# Joint Employer Status Under the National Labor Relations Act > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-03373 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** February 26, 2020 - **Citation:** 85 FR 11184 ## Text NATIONAL LABOR RELATIONS BOARD 29 CFR Part 103 RIN 3142-AA13 Joint Employer Status Under the National Labor Relations Act AGENCY: National Labor Relations Board. ACTION: Final rule. SUMMARY: The National Labor Relations Board (NLRB or Board) has decided to issue this final rule for the purpose of carrying out the provisions of the National Labor Relations Act (NLRA or Act) by establishing the standard for determining whether two employers, as defined in Section 2(2) of the Act, are a joint employer under the NLRA. The Board believes that this rulemaking will foster predictability and consistency regarding determinations of joint-employer status in a variety of business relationships, thereby enhancing labor-management stability, the promotion of which is one of the principal purposes of the Act. Under this final rule, an entity may be considered a joint employer of a separate employer's employees only if the two share or codetermine the employees' essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. DATES: This rule has been classified as a major rule subject to Congressional review. The effective date is April 27, 2020. 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) 273-2917 (this is not a toll-free number), 1-866-315-6572 (TTY/TDD). SUPPLEMENTARY INFORMATION: I. Background A. The Act The NLRA sets forth a number of rights and responsibilities that apply to employers, employees, and labor organizations representing employees, in furtherance of the Act's overarching goals of promoting labor relations stability, 1 protecting employees' right to designate representatives of their own choosing “for the purpose of collective bargaining or other mutual aid or protection,” 2 and preventing unfair labor practices by employers and labor organizations. 3 1 Section 1 of the Act, 29 U.S.C. 151. 2 Section 7 of the Act, 29 U.S.C. 157. 3 Section 8 of the Act, 29 U.S.C. 158. The NLRA also defines the terms “employer” and “employee.” Under Section 2(2) of the Act, “the term `employer' includes any person acting as an agent of an employer, directly or indirectly,” but excludes certain governmental entities, entities subject to the Railway Labor Act, or any labor organization (other than when acting as an employer). Section 2(3) of the Act provides that “the term `employee' shall include any employee, and shall not be limited to the employees of a particular employer, unless this subchapter [of the Act] explicitly states otherwise . . . but shall not include . . . any individual having the status of an independent contractor. . . .” 29 U.S.C. 152(3). The text of the Act and its legislative history further establish that, in determining whether an employment relationship exists between a putative employer and employee, common-law agency principles are controlling. See, e.g., NLRB v. United Ins. Co. of America, 390 U.S. 254, 256 (1968). Thus, in making this determination, the Board is bound by common-law principles, which require that it focus on the control exercised by a putative employer over a person performing work for it. Id; see also Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992). The Act does not contain the term “joint employer,” much less define it. As discussed below, the Board and reviewing courts have developed that concept in adjudication over the years to address situations where two or more separate entities engaged in a business relationship jointly affect the terms and conditions of employment of a group of employees. See Boire v. Greyhound Corp., 376 U.S. 473 (1964) (holding that Board's determination that bus company possessed “sufficient control over the work” of its cleaning contractor's employees to be considered a joint employer was not reviewable in federal district court); Indianapolis Newspapers, Inc., 83 NLRB 407, 408-409 (1949) (finding that two newspaper businesses, Star and INI, were not joint employers, despite their integration, because “there [wa]s no indication that Star, by virtue of such integration, t[ook] an active part in the formulation or application of the labor policy, or exercise[d] any immediate control over the operation, of INI”). Consistent with the statutory requirement that the common law of agency be applied, joint-employer determinations have focused on the extent to which the separate companies exercise control over the persons performing the work. Id. As also discussed below, Section 6 of the Act authorizes the Board to “make, amend, and rescind . . . such rules and regulations as may be necessary to carry out the provisions of this subchapter.” See American Hosp. Ass'n v. NLRB, 499 U.S. 606 (1991) (affirming authority of NLRB to enact rules establishing bargaining units for acute care hospitals). The Board has determined that it is appropriate to do so now in order to define who may be a joint employer under the Act. B. The Development of the Joint-Employment Doctrine Under the NLRA The general formulation of the Board's joint-employer standard is firmly established. “The Board will find that two separate entities are joint employers of a single work force if the evidence shows that they `share or codetermine those matters governing the essential terms and conditions of employment.' ” CNN America, Inc., 361 NLRB 439, 441 (2014) (quoting TLI, Inc., 271 NLRB 798 (1984), enfd. mem. sub nom. Gen. Teamsters Local Union No. 326 v. NLRB, 772 F.2d 894 (3d Cir. 1985)), enf. denied in part 865 F.3d 740 (DC Cir. 2017). This standard derives from language in Greyhound Corp., 153 NLRB 1488, 1495 (1965), enfd. 368 F.2d 778 (5th Cir. 1966), and was endorsed in NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117, 1122-1123 (3d Cir. 1982). It is rooted in longstanding Board precedent and has been consistently approved by reviewing courts. Notably, however, the Board has never attempted to comprehensively define the “essential terms and conditions of employment” that are relevant to the joint-employer inquiry, even though the standard itself inherently implies that it is control over those terms and conditions of employment that is determinative of joint-employer status. 4 And even when a term or condition of employment is deemed “essential” for the purpose of determining joint-employer status, the joint-employer standard described above does not specify the extent of control that must be shown before the two entities may be found to “share or codetermine” that essential term or condition. As fully described in the Notice of Proposed Rulemaking (NPRM), the Board's treatment of the latter issue has evolved over the years. 5 Nevertheless, for at least 30 years (from no later than 1984 to 2015), evidence of indirect control was typically insufficient to prove that an entity was the joint employer of another employer's workers. Even direct and immediate supervision of another employer's employees was insufficient to establish joint-employer status where such supervision was “limited and routine.” 6 4 The Board has held that a joint-employer finding requires “a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” Laerco Transportation, 269 NLRB 324, 325 (1984); accord TLI, Inc., 271 NLRB at 798-799. But this list did not purport to be exhaustive. 5 As more fully described in the NPRM, the Board has consistently recognized that direct control of essential terms and conditions is relevant to this determination, while the extent to which indirect control was a factor has changed over time. Compare Floyd Epperson, 202 NLRB 23, 23 (1973) (dairy company was the joint employer of truck drivers supplied to it by an independent trucking firm based on evidence of both direct and indirect control over the working conditions of the drivers), enfd. 491 F.2d 1390 (6th Cir. 1974), with Airborne Express, 338 NLRB 597, 597 fn. 1 (2002) (holding that “the essential element” in a joint-employer analysis “is whether a putative joint employer's control over employment matters is direct and immediate” (citing TLI, Inc., 271 NLRB at 798-799)); see also NLRB v. CNN America, Inc., 865 F.3d 740, 748-751 (D.C. Cir. 2017) (finding that Board erred by failing to adhere to “direct and immediate control” standard); SEIU Local 32BJ v. NLRB, 647 F.3d 435, 442 (2d Cir. 2011) (“An essential element' of any joint employer determination is `sufficient evidence of immediate control over the employees.” (quoting Clinton's Ditch Co-op Co. v. NLRB, 778 F.2d 132, 138 (2d Cir. 1985))). As also described in the NPRM, the relevance to the joint-employer determination of an entity's contractually reserved but unexercised authority over another company's employees has also changed over time. See Hychem Constructors, Inc., 169 NLRB 274 (1968) (petrochemical manufacturer was not a joint employer of its construction subcontractor's employees even though their cost-plus agreement reserved to the manufacturer a right to approve wage increases and overtime hours and the right to require the subcontractor to remove any employee whom the manufacturer deemed undesirable); Jewel Tea Co., 162 NLRB 508, 510 (1966) (department store was a joint employer of the employees of two independent companies licensed to operate specific departments of its store based on its reserved contractual authority). In AM Property Holding Corp., the Board found that a “contractual provision giving [a property owner] the right to approve [its cleaning contractor's] hires, standing alone, [was] insufficient to show the existence of a joint employer relationship.” 350 NLRB 998, 1000 (2007), enfd. in relevant part sub nom. SEIU Local 32BJ v. NLRB, 647 F.3d 435 (2d Cir. 2011). The Board explained that “[i]n assessing whether a joint employer relationship exists, the Board does not rely merely on the existence of such contractual provisions, but rather looks to the actual practice of the parties.” Id. 6 See, e.g., AM Property Holding Corp., 350 NLRB at 998; Airborne Express, 338 NLRB at 597; TLI, Inc., 271 NLRB at 798. The law governing joint-employer determinations changed significantly in August 2015. At that time, a divided Board overruled the then-extant precedent described above and substantially relaxed the requirements for proving a joint-employer relationship. Specifically, a Board majority held that it would no longer require proof that a putative joint employer has exercised any “direct and immediate” control over the essential terms and conditions of employment of another company's workers. Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB 1599, 1600 (2015) ( Browning-Ferris ), affd. in part, reversed in part and remanded 911 F.3d 1195 (D.C. Cir. 2018). The majority in Browning-Ferris explained that, under its new standard, a company could be deemed a joint employer even if its control over the essential working conditions of another business's employees was indirect, limited and routine, or contractually reserved but never exercised. Id. at 1613-1614. At the same time, however, the Browning-Ferris majority stated that “[e]ven where the common law does permit the Board to find joint employer status in a particular case, the Board must determine whether it would serve the purposes of the Act to do so. . . .” Id. at 1610 (emphasis in original); see also id. at 1614 (“[I]t is certainly possible that in a particular case, a putative joint employer's control might extend only to terms and conditions of employment too limited in scope or significance to permit meaningful collective bargaining.”). In December 2018, the United States Court of Appeals for the District of Columbia Circuit issued its decision on review of the Board's Browning-Ferris decision. See Browning-Ferris Industries of California, Inc. v. NLRB, 911 F.3d 1195 ( Browning-Ferris v. NLRB ). Consistent with the principles stated above, the court held that the Board was required to apply the common law of agency in determining whether an entity was a joint employer of particular employees. Whether proceeding by adjudication or rulemaking, then, the Board “must color within the common-law lines identified by the judiciary.” Id. at 1208. The court upheld the Board's longstanding right-to-control standard as “an established aspect of the common law of agency.” Id. at 1209. In addition, the court also concluded that the common law “permits consideration of those forms of indirect control that play a relevant part in determining the essential terms and conditions of employment.” Id. at 1199-1200. The court therefore affirmed Browning-Ferris' s “articulation of the joint-employer test as including consideration of both an employer's reserved right to control and its indirect control over employees' terms and conditions of employment.” Id. at 1200. In so holding, the court recognized that Browning-Ferris did not present the issue of whether either indirect control or a contractually reserved but unexercised right to control can be dispositive of joint-employer status absent evidence of exercised direct and immediate control. Id. at 1213, 1218. The court, however, faulted the Browning-Ferris Board for failing to confine its inquiry to “indirect control over the essential terms and conditions of the workers' employment.” Id. at 1209. Specifically, the court found that, in considering the factor of indirect control, Browning-Ferris failed to hew to the relevant common-law boundaries that prevent the Board from trenching on the common and routine decisions that employers make when hiring third-party contractors and defining the terms of those contracts. To inform the joint-employer analysis, the relevant forms of indirect control must be those that “share or co-determine those matters governing essential terms and conditions of employment.” By contrast, those types of employer decisions that set the objectives, basic ground rules, and expectations for a third-party contractor cast no meaningful light on joint-employer status. Id. at 1219-1220 (internal citations omitted). The court remanded the case to the Board, and the Board accepted the remand. 7 7 The court also found that the Browning-Ferris Board had neglected to apply the second step of its newly-fashioned standard, under which, “even if it finds that the common law would deem a business to be a joint employer, the Board will also ask whether the putative joint employer possesses sufficient control over employees' essential terms and conditions of employment to permit meaningful collective bargaining.” Id. at 1221 (internal quotation omitted). The court directed the Board to address this issue on remand as well. C. NPRM On September 14, 2018, the Board issued its joint-employer NPRM. There, the Board proposed the following rule: An employer, as defined by Section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate employer's employees only if the two employers share or codetermine the employees' essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction. A putative joint employer must possess and actually exercise substantial direct and immediate control over the employees' essential terms and conditions of employment in a manner that is not limited and routine. 83 FR at 46696. The proposed rule also included a number of hypothetical examples illustrating how it would apply to particular scenarios. In the NPRM, the Board acknowledged that the Agency historically has made major policy determinations through adjudication, but stated that it interpreted Section 6 of the Act as authorizing the Board to engage in this rulemaking, adding that rulemaking on the issue of determining joint-employer status was preferable to adjudication in order to provide clarity and stability to this area of the law. The NPRM further stated the Board's preliminary view, subject to potential revision in response to comments, that a joint-employer doctrine under which the duty to bargain is imposed only on entities that have played an active role in establishing essential terms and conditions of employment best serves the Act's purposes of promoting collective bargaining and minimizing industrial strife. The NPRM invited comments on these issues and, indeed, on all aspects of the proposed rule, including input from employees, unions, and employers regarding their experience in workplaces where multiple entities have some authority over the workplace. The Board set an initial comment period of 60 days, with 7 additional days allotted for reply comments. Thereafter, the Board extended these deadlines three times, including an extension to allow interested parties to comment on the impact of the D.C. Circuit's decision in Browning-Ferris v. NLRB . 8 8 See Order dated January 11, 2019. The NPRM set the deadline for initial comments as November 13, 2018, and comments replying to comments submitted during the initial comment period were due November 20, 2018. On October 30, 2018, the Board extended the deadlines for submitting initial and reply comments for 30 days, to December 13, 2018, and December 20, 2018, respectively. On December 10, 2018, the deadlines were extended for an additional 30 days, to January 14, 2019, and January 22, 2019, respectively. After the D.C. Circuit issued its decision in Browning-Ferris v. NLRB, the Board extended the deadlines a third and final time to permit commenters to address issues raised by the court's decision. The deadline for initial comments was extended to January 28, 2019, and for reply comments to February 11, 2019. 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 NPRM, provides that an entity is a joint employer of a separate employer's employees only if the two employers share or codetermine the employees' essential terms or conditions of employment. However, the Board has modified the proposed rule to define “share or codetermine” as the possession and exercise of “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 relationship with those employees.” The Board has also modified the proposed rule to factor indirect control over essential terms or conditions of employment, contractually reserved control over essential terms or conditions of employment, and control over mandatory subjects of bargaining other than essential terms and conditions of employment into the joint-employer analysis, “but only to the extent [they] supplement[] and reinforce[] evidence of the entity's possession or exercise of direct and immediate control over a particular essential term and condition of employment.” Consistent with these provisions, evidence of contractually reserved control over an essential term or condition of employment is probative for the purpose of determining whether an entity possesses or exercises direct and immediate control over that essential term or condition. Plainly, the fact that an entity has a contractually reserved right to control an essential term or condition is probative of whether it possesses control over that term. Such evidence may also be probative of whether the control possessed and exercised is “substantial,” as that term is defined in the final rule (see Sec. II.E, “ `Substantial' direct and immediate control”, infra). Similarly, evidence of indirect control over an essential term or condition of employment may be probative of whether the control possessed and exercised is substantial. Depending on the circumstances of a particular case, evidence of control over a nonessential term or condition that nonetheless constitutes a mandatory subject of bargaining may be probative of whether an entity possesses and exercises substantial direct and immediate control over an essential term or condition of employment. One can readily foresee cases where the parties dispute the significance or sufficiency of evidence that an entity exercises substantial direct and immediate control over an essential term or condition of employment, such as by claiming that the evidence is not credible or is too isolated or sporadic to meet the substantiality standard, but where the entity's control over one or more related nonessential terms may tend to support a finding of substantial direct and immediate control over an essential term or condition. For example, an entity's control over grievance adjustment or drug or alcohol testing might be probative of its direct and immediate control over discipline or supervision, and an entity's control over dress codes or attendance rules might be probative of its direct and immediate control over discipline. Evidence of an entity's contractually reserved or indirect control over an essential term or condition of employment, or its control over mandatory but nonessential subjects of bargaining, is not, however, otherwise probative of whether the entity “meaningfully affects matters relating to the employment relationship.” Under the final rule, a putative joint employer reaches that threshold only through possession and exercise of substantial direct and immediate control over one or more essential terms and conditions of employment. B. Indirect Control The Board has modified the proposed rule to factor indirect control into the joint-employer analysis, but not to find it sufficient without more to make an entity a joint employer. Accordingly, the final rule provides that evidence of indirect control over essential terms and conditions of employment is probative of joint-employer status, but only to the extent that it supplements and reinforces evidence of direct and immediate control over essential terms and conditions. The definitions of the several essential terms and conditions of employment include statements of what does and does not count as direct and immediate control over the essential term and condition being defined. These statements may bear on indirect control, since what does not count as direct and immediate control may count as indirect control. However, consistent with the D.C. Circuit's decision in Browning-Ferris v. NLRB, the definition of “indirect control” excludes “control or influence over setting the objectives, basic ground rules, or expectations for another entity's performance under a contract,” and evidence of control that by definition does not count as direct and immediate control may fall within this exclusion and so not constitute indirect control, either. For example, the definition of “[h]ours of [w]ork” states that “[a]n entity does not exercise direct and immediate control over hours of work by establishing an enterprise's operating hours or when it needs the services provided by another employer.” But establishing an enterprise's operating hours may not be evidence of indirect control, either. A business that contracts, for example, with a food service contractor to staff its employee lunchroom surely sets “basic ground rules or expectations” for that contractor by specifying the hours when the lunchroom will be open. Thus, specifying those hours would be neither direct and immediate control nor indirect control. In other instances, however, what is excluded by definition from direct and immediate control may constitute indirect control. Accordingly, what is indirect control over an essential term and condition of employment versus what is merely a setting of objectives, basic ground rules or expectations for a contractor's performance is an issue of fact to be determined on a case-by-case basis. C. Contractually Reserved But Unexercised Right To Control The final rule recognizes contractually reserved but unexercised control as a potentially relevant consideration. It provides that evidence of an entity's contractually reserved but never exercised authority over the essential terms and conditions of another employer's employees is probative of joint-employer status, but only to the extent it supplements and reinforces evidence of direct and immediate control over essential terms and conditions of employment. In addition, although not stated explicitly in the regulatory text, the distinction drawn between indirect control that may be relevant to a joint-employer determination and “decisions that set the objectives, basic ground rules, and expectations for a third-party contractor” 9 — i.e., the “routine components of a company-to-company contract” 10 —also applies to contractually reserved but unexercised control. That is, if a contract reserves to an entity a right to control one or more matters involving the objectives, basic ground rules, or expectations for a third-party contractor, such evidence will not be probative of joint-employer status. For example, contractual safety, performance, and quality standards are generally “routine components of a company-to-company contract” 11 and do not support a finding of joint-employer status. This necessarily follows from the final rule's definition of indirect control. If actual influence over the objectives, basic ground rules, or expectations for a third-party contractor is not probative of joint-employer status, as the D.C. Circuit held in Browning-Ferris v. NLRB, then necessarily a contractual but unexercised right to control such matters cannot be probative of such status, either. See Browning-Ferris v. NLRB, 911 F.3d at 1221 (“[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.”) (emphasis added; internal quotation and citation omitted). 9 Browning-Ferris v. NLRB, 911 F.3d at 1220. 10 Id. at 1221. 11 Id. D. Limited and Routine Control The proposed rule stated, in relevant part, that “[a] putative joint employer must possess and actually exercise substantial direct and immediate control over the employees' essential terms and conditions of employment in a manner that is not limited and routine” (emphasis added). The Board has decided to revise the proposed rule to delete “limited and routine” as a general qualifying term and instead to use that term solely in the context of defining what is and is not direct and immediate control over supervision. Thus, the final rule provides that an entity does not exercise direct and immediate control over supervision when its instructions are limited and routine and consist primarily of telling another employer's employees what work to perform, or where and when to perform the work, but not how to perform it. The final rule does not otherwise use the phrase “limited and routine.” E. “Substantial” Direct and Immediate Control The final rule retains the requirement that direct and immediate control over essential terms and conditions of employment be “substantial” to give rise to joint-employer status. The Board has decided, however, to define “substantial direct and immediate control” in the final rule. As defined, “substantial” direct and immediate control means 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. Such control is not “substantial” if it is only exercised on a sporadic, isolated, or de minimis basis. Thus, the exercise of even direct and immediate control may be so isolated, sporadic or de minimis that it fails to establish that the putative joint employer meaningfully affects matters relating to the employment relationship. F. “Essential” Terms And Conditions of Employment The proposed rule, in relevant part, states that “[a]n employer may be considered a joint employer of a separate employer's employees only if the two entities share or codetermine the employees' essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction” (emphasis added). The phrase “such as” suggested that the specifically enumerated essential terms—hiring, firing, discipline, supervision, and direction—might not be exhaustive, but the proposed rule left unanswered whether additional terms and conditions could be deemed essential, and if so, what those terms and conditions might be. The final rule expands the list of essential terms and conditions to include wages, benefits, and hours of work. Additionally, to provide greater certainty and remove a potential issue from litigation, the final rule makes the list of essential terms exhaustive. Finally, the final rule has been revised to provide that an entity's control over other mandatory subjects of bargaining not considered essential terms and conditions of employment is probative of joint-employer status, but only to the extent it supplements and reinforces evidence of direct and immediate control over essential terms and conditions of employment. G. Hypothetical Scenarios in the NPRM The proposed rule included a number of hypothetical scenarios, termed “examples.” They were included to provide additional guidance on the practical application of the proposed rule. The Board has decided to omit the hypothetical scenarios from the final rule and has instead provided more specific guidance in the text of the rule itself, as discussed below. III. Justification for Using Rulemaking, Rather Than Adjudication, To Revise the Joint-Employer Standard A. Authority To Engage in Rulemaking Congress has delegated general rulemaking authority to the Board. Specifically, Section 6 of the National Labor Relations Act, 29 U.S.C. 156, provides that the Board “shall have authority from time to time to make, amend, and rescind, in the manner prescribed by the [Administrative Procedure Act (APA)], such rules and regulations as may be necessary to carry out the provisions of [the Act].” Although the Board historically has made most substantive policy determinations through case adjudication, it has, with Supreme Court approval, engaged in substantive rulemaking. American Hosp. Ass'n. v. NLRB, 499 U.S. 606 (1991) (upholding Board's rulemaking on appropriate bargaining units in the healthcare industry); 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.”). Further, 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, Section 2(2) of the Act defines “employer” and Section 2(3) defines “employee.” Section 7 of the Act defines the employee rights that the Act protects, including the right to bargain collectively through representatives of their own choosing, the right to engage in other concerted activities for the purpose of collective bargaining or mutual aid or protection, and the right to refrain from these activities. Section 8 of the Act defines unfair labor practices under the Act. Of particular relevance is Section 8(a)(5), which provides that it is an unfair labor practice for an employer “to refuse to bargain collectively with the representatives of his employees” (emphasis added). Section 9 of the Act sets forth the Board's responsibilities for conducting representation elections, and Section 10 of the Act provides the Board with the authority to investigate, prevent, and remedy unfair labor practices. The Board's joint-employer doctrine implicates each of these provisions of the Act, and Section 6 grants the Board the authority to promulgate rules that carry out those provisions. B. The Preference for Rulemaking Over Adjudication In the NPRM, we expressed a preliminary belief that rulemaking in this area of the law is desirable for several reasons. Specifically, the NPRM stated that rulemaking, rather than adjudication, would enable the Board to gather information from a wide variety of interested parties and to provide greater clarity to the joint-employer analysis. Rulemaking would also respect the reasonable expectations of regulated parties by ensuring that further changes to the law in this area would only be made prospectively in a new rulemaking proceeding, whereas with case adjudication, changes in the law may be made retroactively. After carefully considering nearly 29,000 comments, the Board continues to believe that rulemaking, rather than adjudication, is the better method to revise and clarify the standard for determining joint-employer status under the Act. First, the Board has been well served by public comment on the issue. The Board received numerous helpful comments from a wide variety of sources, many with considerable legal expertise and/or a great deal of relevant experience. Having considered these comments, the Board has refined the proposed rule in several ways, outlined above in Section II and discussed more fully below in Sections V and VI. It is likely that the Board would not have received as much input from revisiting the joint-employer standard through adjudication rather than rulemaking. Rulemaking has given interested persons a way to provide input through the convenient comment process, and participation was not limited, as in the adjudicatory setting, to legal briefs filed by the parties and amici. Further, the comments confirm that it was especially important for the Board to receive feedback in light of the recent oscillation on the joint-employer standard, after decades of stability, beginning with Browning-Ferris, which overruled longstanding Board precedent and substantially relaxed the evidentiary requirements for finding a joint-employer relationship, and followed by Hy-Brand Industrial Contractors, Ltd. & Brandt Construction Co., 365 NLRB No. 156 (2017) ( Hy-Brand I ), which restored the prior standard, but which was then vacated for procedural reasons in Hy-Brand Industrial Contractors, Ltd. & Brandt Construction Co., 366 NLRB No. 26 (2018) ( Hy-Brand II), 12 resulting in reinstatement by default of the joint-employer standard adopted in Browning-Ferris . 12 Mot. for reconsideration denied 366 NLRB No. 93 (2018) ( Hy-Brand III) . Second, rulemaking has made it possible for the Board to provide greater clarity with respect to the standard than would likely be accomplished through adjudication. Although the Board has decided, in response to comments, to omit the examples that were set forth in the text of the proposed rule, the final rule provides clarity by, for example, setting forth actions that will and actions that will not constitute direct and immediate control over each essential term and condition of employment. This is regulatory guidance that could be dismissed as dicta if set forth in an adjudicatory decision in a case in which it was not essential to the outcome. By providing such guidance, the final rule will comport with the Supreme Court's instruction that the Board should provide parties with “certainty beforehand as to when [they] may proceed to reach decisions without fear of later evaluations labeling [their] conduct an unfair labor practice.” First Nat'l Maint. Corp. v. NLRB, 452 U.S. 666, 679 (1981). Third, the Board continues to believe, as discussed in the NPRM, that by establishing the joint-employer standard through the Board's Rules and Regulations, the final rule will enable employers, unions, and employees to plan their affairs free of the uncertainty that significant changes to the joint-employer doctrine could be made, and retroactively applied, via case adjudication. NLRB v. Wyman-Gordon Co., 394 U.S. 759, 777 (1969) (Douglas, J., dissenting) (“The rule-making procedure performs important functions. It gives notice to an entire segment of society of those controls or regimentation that is forthcoming.”). Finally, the decision to engage in rulemaking regarding the standard for determining joint-employer status is consistent with the similar determinations, by the United States Department of Labor (DOL) and the United States Equal Employment Opportunity Commission (EEOC), to similarly address this issue through rulemaking. 13 13 See Joint Employer Status Under the Fair Labor Standards Act, 85 FR 2820 (Jan. 16, 2020) (to be codified 29 CFR part 791); Introduction to the Fall 2019 Regulatory Plan, 84 FR 71091 (Dec. 26, 2019) (listing EEOC Fall 2019 Unified Rulemaking Agenda, Joint Employer Status Under the Federal Equal Employment Opportunity Statutes (RIN: 3046-AB16)). In sum, and as indicated in the NPRM with respect to the proposed rule, the Board believes that the final rule will foster predictability and consistency regarding determinations of joint-employer status in a variety of business relationships, thereby enhancing labor-management stability, the promotion of which is one of the principal purposes of the Act. IV. Recusal Issues A number of commenters claim that Chairman Ring, Member Emanuel, and/or Member Kaplan entered into this rulemaking with unalterably closed minds as to the outcome and consequently that each should recuse himself from participating in it. For the reasons that follow, the Board rejects these contentions. “[A]n individual should be disqualified from rulemaking only when there has been a clear and convincing showing” that the official “has an unalterably closed mind on matters critical to the disposition of the proceeding.” Air Transp. Ass'n of America, Inc. v. NMB, 663 F.3d 476, 487 (D.C. Cir. 2011) (quoting C & W Fish Co. v. Fox, 931 F.2d 1556, 1564 (D.C. Cir. 1991)). Moreover, “[a]n administrative official is presumed to be objective and `capable of judging a particular controversy fairly on the basis of its own circumstances.' ” Steelworkers v. Marshall, 647 F.2d 1189, 1208 (D.C. Cir. 1980) (quoting United States v. Morgan, 313 U.S. 409, 421 (1941)). Further, “[w]hether the official is engaged in adjudication or rulemaking,” the fact that he or she “has taken a public position, or has expressed strong views, or holds an underlying philosophy with respect to an issue in dispute cannot overcome that presumption.” Id. That presumption is also not overcome “when the official's alleged predisposition derives from [his or] her participation in earlier proceedings on the same issue.” Id. at 1209. Expanding on the latter point, the D.C. Circuit has explained that “[t]o disqualify administrators because of opinions they expressed or developed in earlier proceedings would mean that `experience acquired from their work . . . would be a handicap instead of an advantage.' ” Id. (quoting FTC v. Cement Inst., 333 U.S. 683, 702 (1948)). More recently, the D.C. Circuit has similarly emphasized that it would “`eviscerate the proper evolution of policymaking were we to disqualify every administrator who has opinions on the correct course of his agency's future actions.' ” Air Transp. Ass'n of America, 663 F.3d at 488 (quoting C & W Fish Co., 931 F.2d at 1565). Consistent with the foregoing precedent, each participating Member has determined that there is no basis to recuse himself from this rulemaking. Indeed, comparison of the final rule with the proposed rule in itself clearly demonstrates that the Members did not engage in this endeavor with “an unalterably closed mind.” After considering nearly 29,000 comments, the Board has revised the proposed rule in several significant respects. Throughout this rulemaking process, the Board has been willing to reconsider the preliminary views expressed in the NPRM and to revise the rule as found appropriate. One commenter raises arguments based on section 1, paragraph 6 of Executive Order 13770, entitled “Ethics Commitments by Executive Branch Appointees,” 82 FR 9333 (Jan. 28, 2017). 14 As other commenters correctly note, the cited provision is inapplicable. 15 Section 1, paragraph 6 of Executive Order 13770 is a pledge that states: “I will not for a period of 2 years from the date of my appointment participate in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts.” This paragraph, read together with the definitions of “former employer,” “former client,” and “directly and substantially related” set forth in Executive Order 13770, prohibits a Board Member from participating in a “particular matter involving specific parties” in which his or her former employer or own former client is a party or the representative of a party. Section 2(s) of Executive Order 13770 provides that a particular matter involving specific parties has the same meaning as set forth in 5 CFR 2641.201(h). 16 5 CFR 2641.201, which contains interpretive guidance for the post-employment restrictions found in 18 U.S.C. 207, states that “only those particular matters that involve a specific party or parties fall within the prohibition” of 18 U.S.C. 207(a)(1), and that 14 See comment of Service Employees International Union (SEIU). 15 See comments of Ranking Member Virginia Foxx of the U.S. House of Representatives Committee on Education and Labor (Ranking Member Foxx); HR Policy Association. 16 Section 2(s) additionally states that the definition of a particular matter involving specific parties shall also include “any meeting or other communication relating to the performance of one's official duties with a former employer or former client, unless the communication applies to a particular matter of general applicability and participation in the meeting or other event is open to all interested parties.” This portion of the provision does not apply here. [s]uch a matter typically involves a specific proceeding affecting the legal rights of the parties or an isolatable transaction or related set of transactions between identified parties, such as a specific contract, grant, license, product approval application, enforcement action, administrative adjudication, or court case. 5 CFR 2641.201(h)(1). Further, the regulation states that “[l]egislation or rulemaking of general applicability and the formulation of general policies, standards or objectives, or other matters of general applicability are not particular matters involving specific parties.” Id. 2641.201(h)(2). Here, the joint-employer rulemaking—unlike an administrative adjudication of a case—is not a “specific proceeding affecting the legal rights of the parties” to that proceeding. Rather, this rulemaking is a matter of general applicability. See 5 CFR 2641.201(h)(1)-(2). Further, the phrase “including regulations” in the pledge recusal provision in section 1, paragraph 6 of Executive Order 13770 “is not intended to suggest that all rulemakings are covered,” but instead is a “reminder that regulations sometimes may be particular matters involving specific parties, although in rare circumstances.” Ethics Pledge: Revolving Door Ban—All Appointees Entering Government, DO-09-11 at 2 (Mar. 26, 2009) (“certain rulemakings may be so focused on the rights of specifically identified parties as to be considered a particular matter involving specific parties”); see also Guidance on Executive Order 13770, LA-17-03 (Mar. 20, 2017). Because the joint employer rulemaking is not directed at specific parties, the cited provision of Executive Order 13770 does not apply, and arguments based on Executive Order 13770 are misplaced. Citing Member Emanuel's participation in Hy-Brand I, one commenter argues that Member Emanuel should recuse himself because “[i]t is clear where [he] stands on the important issues at stake in this rulemaking” and because he has “expressed those strong views.” 17 However, the fact that Member Emanuel expressed views on the joint-employer standard in Hy-Brand I is insufficient to demonstrate that Member Emanuel has engaged in this rulemaking with an unalterably closed mind. See Air Transp. Ass'n of America, Inc., 663 F.3d at 487-488; Steelworkers, 647 F.2d at 1208-1209. Accordingly, the AFT's argument is unfounded. 17 See comment of American Federation of Teachers (AFT) at 4. Commenters also argue that Member Emanuel should recuse himself because his participation in this rulemaking would “accomplish the same goals” that he could not accomplish in Hy-Brand I, and this would be inconsistent with his “ethical obligations.” 18 As an initial matter, Member Emanuel's disqualification from Hy-Brand I was unrelated to the substantive issues in that case. It was based on the fact that Member Emanuel had been a shareholder in the law firm that represented Leadpoint Business Services, one of the parties before the Board in Browning-Ferris; it had nothing to do with the substance of the case or the joint-employer standard. See Browning-Ferris v. NLRB, 911 F.3d at 1205-1206. To the extent the AFT is suggesting that Member Emanuel should be disqualified from participating in this rulemaking because he has “[policy] goals,” neither Member Emanuel's underlying philosophy, nor his previously expressed views, nor his initial participation in Hy-Brand I constitute grounds for his disqualification or establish that Member Emanuel has an unalterably closed mind on matters critical to this rulemaking. See Air Transp. Ass'n of America, Inc., 663 F.3d at 487-488; Steelworkers, 647 F.2d at 1208-1209. 18 Id.; see also comments of AFL-CIO; SEIU; Congressional Progressive Caucus; Attorneys General of New York, Pennsylvania, et al.; Center for American Progress Action Fund. Moreover, and as emphasized above, the final joint-employer rule applies prospectively only. Thus, the final rule will not effectively reinstate the Board's vacated decision in Hy-Brand I, it will not affect the outcome in Browning-Ferris (currently pending before the Board on remand from the D.C. Circuit), and it will not affect Leadpoint or any other party in Browning-Ferris . 19 19 The question of what standard should apply in Browning-Ferris on remand was not addressed by the D.C. Circuit, which declined to rule on BFI's challenge to the retroactive application of the Browning-Ferris standard in that case. See 911 F.3d at 1222. Although the Board's Designated Agency Ethics Official (DAEO) determined that Member Emanuel was disqualified from participation in the Hy-Brand cases, the DAEO subsequently determined that Member Emanuel was not disqualified from participating in this rulemaking and provided guidance to all Board members with respect to general recusal considerations. With respect to the DAEO's latter determination, one comment faulted the DAEO's memorandum for purportedly failing to apply the recusal standard for rulemaking “in light of the NPRM's particularly suspect history,” asserting that there should be a “more fulsome” public examination of the DAEO's opinion or memorandum. 20 This vague claim does not undermine the DAEO's determination. 20 Comment of Chairman Robert C. “Bobby” Scott of the House Committee on Education and Labor and Ranking Member Patty Murray of the Senate Committee on Health, Education, Labor, and Pensions (Chairman Scott and Ranking Member Murray) at 16. Another commenter has suggested that the DAEO's memorandum is flawed because it was issued while the Board's recusal procedures were under review. 21 The Board's report on those procedures issued on November 19, 2019. 22 Nothing in that report or in the fact that the review was underway at the time the DAEO issued her memorandum undermines the DAEO's opinion regarding Member Emanuel's participation. 21 Comment of Congressional Progressive Caucus. 22 See NLRB's Ethics Recusal Report, https://www.nlrb.gov/reports/other-agency-reports/ethics-recusal-report (last visited Jan.15, 2020). The Board subsequently announced plans to modify aspects of the report not material to the issues discussed here. Id. One commenter also contends that Member Emanuel's participation in this rulemaking creates an appearance of preferential treatment of a client (Leadpoint) of his former law firm because the client would “derive the same impermissible benefit as it would have from Hy-Brand I .” 23 Accordingly, this commenter argues that Member Emanuel's participation “runs afoul” of section 1, paragraph 6 of Executive Order 13770, as well as 5 CFR 2635.101(b)(8) and (14). Id. 5 CFR 2635.101(b)(8) states: “Employees shall act impartially and not give preferential treatment to any private organization or individual.” 5 CFR 2635.101(b)(14) similarly requires employees to “endeavor to avoid” any actions that would create the appearance that they are violating the law or applicable ethical standards, as “determined from the perspective of a reasonable person with knowledge of the relevant facts.” 23 Comment of SEIU at 20. As discussed above, section 1, paragraph 6 of Executive Order 13770 does not apply to this rulemaking and thus does not support SEIU's claim. Further, because the final rule will apply prospectively only and will not affect pending unfair labor practice cases such as Browning-Ferris, and because there is no evidence that Member Emanuel has acted other than impartially or given preferential treatment to anyone through this rulemaking, there is no basis for finding that Member Emanuel's participation is contrary to 5 CFR 2635.101(b)(8), and no reasonable person with knowledge of the relevant facts would find that Member Emanuel's participation in this rulemaking would create an appearance that the law or ethical standards have been or are being violated. Two commenters argue that Chairman Ring and Member Emanuel are “too biased to participate in rulemaking” based on unfair labor practice litigation involving McDonald's USA, LLC (the McDonald's litigation). 24 Those commenters cite Chairman Ring's and Member Emanuel's former law firms' work in connection with the McDonald's litigation and then-pending motions for Chairman Ring and Member Emanuel to recuse themselves from that case. These commenters argue that the participation of Chairman Ring and Member Emanuel in this rulemaking is “no less problematic” because it would enable Chairman Ring and Member Emanuel “to tailor a rule for the McDonald's case that would directly benefit their former firms' client.” 24 Comment of SEIU National Fast Food Workers Union at 2 (capitalization altered); see also id. at 3 (citing McDonald's USA, LLC, a Joint Employer, et al. “Charging Parties' Motion for Recusal of Chairman Ring and Member Emanuel,” Case 02-CA-093893 et al. (Aug. 14, 2018)); see also comment of SEIU at 21. The Board issued its decision approving a proposed settlement of the McDonald's litigation on December 12, 2019. See McDonald's USA, LLC, 368 NLRB No. 134 (2019). Chairman Ring took no part in the consideration of the case, and the motion for his recusal was dismissed as moot. Id., slip op. at 1 fn. 2. For the reasons explained in the decision, the motion to recuse Member Emanuel was denied. Id. Moreover, as discussed above, the final rule applies prospectively only and thus will have no substantive effect on the now-concluded McDonald's litigation. 25 As such, there is no reasonable basis for concluding that the participation of Chairman Ring and Member Emanuel in this rulemaking would involve preferential treatment of any party to the McDonald's litigation or create an appearance of partiality or preferential treatment. Accordingly, the pendency of the McDonald's litigation at the time the NPRM was published neither requires nor supports Chairman Ring's or Member Emanuel's recusal from participation in this rulemaking. 25 The fact that the Board had proposed a joint-employer rule was taken into consideration in the decision to approve the settlement in the McDonald's litigation, but only to the extent that the Board recognized that the standard adopted in a final rule “[would] likely supplant any standard arising from the [McDonald's] litigation,” and therefore “a decision regarding joint-employer status” in that litigation “may have limited precedential value.” 368 NLRB No. 134, slip op. at 7. Importantly, in weighing the risks inherent in continued litigation, the Board observed that “there [was] no guarantee that McDonald's would be found to be a joint employer with its Franchisees” “[e]ven under the joint-employer standard articulated in Browning-Ferris, ” considering that the Board “has generally not held franchisors to be joint employers with their franchisees” and that “the Board in [ Browning-Ferris ] explicitly disclaimed an intent to address the joint-employer standard in the context of the relationship between a franchisor and a franchisee.” Id., slip op. at 6-7. Finally, to the extent that any commenter's argument regarding the McDonald's litigation is based on 5 CFR 2635.502(a)-(b), the argument is misplaced. 5 CFR 2635.502(a)(1) states that, unless he receives prior authorization, an employee should not participate in a particular matter involving specific parties that he knows is likely to affect the financial interests of a member of his household, or in which he knows that a person with whom he has a covered relationship is or represents a party, 26 if he determines that a reasonable person with knowledge of the relevant facts would question his impartiality in the matter. For reasons already stated, because this CFR provision applies to “particular matters involving specific parties,” it does not apply to a rulemaking of broad application such as this one. Id.; see also Office of Government Ethics Legal Advisory, DO-06-029, “Particular Matter Involving Specific Parties,” “Particular Matter,” and “Matter,” at 9 fn. 10 (Oct. 4, 2006) (“[R]ulemaking `would not, except in unusual circumstances covered under section 502(a)(2), raise an issue under section 502(a)[.]' ”) (quoting OGE Informal Advisory Letter 93 x 25 (Oct. 1, 1993)). 26 Pursuant to 5 CFR 2635.502(b)(1)(iv), an employee is considered to have a “covered relationship” with “[a]ny person for whom the employee has, within the last year, served as officer, director, trustee, general partner, agent, attorney, consultant, contractor, or employee.” 5 CFR 2635.502(a)(2) also includes a “catchall” provision, which states: “An employee who is concerned that circumstances other than those specifically described in this section would raise a question regarding his impartiality should use the process described in this section to determine whether he should or should not participate in a particular matter” (emphasis added). But because the final rule applies prospectively only and does not affect the outcome of any pending litigation, no such concerns are present here. V. Response to Comments The Board received almost 29,000 comments from interested organizations, labor unions, business owners, 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 Development of the Joint-Employer Doctrine Under the Act The Board received numerous comments on the development of the joint-employer doctrine under the Act. In general, those comments acknowledge the accuracy of the Board's description of that development in the NPRM, which is briefly summarized above in Section I. As more fully developed there, for at least 30 years (from no later than 1984 to 2015), evidence of direct and immediate control over essential terms and conditions of employment was required to prove that an entity was the joint employer of another business's workers. This requirement disappeared in August 2015 with the issuance of Browning-Ferris, which held that joint-employer status could be based on evidence of indirect or reserved-but-unexercised control, without more. Several commenters criticize the proposed rule's return to the Board's joint-employer standard as it existed before Browning-Ferris . 27 These commenters contend that the Board cannot simply revert to the pre- Browning-Ferris joint-employer standard because the Board precedent upon which that standard was based— Laerco and its progeny—departed without explanation from the standard articulated in Greyhound Corp., 153 NLRB at 1488, by disregarding evidence of contractually reserved authority and indirect control as evidence of joint-employer status and discounting evidence of supervision and direction that was “limited and routine.” See Laerco, 269 NLRB at 326; TLI, 271 NLRB at 798-799. In the view of these commenters, these departures led to a narrowing of the joint-employer standard without “the benefit of any explicit modification of the earlier Greyhound standard.” 28 27 See comments of Laborers' International Union of North America (LIUNA); International Union of Operating Engineers (IUOE); AFL-CIO. 28 See comment of IUOE. In addition, some commenters contend that the final rule's “direct and immediate” standard was “manufactured” by the Board in Airborne Express, with no explanation and no citation to the common law. 29 These commenters point to Restatement (Second) of Agency (1958) Sec. 220(1), comment d, which states that “the control or right to control needed to establish the relation of master and servant may be very attenuated.” Some commenters argue that the proposed rule's requirement that a putative joint employer must possess and actually exercise substantial direct and immediate control over employees' working conditions “amounts to little more than a `categorical rule' that drains reserved and/or indirect control of any relevance.” At least one commenter observes that the common-law “right-to-control” principle is consistent with Section 2(11) of the NLRA, which defines “supervisor” as “any individual having authority, in the interest of the employer,” to perform one or more of 12 supervisory functions. 29 U.S.C. 152(11) (emphasis added). 30 29 See comments of State Attorneys General; the AFL-CIO. 30 See comment of AFL-CIO. Contrary to these comments, the pre- Browning-Ferris Board precedent described above is consistent with the common law of joint-employment relationships in the context of the Act. Even assuming that Laerco, TLI, and Airborne Express did not adequately explain the basis for requiring substantial direct and immediate control, the Board has provided that explanation here. As the D.C. Circuit has held, “the common law inquiry is not woodenly confined to indicia of direct and immediate control; an employer's indirect control over employees can be a relevant consideration .” Browning-Ferris v. NLRB, 911 F.3d at 1209 (emphasis added). And again, the court upheld “as fully consistent with the common law the Board's determination” in Browning-Ferris “that both reserved authority to control and indirect control can be relevant factors in the joint-employer analysis.” Id. at 1222 (emphasis added). The Board agrees that reserved authority to control and indirect control are relevant considerations. To state the obvious, however, the court also acknowledged the significance of direct and immediate control to the common-law joint-employer analysis when it stated that “the common-law inquiry is not woodenly confined to indicia of direct and immediate control,” id. at 1209 (emphasis added), and the court expressly did not decide whether either indirect control or contractually reserved but unexercised authority, without more, could establish joint-employer status under the Act, id. at 1213, 1218. Accordingly, the final rule makes evidence of indirect control and contractually reserved but unexercised authority probative of joint-employer status insofar as it supplements and reinforces evidence of direct and immediate control over essential terms and conditions of employment. The final rule is therefore consistent with the D.C. Circuit's decision in Browning-Ferris . And by requiring evidence of direct and immediate control, it is also consistent with Laerco and its progeny. The final rule, moreover, is consistent with the Board's pre-1984 precedent, which deemed indirect control relevant to joint-employer status without holding that it was sufficient, standing alone, to establish that status. For example, in Floyd Epperson, 202 NLRB at 23, the Board considered the fact that the putative joint employer, a dairy company, had indirect control over the wages of drivers supplied by another employer. But the Board's conclusion that the dairy company was a joint employer of the drivers relied on “all the circumstances” of the case, including the fact that the company dictated the specific routes that drivers were required to take when transporting its goods, “generally supervise[d]” the drivers, and had authority to modify their work schedules. Id. As explained in the NPRM, in Floyd Epperson and like cases arising before 1984, the Board was not called upon to decide, nor did it assert, that an entity's indirect influence over another company's workers' essential working conditions, standing alone, could establish a joint-employer relationship. Some commenters argue that the rule conflicts with the policies and purposes of the NLRA by purportedly diminishing opportunities for collective bargaining and eliminating protections for those seeking to exercise their rights under the Act. 31 Another commenter argues that while the Browning-Ferris standard facilitates collective bargaining when chosen by workers, promotes enforcement of the Act, and provides clear standards, the proposed rule fails on each of these counts. 32 Other commenters take the opposite position, arguing that the proposed rule encourages collective bargaining by fostering predictable joint-employer determinations in a variety of business relationships, thereby promoting labor-management stability, one of the principal purposes of the Act. 33 In agreement with the latter commenters, the Board believes that the final rule promotes national labor policy by appropriately imposing bargaining obligations solely on entities that have actually exercised substantial direct and immediate control over essential terms and conditions of employment. 31 See comments of National Employment Law Project (NELP); Economic Policy Institute (EPI). 32 See comment of State Attorneys General. 33 See comments of American Supply Association; Chamber of Commerce. B. Comments Regarding Indirect Control Many commenters support requiring actual exercise of substantial direct and immediate control in order to establish joint-employer status. In this regard, commenters assert, among other things, that this requirement is practical; 34 is long-accepted 35 and has always been a fundamental aspect of the joint-employer standard; 36 is consistent with court precedent, the common law, the pertinent Restatements, and/or congressional intent; 37 appropriately assigns unfair labor practice liability to the employer responsible for the violation; 38 and enables businesses to enter into a variety of business relationships and to establish certain high-level requirements ( e.g., minimum training levels) with the confidence that they will not be held responsible for another entity's employees. 39 Further, some commenters state that pre- Browning-Ferris precedent addressing the meaning of direct and immediate control will provide helpful guidance to parties. 40 34 Comment of International Foodservice Distributors Association. 35 Comments of International Foodservice Distributors Association; Restaurant Law Center. 36 Comment of National Retail Federation. 37 Comments of Coalition for a Democratic Workplace (CDW); Chamber of Commerce; HR Policy Association; Ranking Member Foxx; American Staffing Association; Council on Labor Law Equality (COLLE); Restaurant Law Center. 38 Comments of COLLE; Americans for Tax Reform. 39 Comment of National Association of Truckstop Operators. 40 Comments of International Bancshares Corporation; Restaurant Law Center; COLLE. Relatedly, several commenters state that evidence of indirect control may be “probative,” 41 relevant, or permissibly considered, but that the common law, the courts, and/or the Taft-Hartley Congress would not support finding joint-employer status absent evidence of direct or immediate control. 42 In this connection, one commenter states that the Board may choose to address whether indirect control could be “dispositive,” noting that the D.C. Circuit in Browning-Ferris v. NLRB left that question unanswered. 43 However, another commenter takes the position that the extent to which control is exercised has limited or no relevance. 44 41 Comment of CDW. 42 Comments of CDW; HR Policy Association; American Staffing Association; Retail Industry Leaders Association (RILA). 43 Comment of Jenner & Block, LLP. 44 Comment of SEIU. In contrast, several commenters say that consideration of indirect control is consistent with the common law, the pertinent Restatements, court decisions (including Browning-Ferris v. NLRB ), 45 and the practices of other federal agencies that consider indirect control under other statutes. 46 One commenter asserts that considering indirect control is necessary in order to capture how control is actually exercised in the workplace. 47 Some commenters state that indirect control can be just as effective and significant as direct control. 48 Further, some commenters state that the Board failed to adequately justify its “preliminary belief” in the NPRM that, without requiring direct and immediate control, it would be difficult to police the line between independent commercial contractors and genuine joint employers. 49 45 Comments of Southern Poverty Law Center; United Brotherhood of Carpenters and Joiners of America; Congressional Progressive Caucus; Greater Boston Legal Services; International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW); AFL-CIO; International Brotherhood of Teamsters (IBT); United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada, AFL-CIO (UA); 1199SEIU United Healthcare Workers East; LIUNA; Spivak Lipton LLP; IUOE; Members of Congress; Chairman Scott and Ranking Member Murray; Communications Workers of America, AFL-CIO (CWA); NELP; James van Wagtendonk; SEIU; Attorneys General of New York, Pennsylvania, et al.; SEIU Local 32BJ. 46 Comments of UA; James van Wagtendonk. 47 Comment of NELP. 48 See, e.g., Comment of Kelly Sagaser. 49 Comments of Chairman Scott and Ranking Member Murray; Attorneys General of New York, Pennsylvania, et al. Citing various sections of the Act, several commenters argue that indirect control is either relevant to, or an independently sufficient basis for finding, joint-employer status. Specifically, they cite the definition of “employer” in Section 2(2), 50 of “supervisor” in Section 2(11), 51 and of “agent” in Section 2(13), 52 and the policies set forth in Section 1. 53 50 Comments of A. Feola; AFL-CIO; UA; SEIU. 51 Comments of UAW; AFL-CIO. 52 Comment of SEIU. 53 Comments of IUOE; Members of Congress. Under the common law, some forms of indirect control are relevant to the joint-employer analysis. Consistent with this principle, the final rule makes clear that evidence of indirect control over essential terms and conditions of employment is probative of joint-employer status, but only to the extent that it supplements and reinforces evidence of direct and immediate control over essential terms and conditions of employment. Nothing in the Act itself or joint-employer precedent compels us to adopt a rule that permits a finding of joint-employer status based solely on an entity's indirect control over another entity's employees, and the Board declines to do so. With regard to comments that cite various sections of the Act, none of the cited sections requires a conclusion that one entity's exercise of merely indirect control over another entity's employees is sufficient to make the former entity a joint employer. Further, the Board believes that the policies of the Act are furthered, not hindered, by requiring only those entities to come to the bargaining table that have sufficient control over essential terms and conditions of employment to warrant a finding that they meaningfully affect matters relating to the employment relationship, and that direct and immediate control over at least one essential term is necessary to warrant such a finding. Several commenters state that the term “direct and immediate control” is unclear and will lead to uncertainty and litigation over its meaning. 54 Some commenters also state that the final rule should define the term, 55 and some propose definitions or advocate for particular interpretations of that phrase. 56 54 Comments of UAW; 1199SEIU United Healthcare Workers East; SEIU; Signatory Wall and Ceiling Contractors Alliance. 55 See, e.g., Comment of Restaurant Law Center. 56 Comments of SEIU; National Retail Federation; American Hotel & Lodging Association. For the reasons stated by many commenters, the final rule provides guidance on distinguishing what does and does not evidence direct and immediate control over each essential term and condition of employment. We believe that that this approach helps clarify the meaning of “direct and immediate control.” Moreover, the several definitions of essential terms and conditions of employment—specifically, of what does not constitute evidence of direct and immediate control—also shed light on the meaning of indirect control. Many commenters are critical of the term “indirect control,” saying, among other things, that it is undefined, ambiguous, and/or seemingly limitless. 57 Some commenters note that there are different types of indirect control, and they cite the Browning-Ferris court's distinction between forms of indirect control that involve sharing or codetermining those matters governing essential terms and conditions of employment, which may be relevant to a joint-employer determination, and employer decisions that set the objectives, basic ground rules, and expectations for a third-party contractor, which are not. 58 Relatedly, other commenters state or imply that joint-employer status should not be found based solely on a business having the ability to cancel a contract with a subcontractor or franchisee. 59 57 Comments of American Staffing Association; American Action Forum; International Sign Association; Restaurant Law Center; American Hotel & Lodging Association; FedEx Corporation; HR Policy Association; National Association of Home Builders; General Counsel Peter Robb; Chamber of Commerce. 58 Comments of the American Hotel & Lodging Association; COLLE; Restaurant Law Center. 59 See, e.g., Comment of Dean Johnson. Further, several commenters propose defining, or describe, “indirect control” as involving or including control exercised through intermediaries or controlled third parties, 60 or some version of that concept. 61 Relatedly, other commenters state that, in determining the meaning of indirect control, it may be useful to consider the common-law “subservant doctrine.” 62 60 Comments of Selby Schwartz; United Brotherhood of Carpenters and Joiners of America; UAW; Spivak Lipton LLP; HR Policy Association; SEIU; Wholesale Delivery Drivers, General Truck Drivers, Chauffeurs, Sales, Industrial and Allied Workers, Local 848, IBT; Chairman Scott and Ranking Member Murray. 61 See, e.g., Comment of Kentucky Equal Justice Center (“via supervisors and other lower-level direct overseers”). 62 See, e.g., Comment of SEIU. Based on these comments, the Board has decided to provide more clarity by expressly defining “indirect control” in the final rule in a manner that largely tracks the distinction that the D.C. Circuit articulated in Browning-Ferris v. NLRB . Thus, under the final rule, “indirect control” means 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. In defining indirect control, the Board has opted to focus on the connection between the entity's actions and the employees' essential terms and conditions of employment, rather than on how alleged control is communicated. However, the final rule is not intended to immunize an entity from joint-employer status based solely on how its control is communicated, if the other requirements of joint-employer status otherwise are met. In this connection, as the D.C. Circuit observed in Browning-Ferris 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, and we do not intend this rule to do so. Relatedly, as Browning-Ferris v. NLRB discussed, the subservant doctrine takes into account control exercised through an intermediary. One commenter states that indirect control should be considered along with all of the facts and circumstances, including how often indirect control is actually exercised, how many employees are impacted by the indirect control, and whether the indirect control governs a significant number of essential terms and conditions of employment. 63 In addition, several commenters propose examples of indirect control or other arrangements that should not demonstrate joint-employer status, such as determining the skills of the individuals who will perform services; 64 establishing conduct requirements to ensure that the company's employees, property, and customers are protected; 65 deciding that the services of temporary workers supplied by another company are no longer needed at one's worksite; 66 establishing the amount that the customer is willing to pay for services; 67 cost-plus contracts; 68 corporate social-responsibility policies; 69 ensuring compliance with regulatory obligations; 70 permitting employees to participate in basic benefit plans such as retirement, health, dental, and life insurance; 71 establishing minimum wages, where the direct employer is permitted to pay more; 72 and establishing requirements concerning performance management, products, quality, or safety. 73 63 Comment of Jenner & Block, LLP. 64 Comment of Restaurant Law Center. 65 Id. 66 Comment of Jenner & Block, LLP. 67 Comment of Restaurant Law Center. 68 Comments of Restaurant Law Center; COLLE. 69 Comments of COLLE; RILA; HR Policy Association. 70 Comment of HR Policy Association. 71 Id. 72 Comment of John B. Hirsch. 73 Comment of HR Policy Association. The final rule incorporates several aspects of these comments. Preliminarily and as a general matter, the rule states that joint-employer status must be determined on the totality of the relevant facts in each employment setting. More specifically, the final rule provides guidance as to kinds of indirect control that may not be probative of joint-employer status. It does so in the several definitions of essential terms and conditions in stating what does not constitute direct and immediate control of each essential term. Thus, for example, the final rule provides that direct and immediate control excludes setting minimal hiring standards; setting minimal standards of performance or conduct; refusing to allow another employer's employee to continue performing work under a contract; entering into a cost-plus contract; maintaining standards that are required by government regulation; and permitting another employer, under an arms-length contract, to participate in its benefit plans. These same acts also would not constitute evidence of indirect control to the extent they involve setting the objectives, basic ground rules, or expectations for another entity's performance under a contract. 74 See Browning-Ferris v. NLRB, 911 F.3d at 1220 (“[E]mployer decisions that set the objectives, basic ground rules, and expectations for a third-party contractor cast no meaningful light on joint-employer status.”). 74 On the other hand, conduct excluded by definition from evidencing direct and immediate control may evidence indirect control where it does not involve setting the objectives, basic ground rules, or expectations for another entity's performance under a contract. See Sec. II.B, “Summary of Changes to the Proposed Rule: Indirect Control.” While not specifically addressed in the text of the final rule, so-called social responsibility provisions, such as contractual provisions requiring workplace safety practices, sexual harassment policies, morality clauses, 75 wage floors, or other measures to encourage compliance with the law or to promote desired business practices generally will not make joint-employer status more likely under the Act. Typically, such provisions will constitute the setting of basic ground rules or expectations for a third-party contractor. We cannot rule out the possibility, however, that a social-responsibility provision may be probative of joint-employer status to the extent it goes beyond merely setting basic ground rules or expectations for a third-party contractor and evidences substantial control over one or more essential terms or conditions of employment. 75 Morality clauses require employees to maintain standards of behavior to protect the reputation of their employer. See, e.g., Galaviz v. Post-Newsweek Stations, 380 Fed. Appx. 457, 459 (5th Cir. 2010), and Bernsen v. Innovative Legal Marketing, LLC, No. 2:11CV546, 2012 WL 3525612 (E.D. Va. June 20, 2012), for examples of morality clauses. One commenter asserts that the NPRM created confusion by providing that joint-employer status would be limited to entities that play an active role in “establishing” essential terms and conditions of employment. 76 The commenter states that it would undermine the Act's goals if the Board immunized from joint-employer status entities that did not initially establish terms and conditions of employment, but that were nonetheless instrumental in post-establishment interpretation and implementation of those terms and conditions, in preventing modifications of them, or in “endorsing, ratifying, and incorporating” them. 77 76 Comment of SEIU. 77 Id. The proposed rule was not intended to limit joint-employer status in this way. The text of the proposed rule did not thus limit joint-employer status, and neither does the text of the final rule. Thus, an entity may be found to be a joint employer where it possesses and exercises substantial direct and immediate control over essential terms and conditions of employment by maintaining or revising them without having established them in the first instance. One commenter states that we should rely on indirect control that is “actual and measurable”— i.e., indirect control would be probative of joint-employer status if it can be readily identified and objectively measured. 78 While the final rule does not incorporate the commenter's proposed “actual and measurable” standard, it does limit the scope of probative “indirect control” evidence in other ways. Consistent with the D.C. Circuit's decision in Browning-Ferris v. NLRB, the final rule provides that control or influence over setting the objectives, basic ground rules, or expectations for a third-party contractor does not constitute “indirect control” for the purpose of determining joint-employer status. Moreover, the several definitions of essential terms and conditions of employment—specifically, of the statements in those definitions of what does not count as evidence of direct and immediate control—also furnish guidance on what may not count as evidence of indirect control, either. Finally, as to evidence of indirect control that may factor into a joint-employer determination, the final rule provides that such evidence is probative of joint-employer status only to the extent it supplements and reinforces evidence of direct and immediate control. 78 Comment of HR Policy Association. Some commenters describe various fact patterns they said would be problematic under the proposed rule, including a situation where an entity uses a pretextual reason to ask an undisputed employer to discharge an employee, where the request is unlawfully motivated. 79 Rather than lengthening or complicating the final rule with a variety of examples or fact patterns, the final rule clarifies that joint-employer status must be determined on the totality of the relevant facts in each particular employment setting. 79 See, e.g., Comment of LIUNA. One commenter states that the Board should first conduct an independent-contractor analysis to determine whether the Board has jurisdiction before assessing whether direct and immediate control has been exercised. 80 But an entity alleged to be a joint employer of another employer's employees will be the direct employer of its own employees, and the Board's jurisdiction over that entity will be established on this basis, provided the usual statutory and discretionary jurisdictional standards are met. From that point forward, the independent-contractor analysis has little if any bearing on the joint-employer determination. As the Browning-Ferris court discussed, the issue of whether a worker is an independent contractor or an employee is distinct from the issue of whether a worker who is undisputedly the employee of one employer also has a second, joint employer. Accordingly, the Board has not amended the rule to make the suggested change. 80 Comment of Employment Law Alliance. C. Comments Regarding Contractually Reserved But Unexercised Control Many commenters address the question of whether reserved but unexercised control is relevant to the joint-employer analysis. A number of commenters argue that the Board should not consider contractually reserved but unexercised control in its joint-employer analysis. One commenter argues that under the right-to-control standard set forth in the Board's decision in Browning-Ferris, virtually all user employers, franchisors, etc., would be joint employers simply because their contracts with undisputed primary employers almost always give them the potential to control the terms and conditions of employment of the primary employer's employees, if only because such user employers can simply cancel such contracts if not satisfied with the terms and conditions of employment set by the primary employer. 81 Another commenter argues that finding an entity to be an employer of another entity's employees based solely on the conditions under which the entities have agreed that they might terminate their relationship unjustifiably restricts parties' liberty to contract and contravenes private rights long recognized in Anglo-Saxon jurisprudence. 82 Commenters also argue that a standard incorporating contractually reserved control is vague, elusive, and uncertain, difficult to apply, or unworkable, and that such a standard may be used in an outcome-determinative manner to support a particular result. 83 Another commenter states that considering reserved control may inappropriately or unfairly enmesh an entity, especially a franchisor, in another entity's labor dispute. 84 Finally, a commenter argues that extending joint-employer status to entities on the basis of potential control would conflict with other federal and state statutory schemes, creating unwarranted difficulties for businesses in their attempts to comply with various federal and state employment-related laws. 85 81 See comment of General Counsel Robb. 82 See comment of Chamber of Commerce. 83 See comments of American Hotel & Lodging Association; International Bancshares Corporation; CDW; International Sign Association; International Foodservice Distributors Association. 84 See comment of FordHarrison LLP. 85 See comment of General Counsel Robb. In contrast, many commenters argue that the Board's standard should give at least some weight to evidence of an entity's contractually reserved control over essential terms and conditions of employment of another employer's employees. 86 These commenters argue that contractually reserved rights are relevant because they impact and, in some cases, set terms and conditions of employment and claim that the common law deems reserved control relevant because an entity's authority over the work, even if unexercised, prevents another from deciding to render service in a manner different from that which serves the entity holding the reserved control. 87 Another commenter argues that a contractual reservation of authority, particularly when paired with a clause allowing for at-will termination of the contractual relationship, gives the undisputed primary employer a powerful incentive to comply with the wishes of the putative joint employer, without the necessity of any actual exercise of control by the latter. 88 Many commenters argue that the common law, as reflected in relevant Restatements and judicial decisions, permits or requires the consideration of reserved but unexercised control. 89 These commenters argue that the D.C. Circuit's recent decision in Browning-Ferris v. NLRB held that consideration of a company's reserved authority to control terms and conditions of employment is an established aspect of the common law of agency. Commenters also contend that the common law permits or requires consideration of contractually reserved control because the Second Restatement of Agency defines a master as, among other things, someone who has the “right to control,” defines a servant as someone subject to the master's right to control, and looks to the extent of control that the master may exercise “by the agreement.” 90 86 See comments of IBT; NELP. 87 NELP cites Restatement of Employment Law Sec. 1.04. 88 Comment of CWA. 89 See comments of Chairman Scott and Ranking Member Murray; Equal Justice Center; Spivak Lipton LLP; IUOE. 90 See comments of Chairman Scott and Ranking Member Murray; AFL-CIO; IBT; IUOE; Attorneys General of New York, Pennsylvania, et al. Commenters further argue that the Act itself supports considering contractually reserved but unexercised control, citing the Act's purpose of promoting collective bargaining, which is expressly stated in Section 1 of the Act, and the asserted need to adapt to changes in today's workforce by extending the right to collective bargaining to a wide variety of contingent workers as a matter of policy. 91 Other commenters claim that effective collective bargaining requires that all entities with the ability to control workers' terms and conditions of employment must participate in collective bargaining, thereby preventing an entity with reserved but unexercised control from upending, after the fact, collective-bargaining agreements made by the primary employer of the employees over whom the entity possesses reserved control. 92 Another commenter argues that general statutory requirements of good-faith bargaining require the presence at the bargaining table of, for instance, an exclusive purchaser of a manufacturer's products, or a major donor that conditions donations to a nonprofit on specified terms and conditions for the nonprofit's employees, each of which possesses effective control over employees' essential terms and conditions of employment by virtue of its economic relationship with their employer. 93 91 See comments of IUOE; Professor Alexia Kulwiec. 92 See comments of IUOE; NELP. 93 See comment of International Brotherhood of Electrical Workers Local 21 (IBEW Local 21). Two commenters argue that a joint-employer standard that does not consider reserved control would be inconsistent with Section 2(11) of the Act, which defines who is a “supervisor” under the Act. 94 These commenters contend that established Board interpretations of Section 2(11) exclude individuals who possess supervisory authority as defined in Section 2(11) from employee status under Section 2(3), whether or not such authority is exercised. 95 Thus, they maintain, it is inconsistent to hold that a person may be a Section 2(11) supervisor based solely on reserved but unexercised control, but not to find his or her employer a joint employer of the supervised employee based on the same reserved but unexercised control. For example, one commenter argues that no one could dispute that a Director of Nursing in a hospital is a statutory supervisor if the Director retains authority, expressly or implicitly, to direct nurses supplied by a staffing agency when the Director observes that the nurses are not providing services correctly. In that commenter's view, a proper joint-employer framework would provide that the hospital that employs the Director of Nursing must be a joint employer of the supplied nurses. 96 Other commenters point out that the NPRM does not exclude consideration of reserved but unexercised control, but merely clarifies that it is insufficient to establish joint-employer status absent evidence of actual exercise of such control. 97 94 See comments of UAW; AFL-CIO. 95 AFL-CIO cites Yamada Transfer, 115 NLRB 1330, 1332 (1956), and U.S. Gypsum Co., 93 NLRB 91, 92 fn. 8 (1951). 96 See comment of AFL-CIO. 97 See comments of Ranking Member Foxx; CDW. Having carefully considered these comments, the Board has decided to modify the proposed rule to provide that an entity's contractually reserved but never exercised authority over the essential terms and conditions of employment of another employer's employees is probative of joint-employer status, but only to the extent that evidence of such authority supplements and reinforces evidence of actually exercised direct and immediate control. The Board agrees with those commenters who suggest that an entity's ability to cancel a contract or terminate a business relationship with another entity should not be deemed reserved control relevant to the joint-employer inquiry. 98 As stated above, reserved or indirect control is not relevant to the joint-employer analysis, whether such control is exercised or not, where it bears on “the objectives, basic ground rules, or expectations for another entity's performance under a contract.” See text of Final Rule (Rule) Sec. 103.40(E), infra; Browning-Ferris v. NLRB, 911 F.3d at 1221 (“[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). Consistent with this principle, entities' decisions about the conditions under which their business relationships may end are ordinary incidents of contractual relationships that are not probative of joint-employer status. Cf., e.g., First Nat'l Maint. Corp. v. NLRB, 452 U.S. 666, 677-679, 687-688 (1981) (company had no duty to bargain with representative of its own employees over decision to terminate contract and discharge employees). 98 See, e.g., comments of General Counsel Robb; Job Creators Network; Dean Johnson. The Board agrees with commenters who observe that the common law and the Act permit consideration of reserved control, the approach adopted by the final rule. In response to commenters' concerns about vague and unlimited “potential” control that might have been found probative of joint-employer status under the Browning-Ferris standard, the final rule defines and limits what will constitute probative evidence of contractually reserved authority. Under the final rule, such contractually reserved authority, to be probative of joint-employer status, (1) means reserved authority over the essential terms and conditions of employment of another employer's employees, and (2) must supplement and reinforce evidence of direct and immediate control over essential terms and conditions of employment of the other employer's employees. Rule Sec. 103.40(F), (A), infra. It therefore follows that an entity's contractual authority to cancel a contract or terminate a business relationship with another entity is not evidence that the former shares or codetermines matters governing essential terms and conditions of employment of the latter's employees. Accordingly, the rule's approach is consistent with contract-respecting principles of Anglo-Saxon jurisprudence. Similarly, and consistent with the congressional purpose expressed in the Taft-Hartley amendments, 99 an entity's reserved “control” in the sense of its ability to indirectly affect the terms and conditions of employment of another entity's employees as a matter of economic reality—including by being the exclusive purchaser of a manufacturer's products or by a donor conditioning donations to a nonprofit on changes to terms and conditions of employment of the nonprofit's employees—will not be the kind of control that is relevant to the joint-employer analysis. As a matter of economic reality, an employer producing goods or performing services under a contract that is terminable at will has strong incentives to respond to any complaints, suggestions, or requests that the contracting entity may have. The Board is, however, precluded from taking such considerations into account in determining employer status under the Act. See, e.g., Nationwide Mut. Ins. Co. v. Darden, 503 U.S. at 324-325 (discussing Congress's 1947 amendments to NLRA in response to Supreme Court's expansive interpretation of Sec. 2(3) in Hearst ); NLRB v. United Ins. Co. of America, 390 U.S. at 254 (same). It necessarily follows that the Board cannot rely on such considerations in determining joint-employer status, either. 99 See, e.g., Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324-325 (1992) (discussing Congress's 1947 amendments to NLRA in response to Supreme Court's expansive interpretation of Sec. 2(3) “employee” in NLRB v. Hearst Publ's Inc., 322 U.S. 111 (1944)); NLRB v. United Ins. Co. of America, 390 U.S. 254 (1968) (same). For the following reasons, the Board is unpersuaded by the arguments by analogy to the Board's analysis of supervisory status under Section 2(11) of the Act. First, determining supervisory status under Section 2(11) turns on the interpretation of statutory language that differs from the statutory language governing employer or employee status under Section 2(2) and 2(3), respectively. The history of interpretation of Section 2(11) has not been straightforward or free from controversy. See, e.g., NLRB v. Kentucky River Commty. Care, Inc., 532 U.S. 706, 712-721 (2001) (discussing history of interpretation of parts of Sec. 2(11)). Given the intricacy of Section 2(11) and its different purpose from Section 2(2), it should not be surprising that the Board applies different standards to the analysis of supervisory status and joint-employer status. Second, while the commenters correctly observe that the possession of authority under Section 2(11) establishes supervisory status, it is well established that the Board looks beyond mere job titles or conclusory statements of supervisory status in order to determine whether an individual is actually a supervisor under Section 2(11). See, e.g., Coral Harbor Rehab. & Nursing Ctr., 366 NLRB No. 75, slip op. at 1, 17 (2018) (“[W]hat the statute requires is evidence of actual supervisory authority visibly translated into tangible examples demonstrating the existence of such authority.”). Accordingly, while the Board need not apply congruent standards to analyze these different statutory relationships, the legal tests are in fact less divergent than the commenters suggest. Finally, “an individual must exercise supervisory authority over employees of the employer at issue, and not employees of another employer, in order to qualify as a supervisor under Section 2(11) of the Act.” Crenulated Co., 308 NLRB 1216, 1216 (1992) (citing cases). Thus, an individual, employed by a hospital, who possesses contractually reserved but unexercised authority responsibly to direct nurses supplied to the hospital by a staffing agency would not, on that basis, be a Section 2(11) supervisor, nor would the hospital, on that basis, be a joint employer of the nurses employed by the staffing agency. However, if the hospital, through the individual, possessed and exercised substantial direct and immediate control over essential terms and conditions of employment of the supplied staffing-agency nurses, the hospital might well be found to be a joint employer of the supplied nurses, and the individual might accordingly be found to be a statutory supervisor. Accordingly, in practice, the legal tests for joint employer and supervisory status are likely to converge on consistent results in individual cases. Many commenters provide examples of industries or business relationships involving what the commenters identify as potential or reserved control. 100 The final rule incorporates the well-established legal principle that joint-employer status must be determined on the totality of the relevant facts in each particular employment setting. Rule Sec. 103.40(A), infra. Accordingly, the outcome of a joint-employer analysis in individual cases will not be determined based on the industry or type of business relationship involved, but rather will result from application of the standards set forth in the final rule to the particular facts of the case. See, e.g., Boire v. Greyhound Corp., 376 U.S. at 481 (“[W]hether Greyhound possessed sufficient indicia of control to be an `employer' is essentially a factual issue.”). 100 For example, commenters including International Bancshares Corporation, Chamber of Commerce, General Counsel Robb, COLLE, International Sign Association, Job Creators Network, FordHarrison LLP, and Jim Steitz, discuss potential or reserved control in business relationships including those between franchisors and franchisees, contractors and subcontractors, parent and subsidiary companies, and companies that generally provide and receive goods or services, including labor, from one another. Commenters including SEIU Local 32BJ, COLLE, Professor Kulwiec; National Association of Home Builders, International Sign Association, American Hotel & Lodging Association, and FordHarrison LLP discuss potential or reserved control in industries including building cleaning and security, food service and hospitality, home healthcare, agriculture, home building, visual communications, and professional employee organizations. Further, many commenters provide examples of specific kinds of contractual reservations of control that should or should not be probative of an entity's status as a joint employer. As made clear above, kinds of reserved “control” that are “routine components of a company-to-company contract,” Browning-Ferris v. NLRB, 911 F.3d at 1221, will not be probative of joint-employer status under the rule, and, when necessary, the Board will evaluate evidence of an entity's alleged contractually reserved but unexercised control over another company's employees within this framework. (Consistent with the provisions of the final rule, such an evaluation need not be conducted unless the proponent of joint-employer status proves that the entity exercises direct and immediate control over at least one essential term and condition of employment.) More specifically, some commenters discuss whether the joint-employer analysis can or should turn on contractual performance requirements and general work standards, 101 or contractually required compliance with regulations or codes, including government-required nondiscrimination provisions. 102 These kinds of contractual requirements are ordinary incidents of any contractual relationship, and they will generally not be probative of joint-employer status under the final rule. See, e.g., Aldworth Co., 338 NLRB 137, 139 (2002) (“[A]ctions taken pursuant to government statutes and regulations are not indicative of joint employer status.”), enfd. sub nom. Dunkin' Donuts Mid-Atlantic Distrib. Ctr., Inc. v. NLRB, 363 F.3d 437 (D.C. Cir. 2004). 101 CDW; General Counsel Robb. 102 National Association of Home Builders; Center for Workplace Compliance. Some commenters discuss whether the joint-employer analysis can or should consider the ability of an entity that uses services provided by another entity's employees to have input on who provides those services, to monitor performance, to dictate times, manner, and method of performance, or a user entity's reservation of the right to reject individual workers provided by a supplier entity and to require that supplied workers comply with the user entity's plant rules and regulations. 103 The final rule clarifies the conditions under which such contractually reserved controls may be probative of a user entity's joint-employer status. 104 Thus, the contractually reserved but unexercised right to have input on who provides services may be probative of joint-employer status if the evidence demonstrates that such input, if provided, would determine which particular individuals another employer will hire and which it will not or would directly result in the discharge of another employer's employee. Rule Sec. 103.40(C)(4) and (5), infra; see also NLRB v. Browning-Ferris Indus. of Pennsylvania, 691 F.2d at 1125 (facts that BFI “shared with the brokers the power to approve drivers, and devised the rules under which the drivers were to operate at BFI sites” contributed to “substantial evidence which supports the Board's finding that BFI exerted significant control over the work of the drivers”). 103 See comments of General Counsel Robb; Chamber of Commerce. 104 Again, in all cases, contractually reserved but unexercised control is probative only to the extent it supplements and reinforces evidence of direct and immediate control. Rule Sec. 103.40(A), infra. An entity's contractually reserved authority to monitor performance ordinarily will not be probative of joint-employer status. If, however, the evidence were to demonstrate that conduct characterized as “monitoring performance” also encompasses instructing individual employees how to perform their work or issuing performance appraisals to individual employees, that conduct may be probative of joint-employer status. Rule Sec. 103.40(C)(7), infra. And an entity's reserved authority to dictate times, manner, and method of performance may be probative of joint-employer status to the extent such authority encompasses determining work schedules or work hours, including overtime, of another employer's employees, instructing another employer's employees how to perform their work, or assigning particular employees their individual work schedules, positions, and tasks. Rule Sec. 103.40(C)(3), (7), and (8); see also Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989) (“In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party's right to control the manner and means by which the product is accomplished.”) (emphasis added); Restatement of Employment Law Sec. 1.01(a)(3) (“[A]n individual renders services as an employee of an employer if . . . the employer controls the manner and means by which the individual renders services.”) (emphasis added). 105 105 Sections 103.40(C)(1)-(8), the definitions of the several essential terms and conditions of employment, do not directly address contractually reserved but unexercised control. Those definitions specify what does, and give examples of what does not, count as direct and immediate control. But as with indirect control, so also with contractually reserved but unexercised control: In many if not most cases, examples of what does not count as direct and immediate control will also come within the scope of routine components of company-to-company contracting and thus not be probative of joint-employer status. However, we are unable to state, a priori, that this will hold true in all cases. Ultimately, therefore, whether a particular type of contractually reserved but unexercised control that would not, if exercised, count as direct and immediate control may nonetheless be probative of joint-employer status is a question of fact to be determined on the evidence in each case. One commenter also questions whether the joint-employer analysis could consider a user entity's reservation of authority to prevent disruption of its operations or unlawful conduct by a supplier entity's employees on its property, or the user's efforts to monitor, evaluate, and improve the performance of supplied employees where such efforts fall short of controlling the manner, means and details of their performance. 106 In general, policies prohibiting disruption of operations or unlawful conduct constitute the type of basic ground rules and expectations that “cast no meaningful light on joint-employer status.” Browning-Ferris v. NLRB, 911 F.3d at 1219-1220. Efforts to monitor, evaluate, and improve the performance of supplied employees would constitute direct and immediate control of essential terms and conditions if those efforts entailed a decision by the user entity to actually discharge, suspend, or otherwise discipline another entity's employees, to instruct them how to perform their work or issue performance appraisals, or to assign them individual work schedules, positions, and tasks. Rule Sec. 103.40(C)(5)-(8). Thus, contractually reserved authority that, if exercised, would result in the foregoing would be probative of joint-employer status to the extent it supplements and reinforces evidence of direct and immediate control. 106 See comment of General Counsel Robb. Another commenter observes that many businesses outsource janitorial and security services, or production, delivery, and marketing functions. 107 It suggests that any reserved control inherent in such outsourcing should not establish a joint-employment relationship. Under the rule, such ordinary contractual relationships do not make the outsourcing company a joint employer so long as it does not possess and exercise substantial direct and immediate control over essential terms and conditions of employment of employees performing the outsourced functions. Rule Sec. 130.40(A), infra. The commenter further observes that companies have sound business reasons for establishing operational, production, and safety standards in their agreements with suppliers and contractors. For example, it suggests that an aircraft manufacturer's contractual specification of timeframe and production standards for a parts supplier and requirement that the supplier certify that it has a drug and alcohol testing program in place should not weigh towards finding the manufacturer an employer of the supplier's employees. Under the rule, such standards are likely ordinary incidents of contractual relationships that merely set basic ground rules for the supplier's performance under the contract and are therefore not probative of joint-employer status. Rule Sec. 103.40(E), infra. 107 See comment of COLLE. Two commenters suggest that the Board should clarify that an entity does not exercise control over a term or condition of employment by entering into a contract that dictates a particular employment term for individuals performing services under that contract. 108 To the contrary, another commenter suggests that the Board should examine whether an agreement between contracting parties sets wages and/or other working conditions of one party's employees. 109 The final rule adopts the latter suggestion. Under the final rule, if a contract between two employers actually sets essential terms and conditions of employment for employees who will manufacture goods or perform services under the contract, the two employers have shared or codetermined those essential terms. In this regard, the rule is consistent with the Board's pre- Browning-Ferris precedent and with the Third Circuit's formulation of the joint-employer test in NLRB v. Browning-Ferris Industries of Pennsylvania, 691 F.2d at 1124 (“[W]here two or more employers . . . share or co-determine those matters governing essential terms and conditions of employment—they constitute `joint employers' within the meaning of the NLRA.”). 108 See comments of General Counsel Robb; Job Creators Network. 109 See comment of IBEW Local 21. One commenter suggests that the Board should require proof that a joint employer exercises actual supervision and direction on an ongoing basis. 110 The final rule is partially consistent with this suggestion, in that a finding that an entity exercises ongoing supervision and direction (as the rule defines those terms) over the employees of another entity will likely suffice to establish a joint-employer relationship. However, because supervision and direction are only two of eight essential terms and conditions of employment defined by the rule, the final rule does not adopt the commenter's suggestion to the extent it implies that control over supervision and direction are necessary to a joint-employer finding. Evidence of control over other essential terms and conditions of employment may suffice to establish joint-employer status even absent supervision and direction. 110 See comment of HR Policy Association. Many commenters suggest that if the Board decides to consider indicia of reserved, unexercised control, it do so with specific limits. 111 The final rule makes clear that evidence of reserved, unexercised control will only be found probative to the extent it supplements and reinforces evidence of actually exercised direct and immediate control. However, the Board finds it impractical to attempt to quantitatively predetermine how specific factual evidence will weigh in all future cases. 111 For example, Center for Workplace Compliance suggests that the Board should accord reserved control less weight than actual control, and quantify the weight that should be given. Relatedly, HR Policy Association suggests specifically limiting the consideration of reserved control to ten percent of the analysis. Two commenters suggest that the Board should draw clear lines between the kinds of reserved control it will not find probative of joint-employer status (such as brand standards in franchise agreements) and those it will find probative (such as contractually reserved authority to codetermine essential terms and conditions of employment). 112 The Board agrees with this comment and has attempted to provide the guidance requested in both the regulatory text and this accompanying supplementary material. 112 See comments of Restaurant Law Center; International Franchise Association (IFA). Another commenter suggests that the Board should consider reserved control probative of joint-employer status only insofar as it embodies an entity's specific right to displace another entity and directly control the other entity's employees, as opposed to possession by the first entity of some economic influence over the entity that retains day-to-day control over its own employees. 113 The final rule adopts this suggestion insofar as the rule will not permit finding joint-employer status solely on the basis of an entity's economic influence. However, the “share or codetermine” standard does not require displacement by one entity of another company's control because the underlying premise of that standard is that two entities together determine the terms and conditions of employment of a single group of employees. See, e.g., NLRB v. Browning-Ferris Indus. of Pennsylvania, 691 F.2d at 1125 (finding joint-employer relationship where “BFI and the brokers together determined the drivers' compensation and shared in the day to day supervision of the drivers”). 113 See comment of RILA. A commenter suggests that the Board should not consider reserved control as a sufficient basis to permit, as primary, activity otherwise prohibited as secondary under Section 8(b)(4) of the Act. 114 The final rule is consistent with this suggestion. Thus, under the rule, Company A's contractually reserved but unexercised control over terms and conditions of employment of Company B's employees will not, standing alone, permit a union representing Company B's employees to picket against Company A with an object prohibited by Section 8(b)(4). However, under the final rule, evidence of Company A's contractually reserved but unexercised control over essential terms and conditions of employment of Company B's employees will be probative of joint-employer status to the extent it supplements and reinforces evidence of exercised direct and immediate control. Rule Sec. 103.40(A). If Company A is found to be a joint employer of Company B's employees, action by Company's B's employees' bargaining representative against Company A that would otherwise be secondary and unlawful absent the joint-employer finding would be lawful primary activity. 114 See comment of HR Policy Association. Another commenter suggests that the Board should consider, in individual unfair labor practice cases, whether a putative joint employer actually controls the specific term(s) or condition(s) of employment implicated in the case, whether or not it possesses or exercises control over other terms and conditions of employment. 115 In brief, the current rule does not change the Board's existing policies with regard to the allocation of unfair labor practice liability among multiple employers. 115 See comment of IFA. Finally, a commenter suggests that the Board explain the term “active role” used in the NPRM and define the frequency with which an entity must actually exercise contractually reserved control and the scope of such exercise in order to be found a joint employer. 116 The final rule does not include the term “active role,” but it does provide guidance on these issues. The rule requires possession and exercise of “substantial direct and immediate control over one or more essential terms or conditions” of employment, it specifies what will constitute “direct and immediate” control over each essential term or condition of employment, and it defines “substantial” direct and immediate control. Rule Sec. 103.40(A), (C)(1)-(8), (D). The rule does not otherwise specify predetermined thresholds of exercised control that will be necessary to support a finding of a joint-employer status. Rather, such status will be determined within the framework of the rule based on the totality of the relevant facts in each particular employment setting. Rule Sec. 103.40(A). 116 See comment of CWA. D. Comments Regarding Actual Exercise Requirement Many commenters present practical and legal arguments for and against the proposed rule's requirement that an entity actually exercise control over terms and conditions of employment of another entity's employees in order to be found a joint employer of those employees. As reflected in the final rule and discussed below, the Board has decided to retain this requirement. Beginning with practical arguments about an actual exercise requirement, many commenters argue that such a requirement introduces ambiguity into the analysis, makes outcomes less predictable, or otherwise prejudices interested parties in any potential litigation of joint-employer issues. 117 These commenters argue that an exercise requirement complicates the analysis because, unlike contractually reserved control, exercised control cannot be analyzed simply by reference to documents. In contrast, these commenters argue, a standard that did not require evidence of exercised control would allow parties to set expectations at the outset of their contractual relationship and to allocate rights and duties in advance of any allegation of joint employment. With regard to litigation, one commenter argues that an exercise requirement introduces a “worst evidence rule,” where the Board will ignore express language of the contract unless a party can show that an entity has actually exercised control. 118 Commenters argue that an exercise requirement will subject the outcome to the vagaries of the litigation process, with slight factual differences leading to opposite outcomes, will require extensive mini-trials—which may take place months or years after the fact—over individual instances of alleged exercised control, and will impose an unfair evidentiary burden on unions. 119 117 See comments of IBT; SEIU Local 32BJ; Employment Law Alliance; AFL-CIO. 118 See comment of LIUNA. 119 See comments of LIUNA; SEIU Local 32BJ. Commenters also argue that an actual exercise requirement will prevent effective collective bargaining, because an entity subject to another entity's reserved authority will be unable to effectively bargain over terms and conditions of employment subject to that authority, and could allow an entity that had not participated in bargaining to upend any collective-bargaining agreement covering terms and conditions of employment over which the entity possessed contractually reserved, unexercised control. 120 Another commenter suggests that just-cause provisions in collective-bargaining agreements between a staffing agency and its employees would be meaningless if entities to which the agency supplied services retained a contractual right to exclude employees from the worksite without cause. 121 Relatedly, commenters argue that an exercise requirement would erode the duty to bargain under Section 8(a)(5) by allowing an entity to move in and out of joint-employer status tactically by acting to control employment conditions when it finds it necessary to do so, but refraining from exercising its reserved control when it prefers to avoid the legal obligations incumbent upon a joint employer. 122 Finally, a commenter argues that imposing an actual exercise requirement is not supported by the Board's expressed desire to avoid involving uninterested entities in the bargaining relationships of their business partners because an entity that contracts to reserve control over terms and conditions of employment of another entity's employees may be as interested in the employment relationship as is the undisputed employer. 123 120 See comments of LIUNA; IUOE. 121 See comment of IBT. 122 See comments of AFL-CIO; IUOE. 123 See comment of LIUNA. Other commenters argue that an actual exercise requirement is a bright-line rule that will make it easier for parties to predict outcomes, encourage economically fruitful business relationships and contractual arrangements, and promote stability by providing the Board and the courts with a consistent standard. 124 One commenter argues that an exercise requirement ensures meaningful collective bargaining, while a standard that permits finding joint-employer status based solely on contractually reserved control does not. 125 Finally, one commenter seeks guidance as to how much weight, if any, the Board will afford various factors evidencing reserved control, guidance that assertedly was missing from Browning-Ferris . 126 124 See comments of National Retail Federation; CDW; FedEx Corporation. 125 See comment of CDW. 126 See comment of General [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-03373. Public record. Not legal advice.