
1945)) (``[I]t is the right to control, not control or supervision
itself, which is most important.''); United Ins. Co. of America v.
NLRB, 304 F.2d 86, 89 (7th Cir. 1962) (``[I]t is the right and not
the exercise of control which is the determining element.''); Cohen
v. Best Made Mfg. Co., 169 A.2d 10, 11-12 (R.I. 1961) (``The final
test is the right of the employer to exercise power of control
rather than the actual exercise of such power.''); Fardig v.
Reynolds, 348 P.2d 661, 663 (Wash. 1960) (``It is well settled in
this state that . . . [it] is not the actual exercise of the right
of interference with the work, but the right to control, which
constitutes the test.'').
\24\ See Restatement (Second) of Agency secs. 2, 220 (Am. Law
Inst. 1958).
\25\ 30 C.J.S. Employer--Employee sec. 1 (2022) (emphasis added)
(citations omitted).
\26\ 27 Am. Jur. 2d. Employment Relationship sec. 1 (2022)
(emphasis added) (citations omitted).
\27\ BFI v. NLRB, 911 F.3d at 1210 & fn. 6.
---------------------------------------------------------------------------
Finally, because the facts of many cases do not require
distinguishing between contractually reserved and actually exercised
control, many judicial decisions and other authorities spanning the
last century have articulated versions of the common-law test that do
not expressly include this distinction. But the Board is not aware of
any common-law judicial decision or other common-law authority directly
supporting the proposition that, given the existence of a putative
employer's
[[Page 73951]]
contractually reserved authority to control, further evidence of direct
and immediate exercise of that control is necessary to establish a
common-law employer-employee relationship.
For these reasons, the Board believes that in light of controlling
common-law agency principles, it does not have the statutory authority
to require a showing of actual exercise of direct and immediate control
in order to establish that an entity is a joint employer of another
entity's employees. We would not choose to do so, as a matter of
policy, in any case.
Our dissenting colleague faults us, in turn, both for seeking
authority on relevant common-law principles in sources examining the
distinction between employees and independent contractors and for
failing to pay sufficient attention to judicial decisions examining
joint-employer issues under other federal statutes in light of common-
law principles derived from independent-contractor authority. In
support of the first criticism, our colleague quotes selectively from
BFI v. NLRB, in which the court rejected a party's contention that the
joint-employer and independent-contractor tests were ``virtually
identical.'' 911 F.3d at 1213-1215. We recognize, as did the court
there, that several of the factors that guide the employee-or-
independent-contractor determination, as articulated in primary
judicial authority like Darden \28\ and Reid \29\ and in secondary
compendiums, reports, and restatements of the common law of agency
bearing on independent-contractor determinations will ``shed no
meaningful light'' on joint-employer questions, which involve workers
who are clearly some entity's employees. 911 F.3d at 1214-1215.
Nevertheless, we agree with the court that ``both tests ultimately
probe the existence of a common-law master-servant relationship, [a]nd
central to establishing a master-servant relationship--whether for
purposes of the independent-contractor inquiry or the joint-employer
inquiry--is the nature and extent of a putative master's control.'' Id.
at 1214. The final rule is thus consistent with NLRB v. BFI in seeking
guidance from common law material bearing on the independent-contractor
determination to examine, as a threshold matter under Section
103.40(a), whether a common-law employer-employee relationship exists
between a putative joint employer and particular employees.\30\ Once
the party seeking to demonstrate joint-employer status establishes the
existence of a threshold common-law employment relationship, the final
rule appropriately provides for an examination, under Section
103.40(c), of whether the character and objects of such control. i.e.,
who may exercise it, when, and how, extends to essential terms and
conditions of employment that are the central concern of the joint-
employer analysis within the specific context of the NLRA.\31\
---------------------------------------------------------------------------
\28\ Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318,
322-324 (1992).
\29\ Community for Creative Non-Violence v. Reid, 490 U.S. 730,
751 (1989).
\30\ Our dissenting colleague argues that judicial precedent
distinguishing between independent contractors and employees is
``ill-suited to fully resolve joint-employer issues'' in part
because, he contends, the principal in an independent-contractor
relationship ``necessarily exercises direct control of at least two
things that . . . constitute essential terms and conditions,'' by
engaging the worker and deciding upon the compensation to be paid
for the work. This argument proves too much, because an entity that
actually determined which particular employees would be hired and
actually determined the wage rates of another entity's employees
would be a joint employer of those employees for the purposes of the
Act under any joint-employer standard, including the 2020 rule. See
85 FR at 11235-11236. Because every contract for the performance of
work includes price terms and provides for engaging at least one
worker, if such provisions alone were, as our colleague asserts, the
equivalent of exercising direct control over hiring and wages--
essential terms and conditions of employment under the Act--then no
joint-employer standard could distinguish between control sufficient
to establish a joint-employer relationship and control insufficient
to establish a common-law employment relationship when considering
only a single principal and a single worker. From this it is clear
that, contrary to our colleague's assertion, ordinary contract terms
providing generally for engaging workers and setting general price
terms do not constitute an exercise of direct control over the
essential terms and conditions of employment of hiring and wages. As
discussed further below, Sec. 103.40(f) expressly incorporates this
distinction by providing that evidence of an entity's control over
matters that are immaterial to the existence of a common-law
employment relationship and that do not bear on the employees'
essential terms and conditions of employment is not relevant to the
determination of whether an entity is a joint employer. Recognizing
this commonsense distinction in no way undermines our examination of
independent-contractor authority for guidance on the common-law
employment relationship.
\31\ See BFI v. NLRB, 911 F.3d at 1195 (``[E]mployee-or-
independent-contractor cases can . . . be instructive in the joint-
employer inquiry to the extent that they elaborate on the nature and
extent of control necessary to establish a common-law employment
relationship. Beyond that, a rigid focus on independent-contractor
analysis omits the vital second step in joint-employer cases, which
asks, once control over workers is found, who is exercising that
control, when, and how.'') (emphasis in original).
---------------------------------------------------------------------------
Our dissenting colleague faults us for failing to pay sufficient
heed to judicial decisions examining joint-employer questions under
other statutes, especially Title VII of the Civil Rights Act of
1964,\32\ that he claims are materially similar to the NLRA.\33\ As a
threshold matter, because many of the decisions our colleague cites
take independent-contractor authority as the starting point for their
analysis of joint-employer questions, these cases support the Board's
similar examination of articulations of common-law principles in
independent-contractor authority for guidance on the joint-employer
analysis under the NLRA.\34\
---------------------------------------------------------------------------
\32\ 42 U.S.C. 2000e et seq.
\33\ We need not decide whether the statutes our colleague
refers to are ``materially similar'' to the NLRA, because, as
discussed below, courts' discussion and application of common-law
principles in the cases cited by our colleague fully support the
Board's position. We note, however, that these statutes define
``employer'' and ``employee'' differently from the Act and examine
the relationship in different contexts. For instance, Title VII
excludes entities that would clearly be statutory employers under
the NLRA by defining ``employer'' as ``a person engaged in an
industry affecting commerce who has fifteen or more employees for
each working day in each of twenty or more calendar weeks in the
current or preceding calendar year, and any agent of such a
person,'' subject to exclusions that also differ from the exclusions
provided under Sec. 2 of the Act. Compare 42 U.S.C. 2000e(b) with 29
U.S.C. 152. Moreover, joint-employer questions under Title VII and
similar statutes primarily arise in the context of assigning
liability for workplace discrimination in violation of employees'
individual rights. Under the NLRA, by contrast, such questions arise
in an additional forward-looking context: in order to correctly
allocate prospective bargaining rights and obligations in support of
employees' collective right to bargain. Assuming that Title VII and
similar statutes, like the Act, require reference to the content of
the common-law terms ``employer'' and ``employee,'' the necessity
under the Act of prospectively defining bargaining obligations may
tend to focus the common-law inquiry on questions involving reserved
or indirect control more frequently than is likely under primarily
backward-looking individual-rights-protecting statutes.
\34\ See, e.g., Felder v. U.S. Tennis Assn., 27 F.4th 834, 843
(2d Cir. 2022) (relying, inter alia, on Reid and Restatement
(Second) of Agency Sec. 220); Garcia-Celestino v. Ruiz Harvesting,
Inc., 843 F.3d 1276, 1286-1287 (11th Cir. 2016) (relying on Darden
and Reid); Al-Saffy v. Vilsack, 827 F.3d 85 (D.C. Cir. 2016)
(relying, inter alia, on ``traditional agency law principles''
citing Darden); Faush v. Tuesday Morning, Inc., 808 F.3d 208 (3d
Cir. 2015) (``the common-law test outlined in Darden governs'');
Plaso v. IJKG, LLC, 553 Fed. Appx. 199, 203-204 (3d Cir. 2015)
(considering Darden factors).
Some of the decisions our colleague cites are less clearly
relevant, because they employ an ``economic realities'' test, or a
hybrid test that incorporates elements of both a common-law control
test and an economic-realities test. See, e.g., Perry v. VHS San
Antonio, LLC, 990 F.3d 918, 928-929 (5th Cir. 2021) (applying
``hybrid economic realities/common law control test''); Frey v.
Hotel Coleman, 903 F.3d 671, 676 (7th Cir. 2018) (applying ``an
`economic realities' test which is, in essence, an application of
general principles of agency law to the facts of the case''); Al-
Saffy v. Vilsack, 827 F.3d at 96 (noting one of two recognized
``articulations of the test for identifying joint-employer status. .
. . speaks in terms of the `economic realities' of the work
relationship''). Of course, as we note elsewhere, the Board is
precluded by Supreme Court decisions interpreting the Taft-Hartley
amendments from applying an economic-realities test. See, e.g., NLRB
v. United Insurance Co. of America, 390 U.S. 254, 256 (1968). Given
that our colleague elsewhere expresses his agreement with our view
that the Board must apply common-law agency principles in making
joint-employer determinations under the Act, we find his observation
that NLRB v. Hearst Publications, 322 U.S. 111 (1944), involved a
question of employee-or-independent-contractor status rather than a
question of joint-employer status to be something of a non sequitur.
Finally, some of the cases our colleague relies upon are at best
attenuated sources of authority on the content of the common law to
the extent that they articulate a joint-employer standard ultimately
derived from Board decisions--including Board decisions imposing an
actual-exercise requirement without reference to any common-law
authority. See, e.g., Nethery v. Quality Care Investors, L.P., 814
Fed. Appx. 97 (6th Cir. 2020) (applying ``share-or-codetermine''
standard derived from NLRB v. Browning-Ferris Industries of
Pennsylvania, Inc. (NLRB v. BFI of Pennsylvania), 691 F.2d 1117,
1124 (3d Cir. 1982), via Carrier Corp. v. NLRB, 768 F.2d 778, 781
(6th Cir. 1985)); Al-Saffy v. Vilsack, 827 F.3d at 96 (noting one of
two recognized ``articulations of the test for identifying joint-
employer status. . . . borrows language from'' NLRB v. BFI of
Pennsylvania, above); Plaso v. IJKG, LLC, 553 Fed. Appx. at 204
(relying in part on NLRB v. BFI of Pennsylvania for ``significant
control'' formulation); Whitaker v. Milwaukee County, 772 F.3d 802,
810 (7th Cir. 2014) (discussed further below, noting ``joint
employer concept derives from labor law,'' and citing post-TLI/
Laerco NLRA precedent); Graves v. Lowery, 117 F.3d 723, 727 (3d Cir.
1997) (drawing guidance from Board ``cases which have found joint
employment status when two entities exercise significant control
over the same employees'') (citing NLRB v. BFI of Pennsylvania and
post-TLI/Laerco NLRA precedent).
---------------------------------------------------------------------------
[[Page 73952]]
Moreover, far from supporting our colleague's claim that the Board
has ``gone beyond the boundaries of the common law'' by eliminating the
2020 rule's actual-exercise requirement, none of the decisions he cites
articulates a common-law principle that would preclude finding a joint-
employer relationship based on evidence of reserved unexercised control
or indirectly exercised control. To the contrary, several of the cited
cases affirmatively support the Board's conclusion that the common law
permits the finding of a joint-employer relationship based solely upon
reserved, unexercised control or upon control exercised indirectly,
such as through an intermediary.\35\
---------------------------------------------------------------------------
\35\ In Garcia-Celestino v. Ruiz Harvesting, Inc., for example,
the court concluded that, under the common-law standard applicable
to the joint-employer question before it--which it derived from
Supreme Court independent-contractor precedent--``the proper focus
is on the hiring entity's right to control the manner and means by
which the product is accomplished.'' 843 F.3d at 1292-1293
(quotation omitted) (emphasis added). After remand to a district
court to apply the common-law analysis, the court later emphasized
that under the applicable common-law control test ``it is the right
to control, not the actual exercise of control, that is
significant.'' 898 F.3d 1110, 1121 (11th Cir. 2018) (quoting NLRB v.
Associated Diamond Cabs, 702 F.2d 912, 919-920 (11th Cir. 1983))
(emphasis in original). See also discussion of Butler v. Drive
Automotive Industries of Am., 793 F.3d 404 (4th Cir. 2015) and EEOC
v. Global Horizons, Inc., 915 F.3d 631 (9th Cir. 2019), infra.
---------------------------------------------------------------------------
To begin, several of the cases our colleague cites articulate a
version of the joint-employer analysis that provides that an entity is
a common-law employer if it ``exercises significant control'' over
certain terms and conditions of workers' employment.\36\ We agree that
an entity's actual exercise of control may be sufficient to establish
an employment relationship, but nothing about this formulation entails
or supports our colleague's further contention that the actual exercise
of control is necessary. As discussed above, the facts of many cases do
not require distinguishing between reserved control and actually
exercised control, or between control that is exercised directly or
indirectly. Where no question of reserved or indirect control is
presented, it is unsurprising that judges articulate the test in a
manner that does not make such distinctions, and such articulations,
absent a specific claim that actual exercise of control is a necessary
component of the analysis, have little to say to the specific
disagreement between the Board and our dissenting colleague.
---------------------------------------------------------------------------
\36\ See Adams v. C3 Pipeline Constr. Inc., 30 F.4th 943, 961
(10th Cir. 2021) (quoting Knitter v. Corvias Mil. Living, LLC, 758
F.3d 1214, 1226 (10th Cir. 2014) (``Both entities are employers if
they both exercise significant control over the same employees.'')
(internal quotation and citation omitted); Plaso v. IJKG, LLC, 553
Fed. Appx. at 204 (3d Cir. 2015) (``a joint employment relationship
exists when `two entities exercise significant control over the same
employees.' '') (quoting Graves, above); Bristol v. Bd. of Cnty.
Comm'rs of Cnty. of Clear Creek, 312 F.3d 1213, 1218 (10th Cir.
2002) (``Courts applying the joint-employer test . . . look to
whether both entities `exercise significant control over the same
employees.' '') (quoting Graves, above).
---------------------------------------------------------------------------
Relatedly, our colleague cites Felder v. U.S. Tennis Association
for its statement that, under a common-law analysis drawn from the
Supreme Court's decision in Reid, ``the exercise of control is the
guiding indicator.'' But he fails to acknowledge the Felder court's
explanation that sharing significant control under common-law
principles ``means that an entity other than the employee's formal
employer has power to pay an employee's salary, hire, fire, or
otherwise control the employee's daily employment activities, such that
we may properly conclude that a constructive employer-employee
relationship exists.'' 27 F.4th 834, 844 (2d Cir. 2022) (emphasis
added).\37\ Our colleague further asserts that Felder ``quoted with
approval cases from other circuits requiring proof that the putative
joint employer `exercise[d] significant control.' '' However, a closer
examination of the cases cited by Felder reveals that they similarly
support only the proposition that the exercise of control is sufficient
to establish the relationship, not that the exercise of control is
necessary to establish the relationship.\38\ As we have explained, the
final rule is entirely consistent with the proposition that, as these
cases hold, a joint-employment relationship exists when two entities
exercise significant control over the same employees.\39\ Moreover,
each of the cases cited in Felder that our colleague relies upon--and
many others--also discussed the requisite control in terms of the
putative joint-employer's ``right,'' ``ability,'' ``power,'' or
``authority'' to control terms and conditions of employment, consistent
with the common-law principle consistently articulated in the primary
judicial authority discussed
[[Page 73953]]
above, that it is the authority to control that matters, without
respect to whether or how such control is exercised.\40\
---------------------------------------------------------------------------
\37\ Significantly, because Felder involved a Title VII claim of
discriminatory denial of credentials necessary to perform certain
work, the alleged discriminatee never performed work for the
putative joint employer, and the court's analysis necessarily
examined whether the putative joint employer ``would have exerted
control over the terms and conditions of [the employee's]
anticipated employment, by, for example, training, supervising, and
disciplining [the employee]''--in other words, whether it had the
power, though never exercised, to exert the requisite control under
appropriate circumstances. Id. at 845. The court concluded that the
court below had not erred in dismissing the discriminatee's Title
VII claims with respect to the putative joint employer because the
alleged discriminatee failed to allege that the putative joint
employer ``would have significantly controlled the manner and
means'' of his work so as to establish an employment relationship.
\38\ See Knitter, above, 758 F.3d at 1226 (quoting Bristol,
above, 312 F.3d at 1218 (``Under the joint employer test, two
entities are considered joint employer . . . if they both `exercise
significant control over the same employees.' '')), and Plaso,
above, 553 Fed. Appx. at 204 (quoting Graves, above, 117 F.3d at 727
(``[A] joint employment relationship exists when `two entities
exercise significant control over the same employees.' '')).
\39\ As we have noted above, courts focused on particular
factual records that do not turn on the precise role of reserved or
indirect control have frequently and reasonably refrained from
articulating versions of a common-law employer-employee or joint-
employer standard that expressly address whether such control can
suffice alone to establish the relationship. See, e.g., BFI v. NLRB,
above, 911 F.3d at 1213 (``[B]ecause the Board relied on evidence
that Browning-Ferris both had a right to control and had exercised
that control, this case does not present the question whether the
reserved right to control, divorced from any actual exercise of
authority, could alone establish a joint-employer relationship.'').
In crafting a Final Rule of general prospective applicability,
however, our task is different. We must, accordingly, seek guidance
from those judicial articulations of common-law standards that have
expressly addressed the question of whether or how authority to
control must be exercised in order to establish the relevant
relationship. No number of cases holding only that the direct
exercise of control is sufficient can rationally establish that the
direct exercise of control is necessary. Conversely, though, the
large body of authority expressly stating that the direct exercise
of control is not necessary, and, in many cases finding the relevant
relationship without any direct exercise of control, weighs heavily
in favor of our conclusion that the Board may not, consistent with
controlling common-law agency principles, impose such a requirement
as part of a joint-employer standard.
\40\ See Knitter, 758 F.3d at 1226 (considering ``right to
terminate'' employment, and ``ability to promulgate work rules and
assignments, and set conditions of employment including
compensation, benefits, and hours'') (emphasis added) (quotations
and citations omitted); Bristol, 312 F.3d at 1215 (holding putative
joint employer ``lack[ed] the power to control the hiring,
termination, or supervision of [undisputed employer's] employees, or
otherwise control the terms and conditions of their employment)
(emphasis added); Plaso, 553 Fed. Appx. at 204 (considering, inter
alia, putative joint employer's ``authority to hire and fire
employees promulgate work rules and assignments, and set conditions
of employment, including compensation, benefits and hours'')
(emphasis added); Graves, 117 F.3d at 728 (``when an employer has
the right to control the means and manner of an individual's
performance . . . an employer-employee relationship is likely to
exist.'') (emphasis added) (citation omitted); see also, e.g.,
Adams, 30 F.4th at 961, (considering ``right to terminate''
employment relationship, and ``ability to promulgate work rules and
assignments, and set conditions of employment, including
compensation, benefits, and hours'') (quoting Knitter, above);
Perry, 990 F.3d at 929 (``The right to control the employee's
conduct is the most important component of determining a joint
employer. . . . [including a] focus on the right to hire and fire,
the right to supervise, and the right to set the employees' work
schedule.'') (citations omitted).
---------------------------------------------------------------------------
The single case cited by our colleague that arguably articulates a
standard under which the exercise of control would be necessary to find
a joint-employer relationship, Whitaker v. Milwaukee County, does not
purport to draw this principle from the common law, but rather applies
a standard derived from decisions under the NLRA at a time that the
Board had, as we have explained above, adopted an actual-exercise
requirement that was unsupported by and insupportable under the common
law.\41\ Thus, Whitaker drew its articulation of the standard from G.
Heileman Brewing Co. v. NLRB, which enforced a Board Decision and Order
that had adopted, without relevant comment, an administrative law
judge's finding that two entities were joint employers under Laerco
based on their direct negotiation of a contract that set the overall
framework of terms and conditions of employment of the employees.\42\
Because the Board is not a primary source of authority for the common-
law of agency, and did not, in any case purport to draw the control-
based restrictions imposed by Laerco and related decisions from the
common law, Whitaker's statement of the joint-employer standard has
little to say regarding the common-law principles applicable to the
final rule.\43\
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\41\ See Whitaker v. Milwaukee County, 772 F.3d 802, 810 (7th
Cir. 2014) (``An entity other than the actual employer may be
considered a `joint employer' `only if it exerted significant
control over' the employee.'') (emphasis added) (quoting G. Heileman
Brewing Co. v. NLRB, 879 F.2d 1526, 1530 (7th Cir. 1989), enfg. 290
NLRB 991 (1988)).
\42\ See G. Heileman Brewing Co., 290 NLRB 991, 999 (1988),
enfd. 879 F.2d 1256 (7th Cir. 1989).
\43\ In any case, the court in Whitaker concluded, relying in
part on an EEOC Compliance Manual, that the ultimate question of
liability at issue in that case did not turn on the ``technical
outcome of the joint employer inquiry,'' but on whether the putative
joint employer had ``participated in the alleged discriminatory
conduct or failed to take corrective measures within its control''
which the court found it had not. 772 F.3d at 811-812. The court's
suggestion that liability might have been found based on the
putative joint employer's failure to take corrective measures within
its control supports the final rule's treatment of reserved control.
For example, under the final rule, but not under the 2020 rule, an
entity that had contractually reserved but never exercised a right
to veto another entity's disciplinary actions could plausibly be
held jointly responsible if it failed to prevent the second entity's
issuance of unlawful discriminatory discipline to discourage conduct
protected by the Act. Cf. EEOC v. Global Horizons, Inc., 915 F.3d
631, 640-641 (9th Cir. 2019) (discussed further below, holding two
fruit growers could be liable for discrimination in labor supplier's
provision to workers of certain non-wage benefits based on growers'
never-exercised authority to control the manner in which benefits
were provided).
---------------------------------------------------------------------------
Our dissenting colleague further seeks support from the court's
statement in Butler v. Drive Automotive Industries of America that
``the [joint-employer] doctrine's emphasis on determining which
entities actually exercise control over an employee is consistent with
Supreme Court precedent interpreting Title VII's definitions.'' 793
F.3d 404, 409 (4th Cir. 2015) (emphasis added). In context, though, it
is clear that the Butler court's discussion of which entity ``actually
exercised'' control meant something entirely different from what our
colleague means by the phrase. At issue in Butler was whether a
manufacturer was a joint employer of a worker supplied to it by a
temporary employment agency. The court found that the agency discharged
the employee after the manufacturer requested that she be replaced. An
agency manager also testified that he could not recall an instance when
the manufacturer requested that an agency employee be disciplined or
discharged and it was not done. Based primarily on this evidence that
the manufacturer thus exercised indirect control over discipline and
tenure of employment of the agency's employees, the court held, as a
matter of law, that the manufacturer was a joint-employer of the
discharged employee.\44\ The court's observation, in this context, that
the joint-employer doctrine emphasizes ``which entities actually
exercise control'' had nothing to do with any question involving
reserved, unexercised control, but rather with the question of whether,
despite the appearance that the agency was responsible for the
discharge, the manufacturer had actually, though indirectly, brought it
about. The court observed that the joint-employer test ``specifically
aims to pierce the legal formalities of an employment relationship to
determine the loci of effective control over an employee . . . .
Otherwise, an employer who exercises actual control could avoid Title
VII liability by hiding behind another entity.'' 793 F.3d at 415. In
other words, far from suggesting that reserved, unexercised control can
never suffice to establish a joint-employment relationship under the
common law, Butler tends rather to support the final rule's treatment
of indirect control, discussed further below.
---------------------------------------------------------------------------
\44\ As discussed further below, we disagree with our colleague
and the 2020 rule's characterization of control exercised through an
intermediary as direct and immediate rather than as indirect or
mediated.
---------------------------------------------------------------------------
Our colleague further claims that ``[n]ot a single circuit has held
or even suggested that an entity can be found to be the joint employer
of another entity's employees based solely on a never-exercised
contractual reservation of right to affect essential terms . . . i.e.,
conduct other than actually determining (alone or in collaboration with
the undisputed employer) employees' essential terms and conditions of
employment.'' But the Court of Appeals for the Ninth Circuit did just
that in EEOC v. Global Horizons, Inc., 915 F.3d 631 (9th Cir. 2019).
Global Horizons involved an EEOC Title VII enforcement action
against two agricultural employers (the Growers) alleged to be joint
employers of certain foreign workers (the Thai workers) supplied to the
Growers by a labor contractor, Global Horizons, under the H-2A guest
worker program. Global Horizons and the Growers contracted for Global
Horizons to pay the workers and provide certain nonwage benefits
required under Department of Labor regulations governing the H-2A
program in exchange for the Growers' agreement to compensate Global
Horizons for the workers' wages and benefits and pay Global Horizons an
additional fee for its services. 915 F.3d at 634-635. The workers
sought to hold the Growers responsible as joint employers for alleged
unlawful discrimination in Global Horizons' provision of nonwage
benefits, including housing, meals, and transportation. Id. at 636.
The court analyzed the joint-employer question under a common-law
agency test derived from Darden and Clackamas Gastroenterology
Associates, P.C. v. Wells, 538 U.S. 440, 448-449 (2003). 915 F.3d at
638-639. The court
[[Page 73954]]
concluded that, while most of the factors it would typically consider
in applying the common-law agency test under Darden did not apply on
the specific facts before it, ``the common law's `principal
guidepost'--the element of control--[was] determinative.'' 915 F.3d at
640-641. Because the Growers were legally obligated, under H-2A
regulations, to provide the workers with wages and the nonwage benefits
at issue, the court concluded that the Growers ``possessed ultimate
authority over those matters,'' and their ``power to control the manner
in which housing, meals, transportation, and wages were provided to the
Thai workers, even if never exercised, [was] sufficient to render the
Growers joint employers'' of those workers. Id. at 641 (emphasis added)
(citing BFI v. NLRB, 911 F.3d 1195 (D.C. Cir. 2018)).\45\ Global
Horizons is thus consistent with the large body of common-law authority
discussed above in strongly supporting the Board's conclusion that the
2020 rule's actual-exercise requirement is inconsistent with the common
law governing the Board's joint-employer standard.
---------------------------------------------------------------------------
\45\ Contrary to our dissenting colleague's suggestion, the
court in Global Horizons expressly applied a common-law agency test,
not a test derived from the definition of ``employer'' in the H-2A
regulation, to the Title VII joint-employer issue. See 915 F.3d at
639. The fact that the Growers' authority derived from regulation,
not contract, does not undermine the impact of the court's
conclusion that the existence of that authority, even if never
exercised, sufficed to render the Growers joint employers. In any
case, Global Horizons is far from unique: in fact, numerous federal
and state high courts have long concluded, in non-NLRA contexts,
that an entity was or could be a common-law employer of another
employer's employees based solely on the entity's reserved right of
control over those employees. See, e.g., Mallory v. Brigham Young
University, 332 P.3d 922, 928-929 (Utah 2014) (city was common-law
employer of university's employee performing traffic control,
despite absence of evidence of actual exercise of control by city,
where city retained right to control the manner in which workers
performed city's ``nondelegable duty of traffic control'' because
``[i]f the principal has the right to control the agent's method and
manner of performance, the agent is a servant whether or not the
right is specifically exercised'') (citation omitted); Rouse v. Pitt
County Memorial Hosp., Inc., 470 SE 2d 44, 52-53 (N.C. 1996)
(attending physicians could be found employers of resident
physicians employed by hospital based on evidence that hospital
contractually delegated to attending physicians its responsibility
to supervise and control resident physicians' performance of duties,
despite absence of evidence of specific instances of attending
physicians' control of resident physicians' performance because
``[w]here the parties have made an explicit agreement regarding the
right of control, this agreement will be dispositive;'') (citation
omitted); Dunn v. Conemaugh & Black Lick RR, 267 F.2d 571, 577 (3d
Cir. 1959) (railroad was employer of manufacturer's employee based
on railroad's right to command employee's performance without
reference to any instance of exercise of that right because ``the
person is the servant of him who has the right to control the manner
of performance of the work, regardless of whether or not he actually
exercises that right;'') (citation omitted); S.A. Gerrard Co. v.
Industrial Accident Comm'n, 110 P.2d 377, 378 (Cal. 1941) (landowner
was joint employer of farmer's employee based on contract provision
that picking should be done under the supervisions of and in
accordance with landowner's direction without reference to whether
such direction was ever given because ``the right to control, rather
than the amount of control which was exercised, is the determinative
factor.'') (citation omitted).
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2. Indirect Control, Including Control Exercised Through an
Intermediary
After careful consideration of relevant comments, as discussed in
more detail below, the Board has concluded that evidence that an
employer has actually exercised control over essential terms and
conditions of employment of another employer's employees, whether
directly or indirectly, such as through an intermediary, also suffices
to establish the existence of a joint-employer relationship. As the
District of Columbia Circuit has recognized, ``[t]he common law . . .
permits consideration of those forms of indirect control that play a
relevant part in determining the essential terms and conditions of
employment.'' BFI v. NLRB, 911 F.3d at 1199-1200. In addition, the
District of Columbia Circuit has explained that the definition of
``employer'' set forth in Section 2(2) of the Act ``textually indicates
that the statute looks at all probative indicia of employer status,
whether exercised `directly or indirectly' '' and therefore that the
Act ``expressly recognizes that agents acting `indirectly' on behalf of
an employer could also count as employers.'' Id. at 1216.
Judicial decisions and secondary authorities addressing the common-
law employer-employee relationship confirm that indirect control,
including control exercised through an intermediary, can establish the
existence of an employment relationship. The Restatement (Second) of
Agency explicitly recognized the significance of indirect control, both
in providing that ``the control or right to control needed to establish
the relation of master and servant may be very attenuated'' and in
discussing the subservant doctrine, which deals with cases in which one
employer's control may be exercised indirectly, while a second entity
directly controls employees.\46\ As the District of Columbia Circuit
explained in BFI v. NLRB, ``the common law has never countenanced the
use of intermediaries or controlled third parties to avoid the creation
of a master-servant relationship.'' \47\ Similarly, as discussed in
more detail above, the Fourth Circuit has held that an entity was a
joint employer of another employer's employees based primarily on the
entity's exercise of indirect control over the employees' discipline
and discharge by recommending discipline and discharge decisions which
were implemented by the employees' direct employer. Butler, above, 793
F.3d at 415.\48\
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\46\ Restatement (Second) of Agency sections 5(2), comments e,
f, and illustration 6; 220(1), comment d; 226, comment a (1958).
\47\ 911 F.3d at 1217 (citing Nicholson v. Atchison, T. & S. F.
Ry. Co., 147 P. 1123, 1126 (Kan. 1915) (use of a ``branch company''
as a ``mere instrumentality'' ``did not break the relation of master
and servant existing between the plaintiff and the [putative
master]''). The 2020 Rule, and our dissenting colleague, seek to
avoid the District of Columbia Circuit's endorsement of considering
indirect control exercised through an intermediary as probative of
joint-employer status by recharacterizing such control as direct and
immediate. But an action taken through an intermediary is, by
definition, mediated, that is, not immediate or direct. We
accordingly join the District of Columbia Circuit in characterizing
such control as indirect. See 911 F.3d at 1216-1217 (``[C]ommon-law
decisions have repeatedly recognized that indirect control over
matters commonly determined by an employer can, at a minimum, be
weighed in determining one's status as an employer or joint
employer, especially insofar as indirect control means control
exercised through an intermediary.'') (internal quotation and
citation omitted).
\48\ See also Al-Saffy, above, 827 F.3d 85, 97 (District of
Columbia Circuit in Title VII context relying in part on evidence
that officials working for putative joint-employer had recommended
employee's dismissal as evidence supporting reversal of summary
judgment on the joint-employer issue).
---------------------------------------------------------------------------
Consistent with these longstanding common-law principles, the Board
has concluded, after careful consideration of comments as discussed
further below, that evidence showing that a putative joint employer
wields indirect control over one or more of the essential terms and
conditions of employment of another employer's employees can establish
a joint-employer relationship. Ignoring relevant evidence of indirect
control over essential terms and conditions of employment would, in the
words of the District of Columbia Circuit, ``allow manipulated form to
flout reality,'' \49\ contrary to the teachings of the common law.
Under the final rule, for example, evidence that a putative joint
employer communicates work assignments and directives to another
entity's managers or exercises detailed ongoing oversight of the
specific manner and means of employees' performance of the individual
work tasks may demonstrate the type of indirect control over essential
terms and conditions of employment that is sufficient to
[[Page 73955]]
establish a joint-employer relationship.\50\
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\49\ NLRB v. BFI, 911 F.3d at 1219.
\50\ Cf. Cognizant Technology Solutions U.S. Corp. & Google LLC,
372 NLRB No. 108, slip op. at 1 (2023) (finding joint-employer
relationship based in part on Google's exercise of authority over
supervision through intermediary employees of Cognizant, treated as
direct and immediate control under the terms of the 2020 rule).
---------------------------------------------------------------------------
Our dissenting colleague contends that the final rule fails
adequately to ``distinguish evidence of indirect control that bears on
workers' essential terms and conditions of employment from evidence
that simply documents the routine parameters of company-to-company
contracting,'' as required by the D.C. Circuit in BFI v. NLRB.\51\ To
the contrary, Section 103.40(f) of the final rule expressly provides
that evidence of an entity's control over matters that are immaterial
to the existence of an employment relationship under common-law agency
principles and that do not bear on the employees' essential terms and
conditions of employment is not relevant to the determination of
whether the entity is a joint employer. Pursuant to this provision, the
Board will, in individual cases arising under the rule, examine any
proffered evidence of indirect control and determine, as necessary,
whether that evidence is indicative of a kind of control that is an
ordinary incident of company-to-company contracting or is rather
indicative of a common-law employment relationship. If the former, the
rule provides that the Board will not consider that evidence as
probative of the existence of a joint-employer relationship.
Specifically, pursuant to Section 103.40(f) and consistent with the
court's instruction in BFI v. NLRB, the Board will not consider any
evidence of indirect control that the common law would see as part of
an ordinary true independent-contractor relationship as evidence of a
common-law employer-employee relationship.\52\ If, on the other hand,
such evidence shows that a putative joint employer is actually
exercising (or has reserved to itself) a kind of control that the
common law takes to be indicative of an employer-employee relationship,
the Board will consider such evidence in the course of its joint-
employer analysis.\53\
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\51\ Id. at 1226. The court's discussion and its instruction to
the Board to draw this distinction on remand suggests, as we
conclude, that it will be possible to determine, in future
adjudications on specific factual records, that an entity's exercise
of certain kinds of indirect control, such a through an
intermediary, would be independently probative of its joint-employer
status. See id. at 1219 (``If . . . a company entered into a
contract . . . under which that company made all of the decisions
about work and working conditions, day in and day out, with [the
workers' direct employer's] supervisors reduced to ferrying orders
from the company's supervisors to the workers, the Board could
sensibly conclude that the company is a joint employer.'').
\52\ See BFI v. NLRB, above, 911 F.3d at 1221 (The Board's
fleshing out the operation of the joint-employer standard through
case-by-case adjudication ``depends on the Board's starting with a
correct articulation of the governing common-law test. Here, that
legal standard is the common-law principle that a joint employer's
control--whether direct or indirect, exercised or reserved--must
bear on the essential terms and conditions of employment and not on
the routine components of a company-to-company contract.'')
(internal quotation and citation omitted).
\53\ Cf. Butler, above, 793 F.3d at 415 (considering testimony
from temporary employment agency manager that he could not recall an
instance when manufacturer requested an agency employee to be
disciplined or terminated and it was not done as evidence that
manufacturer was joint employer of agency's employees).
---------------------------------------------------------------------------
Our colleague also criticizes us for failing exhaustively to
define, ex ante, what factual circumstances will evidence indirect
control that is relevant to the joint-employer analysis. But, as
discussed above, the joint-employer inquiry is essentially factual and
requires examining all of the incidents of a particular relationship on
a particular record. Small differences in how control has been
indirectly exercised, when, and over what will predictably determine
whether the exercise of such control in individual cases counts, under
the common law, as an ordinary incident of a company-to-company or true
independent-contractor relationship or as evidence of the existence of
a common-law employer-employee relationship. Because of the innumerable
variations in the ways that companies interact with each other, and
with each other's employees, it would be impossible for the Board to
provide a usefully comprehensive and detailed set of examples of when
an entity's exercise of indirect control over another company's
employees will count as evidence of a common-law employment
relationship. We decline to try to do so as part of this
rulemaking.\54\ Instead, we expect the contours of the Board's
application of this rule in particular scenarios to be defined through
the future application of the final rule to specific factual
records.\55\
---------------------------------------------------------------------------
\54\ Cf. 85 FR at 11187 (2020 rule omitting previously proposed
hypothetical scenarios illustrating specific applications of the
Board's joint-employer standard). For similar reasons, we decline to
speculate about the application of the final rule to the various
hypothetical scenarios proposed by our dissenting colleague.
\55\ See BFI v. NLRB, 911 F.3d at 1221 (``In principle, there is
nothing wrong with the Board fleshing out the operation of a legal
test that Congress has delegated to the Board to administer through
case-by-case adjudication.'') (citing Eastex, Inc. v. NLRB, 437 U.S.
556, 574-575 (1978) (``[T]he nature of the problem, as revealed by
unfolding variant situations, requires an evolutionary process for
its rational response, not a quick definitive formula as a
comprehensive answer.'') (internal quotation and citation omitted)).
---------------------------------------------------------------------------
Finally, our colleague claims that courts which have examined the
common-law employer-employee relationship in a joint-employer context
in decisions under Title VII and similar statutes, discussed above,
have applied a significantly more demanding standard than the final
rule articulates. We disagree. Thus far, our discussion has primarily
been concerned with what common-law principles have to say to the role
of reserved or indirect control in the joint-employer test. Of course,
however, the common-law cases are also concerned with, and provide
authority about, the objects of that control. We recognize that
``whether [an entity] possess[es] sufficient indicia of control to be
an `employer' is essentially a factual issue,'' \56\ that ``factors
indicating a joint-employment relationship may vary depending on the
case,'' and that ``any relevant factor[ ] may . . . be considered so
long as [it is] drawn from the common law of agency.'' \57\ Where
courts articulating relevant common-law principles have identified an
entity's authority to control specific elements of the working
relationship as relevant to the analysis, such articulations are
primary authority to which the Board will look in deciding, in
individual cases, whether ``all of the incidents of the relationship''
\58\ indicate that the entity is a common-law employer of particular
employees.\59\ Furthermore, the final rule requires the Board to
inquire specifically into whether a putative joint employer possesses
the authority to control or exercises the power to control one or more
of the employees' essential terms and conditions of employment
implicated by the Act's protection of employees' forward-looking
collective right to bargain with each employer that can control their
terms and conditions of employment. Thus, the final rule both
incorporates the common law's broad focus on all of the incidents of
the relationship in examining whether an entity is a common-law
employer of particular employees and narrows the focus of the Board's
inquiry to essential
[[Page 73956]]
terms and conditions of employment in the context of the specific
rights and obligations provided by the plain language of Section
8(a)(5) and 8(d) of the Act.\60\
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\56\ Boire v. Greyhound, 376 U.S. at 481.
\57\ Felder, above, 27 F.4th at 844 (alternations in original)
(internal quotation omitted). See also NLRB v. United Insurance Co.,
above, 390 U.S. at 258 (``What is important is that the total
factual context is assessed in light of the pertinent common-law
agency principles.'').
\58\ NLRB v. United Insurance Co., above, 390 U.S. at 258.
\59\ See, e.g., Felder, above 27 F.4th at 838 (``[F]actors drawn
from the common law of agency, including control over an employee's
hiring, firing, training, promotion, discipline, [and] supervision .
. . are relevant to [the joint-employer] inquiry.'').
\60\ See 29 U.S.C. 158(a)(5) (``It shall be an unfair labor
practice for an employer--to refuse to bargain collectively with the
representatives of his employees.''); 29 U.S.C. 158(d) (``[T]o
bargain collectively is the performance of the mutual obligation of
the employer and the representative of the employees to meet at
reasonable times and confer in good faith with respect to wages,
hours, and other terms and conditions of employment.'').
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II. Summary of Changes to the Proposed Rule
In this section, we provide a summary overview of changes to the
proposed rule.
A. Overview
The final rule, like the proposed rule, recognizes that common-law
agency principles define the statutory employer-employee relationship
under the Act and affirms the Board's traditional definition of joint
employers as two or more common-law employers of the same employees who
share or codetermine those matters governing those employees' essential
terms and conditions of employment. Consistent with primary judicial
statements and secondary authority describing the common-law employer-
employee relationship, the final rule, like the proposed rule, provides
that a common-law employer of particular employees shares or
codetermines those matters governing employees' essential terms and
conditions of employment if the employer possesses the authority to
control (whether directly, indirectly, or both) or exercises the power
to control (whether directly, indirectly, or both) one or more of the
employees' essential terms and conditions of employment, regardless of
whether the employer exercises such control or the manner in which such
control is exercised.
However, as described below and in response to comments, the Board
has modified the proposed rule (1) to clarify the definition of
``essential terms and conditions of employment,'' (2) to identify the
types of control that are necessary to establish joint-employer status
and the types that are irrelevant to the joint-employer inquiry, and
(3) to describe the bargaining obligations of joint employers.
B. Definition of ``Essential Terms and Conditions of Employment''
The proposed rule provided an illustrative, rather than exclusive,
list of essential terms and conditions of employment. The Board has
modified this definition, for the reasons discussed below and in
response to comments, to provide an exhaustive list of seven categories
of terms or conditions of employment that will be considered
``essential'' for the purposes of the joint-employer inquiry. These
are: (1) wages, benefits, and other compensation; (2) hours of work and
scheduling; (3) the assignment of duties to be performed; (4) the
supervision of the performance of duties; (5) work rules and directions
governing the manner, means, and methods of the performance of duties
and the grounds for discipline; (6) the tenure of employment, including
hiring and discharge; and (7) working conditions related to the safety
and health of employees.
C. Type of Control Sufficient To Establish Joint-Employer Status
The proposed rule provided that a common-law employer's possession
of unexercised authority to control or exercise of the power to control
indirectly, such as through an intermediary, one or more terms or
conditions of employment would be sufficient to establish status as a
joint employer. For the reasons discussed below and in response to
comments, the Board has modified this provision to clarify that, in
each instance, the relevant object of control must be an essential term
or condition of employment as defined by the rule. The Board has also
reformatted and streamlined this portion of the proposed rule to avoid
surplusage.
D. Type of Control Not Relevant to Joint-Employer Status
The proposed rule provided that evidence of an employer's control
over matters that are immaterial to the existence of a common-law
employment relationship or control over matters not bearing on
employees' essential terms and conditions of employment is not relevant
to the joint-employer inquiry. For the reasons discussed below and in
response to comments, the Board has modified this provision to make it
clear that the provision excludes only evidence that is immaterial to
both the common-law employment relationship and an employer's control
over employees' essential terms and conditions of employment, and that
the Board does not presuppose the ``employer'' status of an entity--
such as the principal in a true independent-contractor relationship--
that possesses or exercises only such immaterial forms of control.
E. Bargaining Obligations of Joint Employers
The proposed rule did not specifically address or delineate the
bargaining obligations of joint employers in the proposed regulatory
text.\61\ For the reasons discussed below and in response to comments,
the Board has modified the final rule to provide that a joint employer
of particular employees must bargain collectively with the
representative of those employees with respect to any term or condition
of employment that it possesses the authority to control or exercises
the power to control (regardless of whether that term or condition is
deemed to be an essential term or condition of employment under the
rule). However, such entity is not required to bargain with respect to
any term or condition of employment that it does not possess the
authority to control or exercise the power to control.
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\61\ The NPRM stated the Board's initial views in supplementary
information, subject to comments, that (1) the proposed rule would
only require a putative joint employer to bargain over those
essential terms and conditions of employment it possesses the
authority to control or over which it exercises the power to
control, and (2) the Act's purposes are best served when two or more
statutory employers that each possess some authority to control or
exercise the power to control employees' essential terms and
conditions of employment are parties to bargaining over those
employees' working conditions. 87 FR at 54645 & fn. 26.
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III. Justification for Using Rulemaking, Rather Than Adjudication, To
Revise the Joint-Employer Standard
A. Authority To Engage in Rulemaking
Section 6 of the Act provides that ``[t]he Board shall have
authority from time to time to make, amend, and rescind, in the manner
prescribed by the Administrative Procedure Act, such rules and
regulations as may be necessary to carry out the provisions of this
Act.'' 29 U.S.C. 156. See also NLRB v. Bell Aerospace Co., 416 U.S.
267, 294 (1974) (``[T]he choice between rulemaking and adjudication
lies in the first instance within the Board's discretion.''); NLRB v.
Wyman-Gordon Co., 394 U.S. 759 (1969). In the past, the Board has
exercised its discretion to use the authority delegated by Congress to
engage in substantive rulemaking. See American Hospital Assn. v. NLRB,
499 U.S. 606 (1991).
Section 6 authorizes the final rule as necessary to carry out
Sections 2, 7, 8, 9, and 10 of the Act, 29 U.S.C. 152, 157, 158, 159,
and 160, respectively. Specifically, as set forth above, Section 2(2)
of the Act defines ``employer,'' and Section 2(3) defines ``employee.''
Section 7 sets forth employees' rights
[[Page 73957]]
under the Act, including the right to bargain collectively through
representatives of employees' own choosing, the right to engage in
concerted activities for the purpose of mutual aid or protection, and
the right to refrain from these activities. Section 8 of the Act
defines unfair labor practices under the Act, and Section 8(a)(5) makes
it an unfair labor practice for an employer to refuse to bargain
collectively with employees' bargaining representative. Section 9 of
the Act describes the Board's responsibilities when conducting
representation elections. Section 10 of the Act authorizes the Board to
investigate, prevent, and remedy unfair labor practices. The Board's
joint-employer doctrine bears on each of these provisions of the Act,
and Section 6 permits the Board to promulgate rules carrying out these
provisions.
B. The Preference for Rulemaking Over Adjudication
In the NPRM, we expressed our preliminary belief that rulemaking in
this area of the law is desirable for several reasons. First, the NPRM
set forth the Board's preliminary view that the 2020 rule departed from
common-law agency principles and threatened to undermine the goals of
Federal labor law. Second, the NPRM stated that, in the Board's
preliminary view, establishing a definite, readily available standard
would assist employers and labor organizations in complying with the
Act. Finally, the NPRM expressed the Board's view that because the
joint-employer standard has changed several times in the past decade,
there was a heightened need to seek public comment and input from a
wide variety of interested stakeholders.\62\
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\62\ 87 FR at 54644-54645.
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After carefully considering nearly 13,000 comments, the Board
believes that it is necessary and appropriate to rescind the 2020 rule,
which was contrary to the Act insofar as it was inconsistent with the
common law of agency. The 2020 rule's approach to defining joint-
employer status again incorporated the control-based restrictions that
deviated from common-law agency principles between the 1980s and the
Board's 2015 decision in Browning-Ferris. Not only was this approach
inconsistent with relevant court decisions, including the District of
Columbia Circuit's 2018 decision in Browning-Ferris Industries of
California, Inc. v. NLRB (BFI v. NLRB), 911 F.3d 1195 (D.C. Cir. 2018),
as many commenters have persuasively argued, it also undermines the
goals of Federal labor law. Accordingly, we rescind the 2020 rule in
its entirety.\63\ Although we believe that the Board is required to
rescind the 2020 rule, we would do so even if that rule were valid
because it fails to fully promote the policies of the Act.
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\63\ As discussed at greater length below, we note that even if
we had not decided to promulgate a new standard through rulemaking,
we would nevertheless have chosen to rescind the 2020 rule in its
entirety because of these infirmities. See Sec. IV.C., J., K., and
V, below.
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The Board also believes that setting forth a revised joint-employer
standard through rulemaking is desirable. The NPRM offered a proposal
to restore the Board's focus on whether a putative joint employer
possesses the authority to control or exercises the power to control
particular employees' essential terms and conditions of employment,
consistent with the common law and relevant judicial decisions. The
Board received many helpful comments from individuals and entities with
considerable legal expertise and relevant experience. Having considered
those comments, the Board has refined the proposed rule in several
ways, as outlined above in Section II and discussed more fully below in
Sections IV and V. We believe the proposed rule, as modified,
appropriately defines the essential elements of a joint-employer
relationship and will reduce uncertainty and litigation over the basic
parameters of joint-employer status.
IV. Response to Comments
The Board received almost 13,000 comments from interested
organizations, labor unions, trade associations, business owners,
United States Senators and Members of Congress, State Attorneys
General, academics, and other individuals. The Board has carefully
reviewed and considered these comments, as discussed below.
A. Comments Regarding the Definitions of ``Employer'' and ``Joint
Employer'' and Basing These Definitions on Common-Law Agency Principles
The Board received numerous comments regarding the role of common-
law agency principles in the Board's joint-employer analysis and on the
development of joint-employer doctrine under the Act. In general, the
comments acknowledge the accuracy of the Board's description of the
role common-law agency principles have played in determining joint-
employer status, as briefly summarized above in Section I.
Some commenters criticize the Board's preliminary view that the
common law of agency is the primary guiding principle in its joint-
employer analysis.\64\ These commenters argue that because the Taft-
Hartley amendments did not specify that the common law limits the
joint-employer standard, Congress did not intend such a constraint, and
the Board may establish a joint-employer standard guided solely by the
policies of the Act. Contrary to these comments, authoritative or
relevant judicial decisions establish that common-law agency principles
must guide the Board's joint-employer inquiry. See, e.g., NLRB v. Town
& Country Electric, Inc., 516 U.S. 85, 92-95 (1995) (where Congress
uses the term ``employee'' in a statute without clearly defining it,
the Court assumes that Congress ``intended to describe the conventional
master-servant relationship as understood by common-law agency
doctrine''); BFI v. NLRB, 911 F.3d at 1206 (``[U]nder Supreme Court and
circuit precedent, the National Labor Relations Act's test for joint-
employer status is determined by the common law of agency.'').\65\
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\64\ Comments of Los Angeles County Federation of Labor AFL-CIO
& Locals 396 and 848 of the International Brotherhood of Teamsters;
Professors Sachin S. Pandya, Andrew Elmore, and Kati Griffith.
\65\ See also Clackamas Gastroenterology Associates, P.C. v.
Wells, 538 U.S. 440, 448-449 (2003); Nationwide Mutual Insurance Co.
v. Darden, 503 U.S. 318, 322-324 (1992); Community for Creative Non-
Violence v. Reid, 490 U.S. 730, 740, 752 fn. 31 (1989); Kelley v.
Southern Pacific Co., 419 U.S. 318, 323-324 (1974); NLRB v. United
Insurance Co. of America, 390 U.S. 254, 256-258 (1968).
---------------------------------------------------------------------------
Most commenters confirm that it is appropriate and desirable for
the Board to rely on common-law agency principles in defining the terms
``employer'' and ``joint employer'' under the Act.\66\ Certain of these
commenters note that by acting to overrule the Supreme Court's decision
in NLRB v. Hearst Publishing, 322 U.S. 111 (1944), Congress evinced its
intention to make
[[Page 73958]]
common-law agency principles the cornerstone of the definition of
``employee'' under the Act.\67\ These commenters also emphasized post-
Taft-Hartley judicial decisions interpreting the term ``employee'' in
statutes that do not provide more specific definitions using common-law
agency principles.\68\ Some commenters note that common-law agency
principles play an important functional role in the Board's definition
of the terms ``employer'' and ``employee,'' observing that making an
agency relationship the first step of the joint-employer analysis
ensures that the appropriate entities are included while properly
excluding entities who neither possess nor exercise sufficient control
over employees' essential terms and conditions of employment.\69\ These
commenters generally agree with the proposed rule's view that
appropriate sources of common-law agency principles include the
Restatement (Second) of Agency and other compendiums, reports, and
restatements, along with judicial decisions applying the common
law.\70\
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\66\ Comments of American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO); Americans for Prosperity
Foundation; American Federation of State, County & Municipal
Employees (AFSCME); American Hotel & Lodging Association; Center for
Law and Social Policy; Communications Workers of America, AFL-CIO
(CWA); Congressman Robert C. ``Bobby'' Scott, Chairman of the House
of Representatives Committee on Education and Labor, and 52 other
Members of Congress (Congressman Scott et al.); Economic Policy
Institute (EPI); General Counsel Abruzzo; Independent Bakers
Association; Nicholas Crawford; McGann, Ketterman & Rioux; National
Federation of Independent Business (NFIB); National Partnership for
Women & Families; North Carolina Justice Center; Public Justice
Center; Restaurant Law Center and National Restaurant Association;
Southern Poverty Law Center (SPLC); TechEquity Collaborative; The
Washington Center for Equitable Growth; United States Chamber of
Commerce; Washington Legal Foundation; William E. Morris Institute
for Justice.
\67\ See, e.g., comments of American Hotel & Lodging
Association.
\68\ Comments of NFIB; Washington Legal Foundation.
\69\ See, e.g., comments of AFSCME.
\70\ See, e.g., comments of General Counsel Abruzzo; Michigan
Regional Council of Carpenters and Millwrights.
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Some commenters urge the Board to clarify what common-law sources
it will consult in the final rule. Others ask the Board to limit its
consideration to particular sources, arguing that because the common
law is vast, amorphous, or vague, failing to impose such a limitation
prevents the rule from functioning as self-contained guidance.\71\
Other commenters dispute the enduring relevance of the Restatement
(Second) of Agency.\72\ In particular, some of these commenters take
the position that because the Restatement (Second) of Agency primarily
focuses on assigning liability in tort or contract matters, it is
inapposite or poorly adapted to resolving questions related to the
employment relationship.\73\ Some commenters propose instead that the
Board solely consult judicial decisions applying common-law
principles,\74\ or the Restatement of Employment Law.\75\
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\71\ Comments of Americans for Tax Reform; Coalition for a
Democratic Workplace (CDW); Freedom Foundation; International
Franchise Association (IFA); McDonald's USA, LLC; Promotional
Products Association International (PPAI); Texas Public Policy
Foundation.
\72\ Comments of Washington Legal Foundation; IFA; U.S. Chamber
of Commerce.
\73\ Comments of IFA; U.S. Chamber of Commerce.
\74\ Comments of Washington Legal Foundation.
\75\ Comments of U.S. Chamber of Commerce.
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As we preliminarily indicated in the proposed rule, relevant
sources of common-law agency principles are not difficult to find. We
respond to commenters seeking more definitive guidance that some
relevant sources of common-law agency principles include articulations
of these principles by common-law judges, compendiums, reports, and
restatements of common-law decisions, and early court decisions
addressing ``master-servant relations.'' \76\ Contrary to those
commenters who suggest the common law is too vast or amorphous to give
effect to the terms ``employer'' and ``employee'' in the final rule, we
find it persuasive that the Supreme Court has viewed common-law agency
principles as sufficiently familiar and tractable to assist parties in
interpreting and complying with other labor and employment statutes
that use these terms.\77\
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\76\ As we explained more fully in the NPRM, the employer-
employee relationship under the Act is the common-law employer-
employee relationship. Beginning in the late 19th century, American
legal commentators began using the terms ``master-servant'' and
``employer-employee'' interchangeably. See, e.g., Horace Gray Wood,
A Treatise on the Law of Master and Servant; Covering the Relation,
Duties and Liabilities of Employers and Employees (1877). The
Restatement (Second) of Agency uses both sets of terms synonymously.
We therefore refer elsewhere in the NPRM to ``employer-employee''
relations and the ``employer-employee relationship.''
\77\ See, e.g., Clackamas Gastroenterology Associates, 538 U.S.
at 448-449 (Americans with Disabilities Act); Darden, 503 U.S. at
322-324 (Employee Retirement Income Security Act of 1974); Kelley,
419 U.S. at 323-324 (Federal Employers' Liability Act).
---------------------------------------------------------------------------
Contrary to some commenters, we adhere to the view preliminarily
set forth in the NPRM that the Restatement (Second) of Agency (1958) is
a particularly persuasive source of common-law agency principles. As we
explained in the NPRM, the Supreme Court has acknowledged the
persuasiveness of the Restatement (Second) of Agency when construing
the common-law definition of ``employer.'' \78\ So, too, has the
District of Columbia Circuit, acknowledging this controlling Supreme
Court precedent.\79\ Finally, we follow the District of Columbia
Circuit in rejecting the view set forth by some commenters that the
Restatement was developed to address issues of liability for tort
matters and breaches of contract and is therefore inapposite.\80\
Further, we dispute these commenters' premise. Many early common-law
decisions that helped define the common-law relationship in The
Restatement (Second) of Agency emerged in cases involving rights and
duties under state workers' compensation laws.\81\ More importantly,
all common-law cases, whether involving tort or contract liability or
statutory rights and obligations, focus on whether a common-law agency
relationship exists, and control is the touchstone of that inquiry
under the common law.
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\78\ See, e.g., Clackamas Gastroenterology Associates, 538 U.S.
at 448; Kelley, 419 U.S. at 323-324.
\79\ See BFI v. NLRB, 911 F.3d at 1213 (``[C]ontrolling
precedent makes the Restatement (Second) of Agency a relevant source
of traditional common-law agency standards in the National Labor
Relations Act context.'').
\80\ See id.
\81\ See, e.g., Maltz v. Jackoway-Katz Cap Co., 82 SW2d 909,
912, 918 (Mo. 1934).
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Some commenters argue that by assessing whether an entity possesses
the authority to control or indirectly controls essential terms and
conditions of employment, the Board's proposed definition of
``employer'' exceeds common-law boundaries.\82\ While we will address
commenters' arguments regarding the role reserved and indirect control
play in the proposed rule's definition of ``joint employer'' at length
below, at the outset we simply note our agreement with the District of
Columbia Circuit's view that these forms of control bear on the common-
law employer-employee inquiry, BFI v. NLRB, 911 F.3d at 1216.\83\
Accordingly, we respectfully disagree with those commenters who suggest
the proposed rule's definition of ``employer'' exceeds common-law
boundaries.
---------------------------------------------------------------------------
\82\ Comments of American Hotel & Lodging Association; Bicameral
Congressional Signatories; Council on Labor Law Equality (COLLE);
Independent Bakers Association; National Lumber & Building Material
Dealers Association; National Waste & Recycling Association; North
American Meat Institute; Restaurant Law Center and National
Restaurant Association; U.S. Chamber of Commerce.
\83\ The court also stated that Sec. 2(2) of the Act ``textually
indicates that the statute looks at all probative indicia of
employer status'' because it ``expressly recognizes that agents
acting `indirectly' on behalf of an employer could also count as
employers.'' 911 F.3d at 1216 (quoting 29 U.S.C. 152(2)).
---------------------------------------------------------------------------
Finally, some of these commenters argue that the proposed rule's
definition of ``employer'' is inappropriate because direct supervision
over an employee is a necessary prerequisite to a finding of an
employment relationship for purposes of the Act, citing the Supreme
Court's decision in Allied Chemical & Alkali Workers of America, Local
Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 167-168
(1971).\84\ Respectfully, we find Allied Chemical, which concluded that
retired workers were not ``employees'' because the Act's legislative
history and policies
[[Page 73959]]
contemplate individuals who are currently ``active'' in the workplace,
inapposite. Nothing in the Court's decision in Allied Chemical or
subsequent cases applying it suggests that the Court thereby attempted
to modify ordinary common-law agency principles or engraft additional
``direct supervision'' requirements onto the statutory meaning of
``employer.''
---------------------------------------------------------------------------
\84\ Comments of Restaurant Law Center and National Restaurant
Association; Retail Industry Leaders Association (RILA).
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B. Comments Regarding the Definition of ``Joint Employer''
The proposed rule set forth a definition of ``joint employer''
that, like the definition provided in the 2020 rule, would apply in all
contexts under the Act, including both the representation-case and
unfair-labor-practice case context. No commenter has suggested that any
joint-employer standard the Board adopts should only apply in one
context or the other. We therefore find it appropriate to apply the new
standard set forth in the final rule in both the representation-case
and unfair-labor-practice case contexts.
Our dissenting colleague and several commenters argue that,
although the Board is properly guided by common-law agency principles
when determining joint-employer status, the proposed rule's definition
of ``joint employer'' exceeds the boundaries of the common law of
agency.\85\ These commenters generally contend that defining ``joint
employer'' to include entities who possess but do not exercise control
over essential terms and conditions of employment or entities who do
not exercise direct control over essential terms and conditions of
employment is beyond the permissible scope of the common law.\86\ As
these arguments primarily relate to the treatment of reserved and
indirect control in proposed paragraphs (c), (e), and (f), we discuss
them in greater detail below. However, as noted above, we agree with
the District of Columbia Circuit's view that the common law requires
the Board to evaluate ``all probative indicia of employer status'' in
determining whether entities are ``employers'' or ``joint employers''
under the Act, including forms of indirect and reserved control.\87\
---------------------------------------------------------------------------
\85\ Comments of Americans for Prosperity Foundation; Associated
Builders and Contractors (ABC); Contractor Management Services, LLC;
Independent Bakers Association; Independent Lubricant Manufacturers
Association; LeadingAge; The Mackinac Center for Public Policy;
National Retail Federation; Taxpayers Protection Alliance.
\86\ Comments of Americans for Prosperity Foundation; National
Retail Federation; Washington Legal Foundation.
\87\ See BFI v. NLRB, 911 F.3d at 1216.
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A group of United States Senators and Members of Congress suggests
that by seeking to define ``joint employer'' in the manner set forth in
the proposed rule, the Board is effectively legislating and thereby
usurping the role of Congress.\88\ This commenter also mentions that
the broader definition of ``joint employer'' set forth in the
Protecting the Right to Organize Act of 2021 (PRO Act), H.R. 842,
failed to secure Senate approval.\89\ With respect, the standard set
forth in the proposed rule and the final rule we announce today
represents a faithful attempt to exercise the authority Congress has
delegated to the Board in Section 6 of the Act. Further, as discussed
previously, we are guided by Supreme Court decisions instructing the
Board to consult the common law of agency when interpreting the term
``employer'' in Section 2(2) of the Act. We do not see the definition
of ``joint employer'' in the PRO Act as relevant to our task, which is
to interpret the term ``employer'' that appears in the current version
of the National Labor Relations Act, consistent with the guidance of
relevant judicial decisions.
---------------------------------------------------------------------------
\88\ See comments of Bicameral Congressional Signatories.
\89\ See id.; see also comments of RILA.
---------------------------------------------------------------------------
Some commenters specifically argue that the proposed definition of
``joint employer'' is insufficiently responsive to the District of
Columbia Circuit's request that the Board ``erect some legal
scaffolding'' \90\ to remain within the boundaries of the common
law.\91\ Other commenters take the view that the proposed definitions
of ``employer'' and ``joint employer'' are consistent with the District
of Columbia Circuit's view of common-law agency principles and that the
proposed rule establishes adequate guideposts to satisfy the court's
request.\92\ Again, because commenters espousing both views of this
issue anchor their rationale in matters that principally relate to
paragraphs (c), (e), and (f) of the proposed rule, we deal with these
contentions at greater length below.
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\90\ BFI v. NLRB, 911 F.3d at 1220.
\91\ Comments of ABC; Center for Workplace Compliance; IFA;
National Association of Convenience Stores; NFIB; National Retail
Federation.
\92\ Comments of AFL-CIO; Center for American Progress (CAP);
General Counsel Abruzzo; National Employment Law Project (NELP);
Professors Pandya, Elmore, and Griffith; United Brotherhood of
Carpenters & Joiners of America (UBC); U.S. Senate HELP Committee
Chair Patty Murray & 21 of her Senate Democratic colleagues (Senator
Murray et al.).
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Other commenters raise industry-specific concerns regarding the
proposed definition of ``joint employer.'' Some commenters contend that
the proposed, generally applicable definition of ``joint employer''
stands in tension with how other sections of the Act treat building and
construction industry employers and unions and how the Supreme Court
has interpreted those provisions.\93\ Specifically, these commenters
urge that the Court's decision in NLRB v. Denver Building &
Construction Trades Council, 341 U.S. 675, 689-690 (1951), stands for
the proposition that general contractors and subcontractors in the
construction industry have separate status and identities that, from
the outset, preclude the Board from treating them as joint
employers.\94\
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\93\ Comments of ABC; Associated General Contractors of America
(AGC); COLLE; U.S. Chamber of Commerce.
\94\ Comments of ABC; AGC; American Road & Transportation
Builders Association (ARTBA); National Roofing Contractors
Association; U.S. Chamber of Commerce.
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We do not read Denver Building so broadly. Instead, Denver Building
held that a construction industry general contractor's overall
responsibility for a project or worksite does not itself create an
employment relationship between the general contractor and the
employees of subcontractors working on the jobsite. See id. The
proposed definition of ``joint employer,'' which we include in the
final rule, requires not only a showing that the putative joint
employer has a common-law employment relationship with particular
employees, but also a further showing that a putative joint employer
``share or codetermine those matters governing employees' essential
terms and conditions of employment.'' As a result, the proposed rule,
which focuses on the particular control an entity wields over terms and
conditions of employment, is consistent with Denver Building, which
cautions the Board not to categorically treat all employees of a
subcontractor as the employees of a general contractor without more
specific evidence of control. We further note that nothing in the
relevant provisions of the Act, including Sections 2(2), 8(a)(5), 8(d),
and 9(a), suggests that the Board is required--or permitted--to adopt a
joint-employer standard in the construction industry that differs from
the generally applicable definition. Nor is there any historical
precedent for the Board treating the construction industry differently
than other industries for joint-employer purposes.\95\
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\95\ Instead, the Board historically treated employers in the
construction industry in the same manner as other employers for
joint-employer purposes. See, e.g., Tradesmen International, Inc.,
351 NLRB 399, 403 & fn. 11 (2007) (adopting administrative law
judge's finding that two construction-industry entities were joint
employers); Ref-Chem Co., 169 NLRB 376 (1968) (finding that two
entities were joint employers of a craft unit of construction
employees performing insulation maintenance work), enf. denied on
other grounds 418 F.2d 127 (5th Cir. 1969). See also Adams &
Associates, Inc. v. NLRB, 871 F.3d 358, 378-379 (5th Cir. 2017)
(upholding joint-employer finding where prime contractor and
subcontractor jointly developed employees' wage structure, consulted
with each other on human resources matters, and coordinated on
hiring decisions and on-site operations).
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[[Page 73960]]
Some commenters state that, since the 1974 Health Care amendments
extended the coverage of the Act to include nonprofit hospitals, the
Board has treated hospitals differently than other employers.\96\ They
urge the Board to do so again in the final rule.\97\ In support of the
view that hospitals should be entirely excluded from the ambit of the
joint-employer rule, these commenters point to the Board's 1989 health
care rule, which established eight appropriate bargaining units for
acute-care hospitals.\98\ The commenters argue that by broadening the
definition of ``joint employer,'' the Board risks authorizing a
proliferation of bargaining units, contrary to the stated aims of the
health care rule.
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\96\ See, e.g., comments of American Hospital Association (AHA).
\97\ See, e.g., comments of AHA; Federation of American
Hospitals; U.S. Chamber of Commerce; Virginia Hospital & Healthcare
Association.
Certain of these commenters suggest that the Board's failure to
conduct a ``hospital-specific analysis'' violates the APA and is
grounds for withdrawing the proposed rule. They also raise concerns
regarding the interaction of the proposed rule with Federal
healthcare reimbursement formulas or calculations. See, e.g.,
comments of AHA. Given our discussion of the distinctive concerns of
hospitals above, we respectfully disagree with these commenters'
view that the Board has not sufficiently considered the effect of
the proposed rule on hospitals.
\98\ Comments of AHA; U.S. Chamber of Commerce; Virginia
Hospital & Healthcare Association (citing 29 CFR 103.30). A few
commenters also observe that Sec. 8(d) and 8(g) of the Act set forth
distinctive notice requirements before the termination or
modification of collective-bargaining agreements and before work
stoppages at hospitals. See comments of AHA; U.S. Chamber of
Commerce; 29 U.S.C. 158 (d) & (g). These commenters likewise argue
that the Board has at times adapted other generally applicable
doctrines for the hospital setting, including solicitation and
distribution law. See comments of AHA; U.S. Chamber of Commerce.
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While we acknowledge the specific concerns raised by these
commenters, we are not persuaded to create a hospital-specific
exclusion from the joint-employer standard. First, we note that no pre-
2020 Board decision involving the joint-employer standard ever created
such an exclusion.\99\ In keeping with the preliminary view we
expressed in the NPRM, we are of the mind that the common-law agency
principles that we apply in defining ``employer'' apply uniformly to
all entities that otherwise fall within the Board's jurisdiction. We
see no clear basis in the text or structure of the Act for exempting
particular groups or types of employers from the final rule, nor do we
believe that the Act's policies are best served by such an exemption.
That said, we share these commenters' general views that the proper
application of the final rule in particular cases will require the
Board to consider all relevant evidence regarding the surrounding
context.\100\ Finally, we reject the suggestion, raised by commenters
and our dissenting colleague, that the final rule's definition of
``joint employer'' will cause the proliferation of bargaining units or
disrupt the application of the 1989 health care rule, which deals with
the unrelated question of which classifications of employees constitute
appropriate bargaining units for purposes of filing a representation
petition pursuant to Section 9 of the Act.
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\99\ Instead, pre-2020 Board decisions applied the same standard
when one putative joint employer of particular employees was a
hospital. See, e.g., Flagstaff Medical Center, 357 NLRB 659, 666-667
(2011) (applying the TLI/Laerco test and finding that a hospital
contractor was not a joint employer of a hospital's housekeeping
employees).
\100\ Our dissenting colleague also forecasts that the final
rule will negatively affect hospitals and the healthcare sector. In
particular, he anticipates that the final rule will make it more
difficult for hospitals to rely on firms that supply travel nurses
to fill staffing gaps without risking a joint-employer finding. We
reject our colleague's characterization of the final rule and
emphasize that in determining whether a joint-employer finding is
appropriate in any given context, the Board will consider all
relevant evidence regarding whether a putative joint employer
possesses or exercises the requisite control over one or more
essential terms and conditions of particular employees' employment.
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We similarly decline other commenters' invitation to exempt other
kinds of businesses, including cooperative businesses,\101\ franchise
businesses,\102\ and firms and independent contractors operating in the
insurance and financial advice industry,\103\ from the joint-employer
standard we adopt in this final rule.\104\ As discussed at greater
length in Section VI below, we also decline some commenters' invitation
to create an across-the-board exemption for small businesses.\105\ One
commenter observes that many Federal labor and employment statutes
exempt employers who have less than a minimum number of employees and
suggests that this provides support for a similar exemption from the
final rule. However, we find further support for our view that the Act
requires the Board to apply its joint-employer standard uniformly to
all entities otherwise covered by the Board's jurisdiction in the fact
that the Act contains no similar minimum-employee threshold to those
present in other labor and employment statutes. Instead, we observe
that the Board has statutory jurisdiction over those private-sector
employers whose activity in interstate commerce exceeds a minimal
level.\106\
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\101\ Comments of National Grocers Association.
\102\ Comments of American Association of Franchisees and
Dealers; IFA; Restaurant Law Center and National Restaurant
Association.
\103\ Comments of National Association of Insurance and
Financial Advisors.
\104\ Relatedly, we also decline the request of one commenter to
explicitly state that the final rule covers the relationship between
local unions and national or international unions. See comments of
IFA.
\105\ Comments of Independent Bakers Association; National
Association of Home Builders (NAHB).
\106\ See 29 U.S.C. 152(6) & (7); NLRB v. Fainblatt, 306 U.S.
601, 606-607 (1939). The Board also uses its discretion to decline
to exercise its statutory jurisdiction over a subset of smaller
employers. See, e.g., Siemons Mailing Service, 122 NLRB 81 (1959)
(describing Board's discretionary commerce standard). The Board has
historically combined the gross revenues of joint employers when
applying its discretionary standard. See, e.g., Central Taxi
Service, 173 NLRB 826, 827 (1968); Checker Cab Co., 141 NLRB 583,
586-587 (1963), enfd. 367 F.2d 692 (6th Cir. 1966); see also CID-SAM
Management Corp., 315 NLRB 1256, 1256 (1995). The scope of this
rulemaking does not encompass any changes to the Board's precedent
governing application of its discretionary commerce standard.
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Finally, one commenter asks the Board to clarify that the proposed
rule's definition of ``joint employer'' does not preclude the Board
from adopting rebuttable presumptions to guide it in applying the
joint-employer standard in the future.\107\ For example, this commenter
suggests, the Board could treat an entity's possession or exercise of
certain forms of control over essential terms and conditions of
employment as giving rise to a presumption of joint-employer
status.\108\ In light of our extensive discussions and guidance below
regarding whether particular forms of control are material to the
existence of an employment relationship under common-law agency
principles, we decline the invitation to make this proposed
clarification.
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\107\ Comments of Professors Pandya, Elmore, and Griffith.
\108\ See id.
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C. Comments About Definition of ``Share or Codetermine''
As set forth above, the proposed rule sought to codify the Board's
holding, endorsed by the Third Circuit in NLRB v. Browning-Ferris
Industries of Pennsylvania, Inc., 691 F.2d 1117, 1124 (3d Cir. 1982),
enfg. 259 NLRB 148 (1981), that entities are ``joint employers'' if
they ``share or codetermine those matters governing essential terms and
conditions of employment.'' Nearly all commenters
[[Page 73961]]
agree that the basic ``share or codetermine'' formulation is the
appropriate starting point for the Board's joint-employer
analysis.\109\ As discussed at length below, however, commenters' views
regarding what forms of control suffice to establish that entities
``share or codetermine'' matters governing particular employees'
essential terms and conditions of employment diverge
significantly.\110\
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\109\ See, e.g., comments of CWA; National Women's Law Center;
North American Meat Institute; TechEquity Collaborative; Women
Employed. Other commenters implicitly approve the formulation,
taking it as the starting point for their analysis of the proposed
rule.
\110\ Comments of American Hotel & Lodging Association; IFA;
Leading Age; National Retail Federation; North American Meat
Institute; Society for Human Resource Management (SHRM).
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Paragraph (c) of the proposed rule sought to define the phrase
``share or codetermine those matters governing employees' essential
terms and conditions of employment'' to mean ``for an employer to
possess the authority to control (whether directly, indirectly, or
both), or to exercise the power to control (whether directly,
indirectly, or both), one or more of the employees' essential terms and
conditions of employment.'' \111\
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\111\ 87 FR at 54663.
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One commenter suggests that because the Third Circuit's formulation
of the ``share or codetermine'' standard (and the formulation used in
paragraph (c) of the proposed rule) speaks in terms of ``matters''
governing essential terms and conditions of employment, a putative
joint employer must possess the authority to control or exercise
control over more than one essential term or condition of employment to
meet the standard.\112\ We do not find this argument persuasive as an
analytical or logical matter. First, we do not construe the word
``matters'' in the standard to refer to essential terms or conditions
of employment themselves, but rather to the workplace issues related to
those terms or conditions. Second, we disagree that control over one
essential term or condition of employment is necessarily insufficient.
For example, as discussed at length below, commenters are unanimous
that wages are an essential term or condition of employment. Given the
centrality of wages to the employment relationship, it would be
difficult to argue that a common-law employer's control over wages,
standing alone, is insufficient to create an employment relationship.
---------------------------------------------------------------------------
\112\ Comments of Freedom Foundation.
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A number of commenters challenge the premise that possessing but
not exercising the authority to control or exercising indirect control
over one or more essential terms and conditions of employment can ever
serve as evidence of joint-employer status.\113\ Some of these
commenters, especially those writing on behalf of small businesses,
suggest that forms of reserved control that amount to ``contractual
fine print'' that are never put into action should not result in a
joint-employer finding.\114\ While others appear to concede that there
may be circumstances in which indirect or reserved control is probative
of joint-employer status, those commenters emphasize that requiring
evidence that an entity actually exercises control is preferable.\115\
---------------------------------------------------------------------------
\113\ Comments of American Staffing Association; Independent
Lubricant Manufacturers Association; QuickChek; RaceTrac, Inc.; Rio
Grande Foundation.
\114\ Comments of Energy Marketers of America; Independent
Lubricant Manufacturers Association; M. M. Fowler, Inc.; One Energy
Inc.; Ready Training Online; Reid Stores, Inc. d/b/a Crosby's.
\115\ Comments of American Trucking Associations; Americans for
Prosperity Foundation; ANB Bank; California Policy Center;
Competitive Enterprise Institute; Goldwater Institute; Home Care
Association of America; Independent Electrical Contractors; National
Black McDonald's Operators Association; RaceTrac, Inc.; Rachel
Greszler.
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Consistent with the preliminary view set forth in our NPRM, we are
unpersuaded by comments suggesting that forms of indirect or reserved
control can never serve as evidence of joint-employer status. In our
view, this argument is undermined by both the weight of common-law
authority and relevant judicial decisions, including the District of
Columbia Circuit's decision in BFI v. NLRB. See 911 F.3d at 1213 & 1216
(``[T]he Board's conclusion that an employer's authorized or reserved
right to control is relevant evidence of a joint-employer relationship
wholly accords with traditional common-law principles of agency,'' and
``indirect control can be a relevant factor in the joint-employer
inquiry.'').
Moreover, ``contractual fine print'' bearing on the allocation of
authority to control the details of the manner and means by which work
is performed, and the terms and conditions of employment of those
performing the work, has legal force and effect without respect to
whether or not contractually reserved authority to control is ever
exercised. By incorporating such contractual allocations of control
into the Board's joint-employer analysis, the final rule permits
business entities to evaluate and control their potential status as
joint employers under the Act, ex ante, based on their freely chosen
contractual arrangements. By contrast, a standard that turns on an ex-
post analysis of whether and to what extent a party has actually
exercised contractually reserved control impedes contracting parties'
ability to reliably determine ahead of time whether or not they will
have obligations under the Act related to employees of another
employer. This distinction may be particularly important, for example,
in successorship situations involving an incumbent union, where
questions about bargaining obligations may arise before sufficient time
has passed for parties to reliably ascertain whether and to what extent
contractually reserved authority to control will be actually
exercised.\116\
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\116\ For this reason, we reject our dissenting colleague's
suggestion that the final rule will have an adverse effect in
successorship situations. In successorship situations where a
transaction is structured in such a way that more than one entity in
the resulting structure could potentially be considered an employer,
the final rule has the distinct advantage of permitting all parties
to determine and define their NLRA rights and obligations, ex ante,
by contract. Under the 2020 rule, by contrast, the rights and
obligations of contracting businesses could not be ascertained at
the outset of a business relationship but would instead turn on
contingent facts about whether or not one party chose to exercise
rights it had reserved to itself by contract.
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Another group of commenters suggests that while an entity's
indirect or reserved control over essential terms and conditions of
employment may be probative, it is not sufficient, standing alone, to
confer joint-employer status.\117\ These commenters argue that the
Board has never held that a single instance of unexercised control was
sufficient to create a joint-employer relationship and generally
criticize the NPRM's discussion of the Board's precedent in the two
decades after Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964),
issued and before TLI, supra, 271
[[Page 73962]]
NLRB 798, and Laerco, supra, 269 NLRB 324, were decided.\118\
---------------------------------------------------------------------------
\117\ Comments of ABC; American Hotel & Lodging Association;
Center for Workplace Compliance; CDW; COLLE; Competitive Enterprise
Institute; Control Transportation Services, Inc.; HR Policy
Association; IFA; International Foodservice Distributors Association
(IFDA); NATSO & SIGMA; National Asian/Pacific Islander American
Chamber of Commerce and Entrepreneurship (National ACE); National
Association of Convenience Stores; National Taxpayers Union;
National Waste & Recycling Association; New Civil Liberties Alliance
& Institute for the American Worker; RILA; Restaurant Law Center and
National Restaurant Association; SHRM; The Mackinac Center for
Public Policy; U.S. Chamber of Commerce.
One of these commenters draws an analogy to the Board's
treatment of primary and secondary indicia of supervisory status in
cases involving Sec. 2(11) of the Act, 29 U.S.C. 152(11). Comments
of COLLE. The scope of the definition of ``supervisor'' is an
express exception to the definition of ``employee'' under Sec. 2(3)
of the Act. See, e.g., NLRB v. Kentucky River Community Care, Inc.,
532 U.S. 706, 711 (2001). Unlike the definition of ``employee,''
then, the definition of supervisor turns on questions of statutory
interpretation, not common-law agency principles. Accordingly, we
find this analogy inapposite.
\118\ Comments of CDW; HR Policy Association; IFA; NATSO &
SIGMA; New Civil Liberties Alliance & Institute for the American
Worker; RILA; Small Business & Entrepreneurship Council; Tesla,
Inc.; U.S. Chamber of Commerce.
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As set forth more fully in the NPRM, we disagree with these
commenters' view of the Board's pre-TLI/Laerco precedent. Instead, we
view cases from that time period as supportive of the view that the
right to control employees' work and terms and conditions of employment
is determinative in the joint-employer analysis. Cases decided during
the two decades after Boire issued did not tend to turn on whether both
putative joint employers actually or directly exercised control. For
example, in Jewel Tea Co., 162 NLRB 508 (1966), the Board found that an
entity's contractually reserved power to set working hours and to
reject or terminate workers was sufficient to establish that entity's
status as a joint employer. In addition, in Value Village, 161 NLRB
603, 607 (1966), the Board found a joint-employment relationship where
one entity reserved control over ``the manner and method of work
performance'' and to terminate the contract at will in an operating
agreement, emphasizing that ``the power to control is present by virtue
of the operating agreement.'' \119\
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\119\ Our dissenting colleague criticizes our reliance on Jewel
Tea and Value Village as support for our view that pre-TLI/Laerco
precedent did not require evidence of a putative joint employer's
direct exercise of control, noting that other pre-TLI/Laerco
precedent relied on record evidence of actually exercised or direct
control. As we note in Sec. I.D. above, however, it is unsurprising
that cases where the record establishes that an entity has directly
exercised control have not addressed the question of whether
reserved or indirect control could also independently suffice to
establish the relationship. Our colleague cites no pre-TLI/Laerco
precedent holding that actual exercise of direct control was
necessary, and no number of cases holding only that the direct
exercise of control is sufficient can rationally establish that
proposition. Conversely, Jewel Tea, Value Village, and the many
other pre-TLI/Laerco decisions cited above in which the Board has
expressly stated that control need not be actually exercised, or
exercised in any particular way, in order to establish a joint-
employer relationship clearly establish that the Board's historic
joint-employer standard did not include any such requirement. See
also fn. 2, above.
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Some commenters specifically criticize the proposed rule's
treatment of reserved control, suggesting that it might be difficult to
assess whether forms of reserved control are sufficient to give rise to
liability or a bargaining obligation.\120\ One commenter notes that
reservations of control are often ``boilerplate'' inclusions in
contracts that should not give rise to a joint-employer finding.\121\
Certain of these commenters express concerns that the standard might be
susceptible to outcome-driven applications or other unfair
results.\122\
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\120\ Comments of Home Care Association of America; IFA; U.S.
Chamber of Commerce.
\121\ Comments of IFA.
\122\ Comments of AGC; American Pizza Community; Americans for
Prosperity Foundation; Competitive Enterprise Institute; HR Policy
Association; IFA; James Bitzonis; National Association of
Manufacturers (NAM); NAHB; National Retail Federation; National
Roofing Contractors Association; Restaurant Law Center and National
Restaurant Association.
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Many commenters agree with the NPRM's discussion of how the common
law treats forms of reserved control.\123\ One of these commenters
cites the District of Columbia Circuit's discussion in BFI v. NLRB, 911
F.3d at 1211, of how ``the `right to control' runs like a leitmotif
through the Restatement (Second) of Agency.'' \124\ In particular, some
commenters cited approvingly to the NPRM's discussion of common-law
judicial decisions that treat reserved control as an especially
probative indication of an agency relationship.\125\ See, e.g., Dovell
v. Arundel Supply Corp., 361 F.2d 543, 545 (D.C. Cir. 1966) (quoting
Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir. 1945)) (``[I]t is the
right to control, not control or supervision itself, which is most
important.'').
---------------------------------------------------------------------------
\123\ Comments of AFL-CIO; Congressman Scott et al.; General
Counsel Abruzzo; NELP. A few of these commenters suggest that the
Board omit references to ``reserved'' and ``indirect'' control in
the final rule to eschew any suggestion that the joint-employer
analysis requires control to be taxonomized. See comments of AFL-
CIO; International Union of Operating Engineers (IUOE). As we hope
to make clear in our discussion of the comments we received and the
final rule, our intention is for the final rule to reflect the
common law's view that control is the touchstone of an agency
relationship, regardless of how it is wielded. While this does not
require forms of control to be categorized in any particular way,
the terminology used is reflective of the language contained in the
legal precedent upon which we rely.
\124\ Comments of NELP.
\125\ Comments of AFL-CIO.
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The final rule also adheres to the view that reserved control is
probative and that it is appropriate for the Board to find that joint-
employer status is established based on a putative joint employer's
reserved control over an essential term or condition of employment. As
set forth more fully in the NPRM,\126\ the reservation of authority to
control essential terms or conditions of employment is an important
consideration under common-law agency principles. We agree with the
District of Columbia Circuit that common-law sources treat the right to
control as central to the joint-employer inquiry and that forms of
reserved control can reveal an entity's right to control essential
terms or conditions of employment.\127\ As discussed above,
incorporating parties' contractual allocations of control into the
Board's joint-employer analysis also enhances contracting parties'
ability to evaluate and control their statutory obligations with
respect to other employers' employees at the inception of their
business relationships.
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\126\ 87 FR at 54648-54650.
\127\ BFI, 911 F.3d at 1213 (``[T]he Board's conclusion that an
employer's authorized or reserved right to control is relevant
evidence of a joint-employer relationship wholly accords with
traditional common-law principles of agency.'').
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Certain commenters specifically take issue with the proposed rule's
view that indirect control can establish joint-employer status.\128\ A
number of these commenters argue that only direct control can or should
be relevant to the joint-employer inquiry.\129\ They urge that control
exercised through an intermediary should not itself be sufficient to
establish status as a joint employer, contending that this aspect of
the proposed rule threatens to interfere with parties' reliance on the
use of independent contractors or vendors to perform services.\130\ One
of these commenters observes that courts interpreting the Fair Labor
Standards Act have at times treated forms of routine indirect control
as immaterial to the existence of a joint-employer relationship and
urges the Board to follow suit.\131\
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\128\ Comments of American Pizza Community; Americans for Tax
Reform; American Trucking Associations; ANB Bank; Connie Cessante;
Goldwater Institute; NAHB; National Roofing Contractors Association;
One Energy Inc.; Ready Training Online; Reid Stores, Inc. d/b/a
Crosby's; Robert Kulik; TechNet.
\129\ Comments of Competitive Enterprise Institute; Energy
Marketers of America; FreedomWorks Foundations; Home Care
Association of America; IFA; National Retail Federation; One Energy
Inc.; QuickChek; RaceTrac, Inc.; The Mackinac Center for Public
Policy.
\130\ Comments of American Hotel & Lodging Association; FMI--The
Food Industry Association; International Bancshares Corporation; New
Civil Liberties Alliance & Institute for the American Worker; Rio
Grande Foundation; SHRM; Small Business & Entrepreneurship Council;
U.S. Black Chambers, Inc.; U.S. Chamber of Commerce. Some commenters
cite Computer Associates International, Inc., 324 NLRB 285, 286
(1987), for the proposition that Sec. 8(b) of the Act reflects
Congress's intention to protect employers' autonomy in their
selection of independent contractors. See, e.g., comments of SHRM. A
number of individuals raised similar concerns, noting that they fear
the proposed rule might harm their prospects of being hired as
independent contractors in the future. See, e.g., comments of Monica
Cichosz; Gregg Micalizio.
\131\ Comments of National Retail Federation.
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Other commenters, citing sources of common-law agency principles
and judicial decisions applying common-law principles, stress that an
entity itself need not actually exercise control over particular
employees for the Board to
[[Page 73963]]
find that an agency relationship exists.\132\ Many commenters approve
of the Board's discussion of the Restatement (Second) of Agency in the
preamble to the proposed rule and cite portions of the Restatement
contemplating that an agency relationship can be premised on indirect
control.\133\ Some of these commenters specifically addressed the
``subservant'' doctrine. See Restatement (Second) of Agency, section
5(2), cmts. e, f, and illus. 6; section 220(1), cmt. d; section 226,
cmt. a (1958). One of these commenters, citing the District of Columbia
Circuit's decision in BFI v. NLRB, 911 F.3d at 1218, argues that the
subservant doctrine demonstrates the common law's recognition of the
important role that forms of indirect control can play in an agency
relationship.\134\
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\132\ Comments of American Civil Liberties Union (ACLU); AFL-
CIO; Congressman Scott et al.; CWA; General Counsel Abruzzo; IUOE;
Lawyers' Committee for Civil Rights Under Law; Los Angeles County
Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT; NELP;
Restaurant Opportunities Centers United; State Attorneys General;
The Leadership Conference on Civil and Human Rights; The Strategic
Organizing Center; United Electrical, Radio and Machine Workers of
America (UE); UNITE HERE International Union; United Steelworkers.
Among these commenters, several suggest that if the Board
decides to promulgate a final rule (rather than simply rescind the
2020 rule), the Board should delete references to direct and
indirect control in proposed subparagraph (c). See comments of AFL-
CIO; IUOE. We address this aspect of these comments in our
discussion below.
\133\ Comments of CWA; General Counsel Abruzzo; Los Angeles
County Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT.
\134\ Comments of State Attorneys General.
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As noted above, because we agree with the commenters who discuss
common-law precedent and the District of Columbia Circuit's statements
regarding the role indirect control plays in the joint-employer
analysis,\135\ we respectfully reject the view of commenters who
suggest that evidence of indirect control over essential terms or
conditions of employment is insufficient to establish joint-employer
status. The final rule adheres to the Board's preliminary view that
forms of indirect control may be evidence of joint-employer status. As
set forth in the NPRM, we are persuaded by the District of Columbia
Circuit's view that the common-law standard requires consideration of
indirect control. See BFI v. NLRB, 911 F.3d at 1216-1217 (``Common law
decisions have repeatedly recognized that indirect control over matters
commonly determined by an employer can, at a minimum, be weighed in
determining one's status as an employer of joint employer, especially
insofar as indirect control means control exercised through an
intermediary.'').\136\ We further agree with the views of some
commenters that the 2020 rule reintroduced control-based restrictions,
notably the requirement of ``substantial direct and immediate
control,'' that are contrary to the common-law view of how agency
relationships are created. For this reason, independent of our decision
to promulgate a new rule, we rescind the 2020 rule because it is
inconsistent with common-law agency principles and therefore
inconsistent with the National Labor Relations Act. Moreover, we are
further persuaded that there is value in codifying the principle that
forms of indirect control over one or more essential terms or
conditions of employment are probative of joint-employer status in the
final rule text, as discussed below.
---------------------------------------------------------------------------
\135\ See BFI v. NLRB, 911 F.3d at 1216 (``[I]ndirect control
can be a relevant factor in the joint-employer inquiry.'').
\136\ Similarly, as one commenter observed, the Supreme Court's
decision in Boire v. Greyhound, 376 U.S. 473, 481 (1964), made no
distinction on the basis of whether an entity wields direct or
indirect control. See comments of NELP.
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D. Comments About the Definition of ``Essential Terms and Conditions of
Employment''
Paragraph (d) of the proposed rule defined ``essential terms and
conditions of employment'' to ``generally include'' but not be limited
to ``wages, benefits, and other compensation; hours of work and
scheduling; hiring and discharge; discipline; workplace health and
safety; supervision; assignment; and work rules and directions
governing the manner, means, or methods of work performance.'' \137\ In
setting forth a nonexhaustive list of essential terms and conditions of
employment, the proposed rule relied in part on the Board's 2015 BFI
decision, which took the same approach.\138\ As mentioned above, the
phrase ``essential terms and conditions of employment'' derives from
the Third Circuit's formulation of the joint-employer standard in NLRB
v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117,
1124 (3d Cir. 1982), enfg. 259 NLRB 148 (1981), where the court stated
that entities are ``joint employers'' if they ``share or codetermine
those matters governing essential terms and conditions of employment.''
---------------------------------------------------------------------------
\137\ 87 FR at 54663.
\138\ Id. at 54643 (citing BFI, supra, 362 NLRB at 1613).
---------------------------------------------------------------------------
Although some commenters approve of the proposed rule's use of an
open-ended, nonexhaustive list of ``essential terms and conditions of
employment,'' \139\ many commenters criticize that aspect of the
proposed rule.\140\ Notably, the United States Small Business
Administration Office of Advocacy, along with many individuals and
small business owners, express concerns about how parties covered by
the Act will successfully comply with their potential obligations as
joint employers without more clarity regarding the scope of ``essential
terms and conditions of employment.'' \141\ Some commenters suggest
that the Board adopt an exhaustive list of essential terms and
conditions of employment and make any further refinements to that list
in a future rulemaking proceeding.\142\
---------------------------------------------------------------------------
\139\ Comments of AFL-CIO; Center for Law and Social Policy;
International Brotherhood of Teamsters (IBT); Lawyers' Committee for
Civil Rights Under Law; Los Angeles County Federation of Labor AFL-
CIO & Locals 396 and 848 of the IBT; National Partnership for Women
& Families; National Women's Law Center; NELP; Public Justice
Center; Restaurant Opportunities Centers United; SPLC; State
Attorneys General; TechEquity Collective; The Leadership Conference
on Civil and Human Rights; William E. Morris Institute for Justice;
Women Employed.
\140\ Comments of American Staffing Association; ANB Bank; Asian
McDonald's Operators Association; ABC; California Policy Center;
Center for Workplace Compliance; CDW; Energy Marketers of America;
Freedom Foundation; Goldwater Institute; Home Care Association of
America; HR Policy Association; International Bancshares
Corporation; IFDA; IFA; LeadingAge; McDonald's USA, LLC; NATSO and
SIGMA; National Association of Convenience Stores; NAHB; National
Association of Insurance and Financial Advisors; NAM; National
Association of Realtors; National Black McDonald's Operators
Association; National Retail Federation; National Roofing
Contractors Association; New Civil Liberties Alliance & Institute
for the American Worker; PPAI; Rachel Greszler; RILA; Subcontracting
Concepts, LLC; The Mackinac Center for Public Policy; U.S. Chamber
of Commerce.
\141\ Comments of Luis Acosta; Escalante Organization;
Independent Electrical Contractors; M. M. Fowler, Inc.; One Energy
Inc.; QuickChek; RaceTrac, Inc.; Ready Training Online; Reid Stores,
Inc. d/b/a Crosby's; SBA Office of Advocacy.
\142\ Comments of CDW; IFA; The Mackinac Center for Public
Policy.
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Another group of commenters propose that the Board modify the
proposed rule by explicitly tying the definition of ``essential terms
and conditions of employment'' to the concept of mandatory subjects of
bargaining for purposes of Section 8(d) of the Act.\143\ These
commenters generally also favor a flexible approach to defining the
scope of a joint
[[Page 73964]]
employer's bargaining obligation.\144\ Relatedly, some commenters
request that the Board consider amending the proposed rule to
incorporate a statement regarding the scope of a joint employer's
bargaining obligation that appeared in the NPRM's preamble,\145\ while
others suggest that the Board should clarify how to allocate bargaining
responsibilities between two entities that share or codetermine one or
more essential terms and conditions of employment.\146\
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\143\ Comments of General Counsel Abruzzo; IBT; IUOE; Jobs with
Justice and Governing for Impact; Los Angeles County Federation of
Labor AFL-CIO & Locals 396 and 848 of the IBT; State Attorneys
General; UE. One of these commenters cites Sun-Maid Growers of
California v. NLRB, 618 F.2d 56, 59 (9th Cir. 1980) in support of
this view. See Los Angeles County Federation of Labor AFL-CIO &
Locals 396 and 848 of the IBT.
\144\ Comments of Los Angeles County Federation of Labor AFL-CIO
& Locals 396 and 848 of the IBT; NELP.
\145\ See 87 FR at 54645 fn. 26. Comments of IBT; IUOE; Service
Employees International Union (SEIU); U.S. Chamber of Commerce.
\146\ Comments of RILA; SHRM.
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One of these commenters observes that the Board should be careful
to distinguish control over essential terms and conditions of
employment that is material to the existence of a common-law employment
relationship from control over matters that the Act requires parties to
bargain over.\147\ Another commenter acknowledges that an entity's
control over certain mandatory subjects of bargaining, like cafeteria
prices, see Ford Motor Co. v. NLRB, 441 U.S. 488, 498 (1979), may
control a term of employment to which a bargaining duty attaches but
not possess or exercise control over an essential term or condition of
employment so as to be regarded as a common-law employer.\148\
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\147\ Comments of UNITE HERE.
\148\ See reply comments of AFL-CIO.
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We have taken these comments into consideration in revising the
final rule's treatment of essential terms and conditions of employment
and in adding paragraph (h) to the final rule. The final rule responds
to commenters who suggest tying the definition of essential terms and
conditions of employment to Section 8(d) of the Act by emphasizing
that, once an entity is found to be a joint employer because it
possesses the authority to control or exercises the power to control
one or more essential terms or conditions of employment identified in
the rule, that entity has a statutory duty to bargain over all
mandatory subjects of bargaining it possesses the authority to control
or exercises the power to control. That duty is common to all employers
under the Act. See Management Training, 317 NLRB 1355 (1995). The scope
of a joint employer's duty to bargain, however, is distinct from the
issue of joint-employer status. As in other cases involving the scope
of the duty to bargain, if a joint employer contests its duty to
bargain over a particular issue, the Board will assess whether a
particular subject of bargaining is mandatory on a case-by-case basis,
applying familiar and longstanding precedent. However, the final rule
provides the clarity and predictability other commenters sought by
specifically enumerating the essential terms and conditions of
employment that will, as a threshold matter, give rise to a finding
that an entity is a joint employer if that entity possesses the
authority to control or exercises the power to control one or more of
the listed terms. Moreover, by adding paragraph (h), the final rule
likewise responds to those commenters who requested that the Board
include a statement of the nature of a joint employer's bargaining
obligation in the text of the rule itself.\149\
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\149\ See comments of American Staffing Association; RILA; SHRM;
Texas Public Policy Foundation. One commenter notes that Board
precedent already addresses the contours of a joint employer's
bargaining obligation and suggests that this obviates the need for a
clearer articulation of the duty in the text of a final rule.
Comments of AFL-CIO.
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As mentioned above, the final rule incorporates an exhaustive list
of essential terms and conditions of employment. These essential terms
and condition of employment are: ``(1) wages, benefits, and other
compensation; (2) hours of work and scheduling; (3) the assignment of
duties to be performed; (4) the supervision of the performance of
duties; (5) work rules and directions governing the manner, means, and
methods of the performance of duties and the grounds for discipline;
(6) the tenure of employment, including hiring and discharge; and (7)
working conditions related to the safety and health of employees.''
\150\ Because these essential terms and conditions of employment are
substantively the same as those offered as illustrations in the
proposed rule, we next address commenters' particular concerns
regarding the proposed rule's treatment of specific terms and
conditions of employment as ``essential.''
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\150\ The list of essential terms and conditions of employment
is discussed further in Section V.D., below.
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Commenters who addressed the proposed rule's treatment of specific
``essential terms and conditions of employment'' unanimously agree that
certain terms and conditions of employment are ``essential'' for
purposes of the joint-employer standard. These include wages and
benefits,\151\ hours of work,\152\ hiring, discipline, and
discharge,\153\ assignment,\154\ and supervision.\155\ Many commenters
specifically state that, at a minimum, they approve of the list of
essential terms and conditions of employment that was used in the 2020
rule, including scheduling, hiring, termination, discipline, assignment
of work, and instruction.\156\
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\151\ Comments of Association of Women's Business Centers;
Center for Law and Social Policy; General Counsel Abruzzo; IFA;
Lawyers' Committee for Civil Rights Under Law; NAM; National Women's
Law Center; North Carolina Justice Center; Public Justice Center;
RILA; SPLC; TechEquity Collective; The Leadership Conference on
Civil and Human Rights; William E. Morris Institute for Justice;
Women Employed.
\152\ Comments of Center for Law and Social Policy; General
Counsel Abruzzo; Lawyers' Committee for Civil Rights Under Law;
National Partnership for Women & Families; National Women's Law
Center; North Carolina Justice Center; Public Justice Center; SPLC;
TechEquity Collective; The Leadership Conference on Civil and Human
Rights; RILA; William E. Morris Institute for Justice; Women
Employed.
\153\ Comments of California Policy Center; General Counsel
Abruzzo; IBT; NAM.
Our dissenting colleague generally agrees that matters relating
to particular employees' hiring and discharge are essential, but he
expresses concern that the formulation used in the final rule--
``tenure of employment, including hiring and discharge''--is too
broad and runs the risk of ``making general contractors in the
construction industry joint employers per se.'' With respect, we
reject our colleague's characterization. General contractors in the
construction industry will be deemed joint employers only if all
requirements of the standard are established, including the
threshold requirement that they have a common-law employment
relationship with particular employees. We use the phrase ``tenure
of employment, including hiring and discharge'' to encompass a range
of actions that determine or alter individuals' employment status,
offering hiring and discharge as examples. As discussed elsewhere,
nothing in the final rule intends to treat general contractors in
the construction industry--or, indeed, any entities--as joint
employers on a per se or categorical basis.
\154\ Comments of IBT; NELP.
\155\ Comments of General Counsel Abruzzo; IBT.
\156\ See, e.g., comments of IFA; NFIB; National Women's Law
Center.
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A number of commenters and our dissenting colleague contend that
workplace health and safety should not be considered an essential term
or condition of employment for purposes of the joint-employer
standard.\157\ These commenters emphasize the role that government
regulation plays in setting minimum standards for workplace
[[Page 73965]]
health and safety,\158\ especially in certain industries, including the
trucking, food and consumer goods, and waste and recycling
industries.\159\ Other commenters strenuously urge the Board to include
workplace health and safety as essential.\160\ In fact, one commenter
suggests that, in light of the Covid-19 pandemic, the Board should make
explicit that workplace health and safety is an essential condition of
all in-person employment.\161\
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\157\ Comments of American Association of Port Authorities
(AAPA); American Trucking Associations; Association of Women's
Business Centers; FMI--The Food Industry Association; Home Care
Association of America; IFA; NATSO & SIGMA; National Association of
Convenience Stores; NAM; National Retail Federation; New Civil
Liberties Alliance & Institute for the American Worker; North
American Meat Institute; Rio Grande Foundation; Trucking Industry
Stakeholders.
One of these commenters argues that workplace health and safety
was not historically regarded as an essential term or condition of
employment under the common law and should therefore be omitted. See
comments of IFA.
\158\ Comments of AAPA; American Trucking Associations; Home
Care Association of America; National Association of Convenience
Stores. As an example, one commenter notes that health and safety in
the trucking industry is pervasively regulated by several other
Federal agencies, including ``the Department of Labor's Occupational
Safety and Health Administration (OSHA) and the Department of
Transportation's Federal Motor Carrier Safety Administration
(FMCSA).'' Comments of American Trucking Associations. Contrary to
the suggestion of this commenter, the Board is aware of the
expertise these regulators have in setting substantive health and
safety standards and does not intend to prescribe any particular
health and safety standards in the final rule.
\159\ Comments of American Trucking Associations; FMI--The Food
Industry Association; National Waste & Recycling Association;
Trucking Industry Stakeholders.
\160\ Comments of Center for Law and Social Policy; IBT;
Lawyers' Committee for Civil Rights Under Law; National Partnership
for Women & Families; National Women's Law Center; NELP; North
Carolina Justice Center; Public Justice Center; SPLC; TechEquity
Collective; The Leadership Conference on Civil and Human Rights; The
Strategic Organizing Center; William E. Morris Institute for
Justice; Women Employed.
\161\ Comments of State Attorneys General.
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A few commenters express the view that scheduling should not be an
essential term or condition of employment for joint-employer
purposes.\162\ In this regard, some commenters note that determining
the hours of operation for a facility should not be treated as
comparable to determining hours of work for all individuals who perform
services in that facility,\163\ while others characterize scheduling as
related to ``routine'' contractual provisions that speak to the timing
for completion of a project.\164\ Certain commenters note that treating
control over scheduling as indicative of a common-law employment
relationship may disproportionately affect entities operating in the
manufacturing and staffing industries.\165\ Other commenters observe
that scheduling practices are intertwined with employees' hours of work
and should therefore be considered essential.\166\
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\162\ Comments of American Pizza Community; Association of
Women's Business Centers; NAM; SBA Office of Advocacy.
\163\ Comments of American Hotel & Lodging Association; FMI--The
Food Industry Association; National Retail Federation.
\164\ Comments of SBA Office of Advocacy.
\165\ Comments of FMI--The Food Industry Association; NAM; Clark
Hill PLC.
\166\ Comments of General Counsel Abruzzo; IBT; National Women's
Law Center.
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Some commenters argue that work rules and directions governing the
manner, means, or methods of work performance should not be essential
for purposes of the joint-employer standard.\167\ These commenters
express concern that including work rules and directions potentially
sweeps too broadly and risks exposing small business owners to
substantial new liability.\168\ Similarly, our dissenting colleague
expresses concern that including work rules and directions on the list
of essential terms and conditions of employment sweeps too broadly,
potentially allowing the Board to make a joint-employer finding on the
strength of ambiguous language in work rules. He also predicts that
including work rules and directions as essential will lead to more
frequent joint-employer findings in the staffing, healthcare, and
franchise industries. Commenters who favor including work rules and
directions on the list of essential terms and conditions of employment
generally argue that entities reserving or exercising control over work
rules and directions thereby exert considerable influence over the
manner and means of particular employees' work.\169\
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\167\ Comments of Americans for Prosperity Foundation; Americans
for Tax Reform; NAM; Rio Grande Foundation.
\168\ Comments of Americans for Tax Reform; Rio Grande
Foundation.
\169\ Comments of General Counsel Abruzzo; NELP.
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Several commenters propose additional terms and conditions of
employment that the Board should consider essential. A few commenters
propose adding practices related to surveillance and monitoring to the
list.\170\ One comment goes further, suggesting that the Board adopt a
rebuttable presumption that an entity is a joint employer if it imposes
certain requirements on another entity or that entity's employees
(among others, retaining discretion to hire or fire that entity's
employees and requiring that entity's employees to enter into
noncompete agreements or other restraints on operating a business in
the same trade or industry during or after the contract).\171\
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\170\ Comments of Center for Law and Social Policy; Jobs with
Justice and Governing for Impact.
\171\ Comments of Professors Pandya, Elmore, and Griffith.
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As noted above, the Board has determined to include an exhaustive
list of essential terms and conditions of employment in the final rule.
While commenters broadly agree on the content of the proposed rule's
list, we briefly address commenters' specific concerns about our
decision to include scheduling, workplace health and safety, and work
rules and directions governing the manner, means, or methods of work
performance.
With respect to scheduling, we begin by noting several commenters'
approval of the 2020 Rule's inclusion of scheduling along with hours of
work as an essential term or condition of employment.\172\ We find that
Section 2 of the Restatement (Second) of Agency provides support for
including both ``hours of work and scheduling'' on the list of
essential terms and conditions of employment. We further note that
Board law has long treated scheduling as probative of joint-employer
status.\173\ We are also persuaded by the view set forth by some
commenters that scheduling practices are often intertwined with hours
of work.
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\172\ See comments of General Counsel Abruzzo; IBT; National
Women's Law Center.
\173\ See, e.g., Continental Winding Co., 305 NLRB 122, 123 fn.
4 (1991).
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Having carefully considered the valuable input of commenters on the
proposed rule's inclusion of workplace health and safety on our list of
essential terms and conditions of employment (and the views of our
dissenting colleague), we are persuaded to retain this aspect of the
proposed rule. We find common-law support for including workplace
health and safety as an essential term or condition of employment in
references to the importance of an employer's control over ``the
physical conduct'' of an employee ``in the performance of the service''
to the employer.\174\ While many commenters and our dissenting
colleague have observed that workplace health and safety is subject to
substantive regulation by many federal, state, and local authorities,
especially in certain industries, we do not seek to displace or
interfere with those regulatory schemes by recognizing that control
over workplace health and safety is indicative of a joint-employment
relationship. As discussed further below, we do not consider
contractual terms that do nothing more than incorporate regulatory
requirements, without otherwise reserving authority to control or
exercising power to control the performance of work or terms and
conditions of employment, indicative of
[[Page 73966]]
joint-employer status.\175\ Finally, as noted above, many commenters
confirmed our preliminary view that the experience of the Covid-19
pandemic demonstrated the importance of treating workplace health and
safety as essential.
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\174\ Restatement (Second) of Agency, sec. 2 (1958). While our
colleague does not find our reference to this ``general statement''
in the Restatement persuasive, we believe that ``the physical
conduct'' of an employee ``in the performance of the service'' to
the employer encompasses workplace health and safety.
\175\ Contrary to our dissenting colleague's suggestion, if an
employer's compliance with health and safety regulations or OSHA
standards involves choosing among alternative methods of satisfying
its legal obligation, a contract term that merely memorializes the
employer's choice regarding how to comply with the regulation would
not indicate joint-employer status. To the extent that an employer
reserves further authority or discretion over health and safety
matters, however, such reserved control (or control exercised
pursuant to such a reservation) would bear on the joint-employer
inquiry.
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We also adhere to the view set forth in the proposed rule that work
rules and directions governing the manner, means, or methods of work
performance are properly included as essential terms and conditions of
employment. As with our discussion of scheduling above, we note that
many commenters found it appropriate for the Board to follow the 2020
rule's lead in treating work rules and directions as essential.
Moreover, we find support for including work rules and directions on
the list of essential terms and conditions of employment in Sections 2
and 220 of the Restatement (Second) of Agency.\176\ In this regard, we
agree with the views set forth by some commenters that possessing or
exercising control over work rules or directions governing the manner,
means, or methods of work performance illuminates the extent of control
an employer exercises over the details of the work to be
performed.\177\
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\176\ Id., sec. 2 & 220.
\177\ We reject our dissenting colleague's suggestion that the
Board will seize upon ambiguous language in work rules to make a
joint-employer finding. Instead, we consider work rules or
directions essential because they may be especially clear indicators
of a putative joint employer's authority to control or exercise of
control over the details of particular employees' work. Cf.
Cognizant Technology Solutions U.S. Corp. & Google LLC, 372 NLRB No.
108, slip op. at 1 (2023) (finding joint-employer relationship under
2020 rule based in part on entity's maintenance of ```workflow
training charts' which govern[ed] the details of employees'
performance of specific tasks.'').
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Finally, in light of the clarification we make regarding the
content of a joint employer's bargaining obligation in paragraph (h) of
the final rule, we do not find it necessary to add other terms or
conditions of employment to the final rule's list of ``essential''
terms or conditions of employment. However, we believe the final rule
is responsive to commenters' insights that bargaining over certain of
these subjects, like workplace surveillance, may be very important to
employees who organize and seek to bargain collectively. As a result,
the final rule recognizes that once an entity is found to be a joint
employer on the basis of its control of one or more essential terms or
conditions of employment, that entity will be subject to a duty to
bargain over all mandatory subjects of employment that it
controls.\178\
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\178\ Contrary to the view of our dissenting colleague,
providing an exhaustive list of essential terms and conditions of
employment is not intended to address the District of Columbia
Circuit's concerns about the forms of indirect control that bear on
the joint-employer inquiry, but to instead respond to the court's
guidance, on remand, that the Board ``explain which terms and
conditions are `essential' to permit `meaningful collective
bargaining,''' and to ``clarify what `meaningful collective
bargaining' entails and how it works in this setting.'' BFI v. NLRB,
911 F.3d at 1221-1222 (quoting BFI, 362 NLRB at 1600).
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E. Comments About Forms of Control Sufficient To Establish Status as a
Joint Employer
Proposed paragraph (e) of the proposed rule provided that whether
an employer possesses the authority to control or exercises the power
to control one or more of the employees' terms and conditions of
employment is determined under common-law agency principles. Possessing
the authority to control is sufficient to establish status as a joint
employer, regardless of whether control is exercised. Exercising the
power to control indirectly is sufficient to establish status as a
joint employer, regardless of whether the power is exercised directly.
Control exercised through an intermediary person or entity is
sufficient to establish status as a joint employer.\179\
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\179\ 87 FR at 54663.
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Some commenters specifically request that the Board modify this
paragraph of the proposed rule to specify what quantum or degree of
indirect or reserved control will be sufficient to give rise to a
joint-employer finding.\180\ Many commenters commended the 2020 rule
for returning to TLI/Laerco's ``substantial direct and immediate
control'' formulation as the threshold that would give rise to a joint-
employer finding and treating ``limited and routine'' instances of
control as irrelevant to the joint-employer inquiry, with some noting
the practical benefits of that standard for the construction,
franchise, retail, restaurant, and staffing industries.\181\ Our
dissenting colleague likewise expresses his preference for the 2020
rule's treatment of the forms of control that are sufficient to
establish status as a joint employer. Some commenters suggest that
Congress, in enacting the Taft-Hartley amendments, implicitly
contemplated that only substantial direct and immediate control could
suffice to establish a joint-employer relationship.\182\ In addition,
some of these commenters urge that it is especially important for the
Board to ascertain whether an entity will possess or exercise control
on a prospective basis as a precondition to imposing a bargaining
obligation.\183\
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\180\ Comments of American Trucking Associations; COLLE;
Competitive Enterprise Institute; Escalante Organization; NAHB; SBA
Office of Advocacy; SHRM. Some commenters suggest that the proposed
rule is sufficiently vague that it could have negative effects on
the residential construction industry, exposing homeowners who
control access to job sites, working hours, and many day-to-day
conditions of employment to classification as potential joint
employers. See comments of NAHB; Restaurant Law Center and National
Restaurant Association. Another commenter questions whether a
franchisor would be deemed a joint employer by virtue of providing
optional tools and resources to a franchisee. See comments of
Escalante Organization.
\181\ Comments of AGC; American Pizza Community; Americans for
Tax Reform; American Staffing Association; California Policy Center;
Escalante Organization; Independent Electrical Contractors; IFA;
Michael Remick; National Association of Realtors; National Black
McDonald's Operators Association; National Demolition Association;
National Retail Federation; National Taxpayers Union; New Civil
Liberties Alliance & Institute for the American Worker; North
American Meat Institute; Restaurant Law Center and National
Restaurant Association; RILA; The Mackinac Center for Public Policy;
Yum! Brands. One commenter also argues that there must be a showing
of regular and continuous control, not merely sporadic and de
mi
[…truncated; see source link]Indexed from Federal Register on October 27, 2023.
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