Standard for Determining Joint Employer Status, 73946-74018 [2023-23573]

Agencies

• National Labor Relations Board

[Federal Register Volume 88, Number 207 (Friday, October 27, 2023)]
[Rules and Regulations]
[Pages 73946-74018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23573]



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Vol. 88

Friday,

No. 207

October 27, 2023

Part II





 National Labor Relations Board





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29 CFR Part 103





Standard for Determining Joint Employer Status; Final Rule

Federal Register / Vol. 88 , No. 207 / Friday, October 27, 2023 / 
Rules and Regulations

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NATIONAL LABOR RELATIONS BOARD

29 CFR Part 103

RIN 3142-AA21


Standard for Determining Joint Employer Status

AGENCY: National Labor Relations Board.

ACTION: Final rule.

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SUMMARY: The National Labor Relations Board has decided to issue this 
final rule for the purpose of carrying out the National Labor Relations 
Act (NLRA or Act) by rescinding and replacing the final rule entitled 
``Joint Employer Status Under the National Labor Relations Act,'' which 
was published on February 26, 2020, and took effect on April 27, 2020. 
The final rule establishes a new standard for determining whether two 
employers, as defined in the Act, are joint employers of particular 
employees within the meaning of the Act. The Board believes that this 
rule will more explicitly ground the joint-employer standard in 
established common-law agency principles and provide guidance to 
parties covered by the Act regarding their rights and responsibilities 
when more than one statutory employer possesses the authority to 
control or exercises the power to control particular employees' 
essential terms and conditions of employment. Under the final rule, an 
entity may be considered a joint employer of another employer's 
employees if the two share or codetermine the employees' essential 
terms and conditions of employment.

DATES: Effective December 26, 2023. This rule has been classified as a 
major rule subject to Congressional review. However, at the conclusion 
of the congressional review, if the effective date has been changed, 
the National Labor Relations Board will publish a document in the 
Federal Register to establish the new effective date or to withdraw the 
rule.

FOR FURTHER INFORMATION CONTACT: Roxanne L. Rothschild, Executive 
Secretary, National Labor Relations Board, 1015 Half Street SE, 
Washington, DC 20570-0001, (202) 273-1940 (this is not a toll-free 
number), 1-866-315-6572 (TTY/TDD).

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Background

    Section 2(2) of the National Labor Relations Act defines an 
``employer'' to include ``any person acting as an agent of an employer, 
directly or indirectly.'' 29 U.S.C. 152(2) (emphasis added). In turn, 
the Act provides that the ``term `employee' shall include any employee, 
and shall not be limited to the employees of a particular employer, 
unless [the Act] explicitly states otherwise . . . .'' Id. 152(3). 
Section 7 of the Act provides that employees shall have the right

to self-organization, to form, join, or assist labor organizations, 
to bargain collectively through representatives of their own 
choosing, and to engage in other concerted activities for the 
purpose of collective bargaining or other mutual aid or protection 
and to refrain from any or all such activities.

Id. 157. Section 9(c) of the Act authorizes the Board to process a 
representation petition when employees wish to be represented for 
collective bargaining. Id. 159(c). And Section 8(a)(5) makes it an 
unfair labor practice for an employer to refuse to bargain collectively 
with the representatives of its employees. Id. 158(a)(5).
    The Act does not specifically address situations in which statutory 
employees are employed jointly by two or more statutory employers 
(i.e., it is silent as to the definition of ``joint employer''), but, 
as discussed below, the Board, with court approval, has long applied 
common-law agency principles to determine when one or more entities 
share or codetermine the essential terms and conditions of employment 
of a particular group of employees.

B. The Development of Joint-Employment Law Under the National Labor 
Relations Act

    As set forth more fully in the Board's September 4, 2022 notice of 
proposed rulemaking (the NPRM), in Boire v. Greyhound Corp., 376 U.S. 
473, 481 (1964), a representation case involving the relationship 
between a company operating a bus terminal and its cleaning contractor, 
the Supreme Court explained that the question of whether Greyhound 
``possessed sufficient control over the work of the employees to 
qualify as a joint employer'' was ``essentially a factual question'' 
for the Board to determine.\1\ On remand, the Board held that Greyhound 
and the cleaning contractor were joint employers of the employees at 
issue because they ``share[d], or codetermine[d], those matters 
governing essential terms and conditions of employment.'' Greyhound 
Corp., 153 NLRB 1488, 1495 (1965), enfd. 368 F.2d 776 (5th Cir. 1966). 
For nearly two decades following the Board's decision in Greyhound, the 
Board regarded the right to control employees' work and their terms and 
conditions of employment as determinative in analyzing whether entities 
were joint employers of particular employees. Board precedent from this 
time period generally did not require a showing that both putative 
joint employers actually or directly exercised control.\2\ The

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Board's reliance on reserved or indirect control in joint-employer 
cases during this period was well within the mainstream of both Board 
and judicial treatment of such control in the independent contractor 
context, including in non-labor-law settings, and reviewing courts 
broadly endorsed the Board's consideration of forms of reserved and 
indirect control as probative in the joint-employer analysis.\3\
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    \1\ See Standard for Determining Joint-Employer Status, 87 FR 
54641 (Sept. 7, 2022).
    \2\ See, e.g., Globe Discount City, 209 NLRB 213, 213-214 & fn. 
3 (1974) (finding joint employer based on license agreements, 
without reference to any exercise of authority); Lowery Trucking 
Co., 177 NLRB 13, 15 (1969) (finding joint employer based in part on 
unexercised right to reject other employer's employee), enfd. sub 
nom. Ace-Alkire Freight Lines v. NLRB, 431 F.2d 280 (8th Cir. 1970) 
(observing that ``[w]hile [putative joint employer] never rejected a 
driver hired by [supplier], it had the right to do so''); United 
Mercantile, Inc., 171 NLRB 830, 831-832 (1968) (finding joint 
employer based on license agreements, without reference to any 
exercise of authority); Floyd Epperson, 202 NLRB 23, 23 (1973) 
(finding joint employer based in part on indirect control over wages 
and discipline), enfd. 491 F.2d 1390 (6th Cir. 1974); Buckeye Mart, 
165 NLRB 87, 88 (1967) (finding Buckeye joint employer of employees 
of Fir Shoe based solely on contractually reserved authority over, 
inter alia, discharge decisions and rules and regulations governing 
employee conduct), enfd. 405 F.2d 1211 (6th Cir. 1969); Jewel Tea 
Co., 162 NLRB 508, 510 (1966) (finding joint employer based on 
contractually reserved, unexercised power to effectively control 
hire, discharge, wages, hours, terms, ``and other conditions of 
employment'' and observing: ``That the licensor has not exercised 
such power is not material, for an operative legal predicated for 
establishing a joint-employer relationship is a reserved right in 
the licensor to exercise such control''); Value Village, 161 NLRB 
603, 607 (1966) (finding joint employer based on operating agreement 
and observing ``[s]ince the power to control is present by virtue of 
the operating agreement, whether or not exercised, we find it 
unnecessary to consider the actual practice of the parties regarding 
these matters as evidenced by the record.''); Spartan Department 
Stores, 140 NLRB 608, 608-610 & fn. 1, 4 (1963) (finding joint 
employer based solely on uniform license agreements); Taylor's Oak 
Ridge Corp., 74 NLRB 930, 938 (1947) (finding joint employer based 
solely on contractually reserved authority over numerous essential 
terms and conditions of employment, and observing: ``That the 
Employer's power of control may not in fact have been exercised is 
immaterial, since the right to control, rather than the actual 
exercise of that right, is the touchstone of the employer-employee 
relationship.''); General Motors Corp. (Baltimore, MD), 60 NLRB 81 
(1945) (finding joint employer based on contractually reserved 
authority, despite testimony that entity exercised no control in 
practice); Anderson Boarding & Supply Co., 56 NLRB 1204, 1206 (1944) 
(finding joint employer based on unexercised contractual authority); 
Bethlehem-Fairfield Shipyard, Inc., 53 NLRB 1428, 1431 (1943) 
(finding joint employer based on reserved rights to dismiss 
employees and set wage scales, despite crediting testimony entity 
actually exercised no control).
    Our colleague observes that a number of these cases involve 
department store licensing relationships. He argues that the Board 
did not purport to apply general common-law agency principles in 
these cases but instead applied a distinctive analysis focused on 
``whether the department store was in a position to influence the 
licensee's labor relations policies.'' We disagree. The cases we 
cite above, including the department store cases, ultimately rest on 
early post-Taft-Hartley Board decisions that are consistent with the 
final rule's approach. For example, in one early case, the Board 
held that ``an employer-employee relationship is established where 
the [entity] for whom services are rendered possesses the right of 
control over such fundamental matters as the employees' day-to-day 
operations and their basic working conditions.'' Franklin Simon & 
Co., 94 NLRB 576, 579 (1951). In that case, the Board found that a 
department store and its licensee were joint employers because ``a 
substantial right of control over matters fundamental to the 
employment relationship is retained and exercised by both 
[entities].'' Id. (emphasis in original). We find these statements 
instructive and see no indication that the Board intended such 
statements to apply solely in the department store context, as our 
colleague implies. As for Buckeye Mart, supra, which our colleague 
suggests is at odds with the broader principles we argue animated 
the Board's early decisions, we note that in that case the Board 
found a department store to jointly employ the employees of one of 
its licensees but not the other. At most, this case shows that the 
Board applied the relevant standard to find one joint-employment 
relationship but not another based on the particular language of the 
license agreements at issue. It does not call the relevant standard 
or its underlying principles into question.
    \3\ See, e.g., Carrier Corp. v. NLRB, 768 F.2d 778, 781 (6th 
Cir. 1985) (finding joint employer based in part on entity's 
consulting about wages and benefits with direct employer and 
reserved authority to request removal or dismissal of employees); 
International Chemical Workers Union Local 483 v. NLRB, 561 F.2d 
253, 255 (D.C. Cir. 1977) (``Whether Cabot and P & K were joint 
employers depends upon the amount of actual and potential control 
that Cabot had over the replacement employees. This in turn, to a 
certain extent, is dependent upon the amount and nature of control 
that Cabot exercised and was authorized to exercise under the 
contract.'') (emphasis added); Vaughn Bros., 94 NLRB 382, 383 (1951) 
(``Under this [common-law] test an employment relationship exists 
where the person for whom the services are performed reserves the 
right, even though not exercised, to control the manner and means by 
which the result is accomplished.''); Alaska Salmon Industry, Inc. 
(Seattle Wash), 81 NLRB 1335, 1338 (1949) (``[A]n employee 
relationship . . . is found to exist where the person for whom the 
services are performed reserves the right (even if not exercised) to 
control the manner and means by which the result is 
accomplished.''); San Marcos Telephone Co., 81 NLRB 314, 317 (1949) 
(``Under [common-law] doctrine, an employee relationship, rather 
than that of an independent contractor, exists where the person for 
whom the services are performed reserves the right (even if not 
exercised) to control the manner and means by which the result is 
accomplished.''); Steinberg and Co., 78 NLRB 211, 220-221, 223 
(1948) (``Under [common-law] doctrine it has been generally 
recognized that an employer-employee relationship exists where the 
person for whom the services are performed reserves the right to 
control the manner and means by which the result is 
accomplished.''), enf. denied 182 F.2d 850 (5th Cir. 1950). See also 
judicial decisions discussed in Sec. I.D., below.
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    In NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 
F.2d 1117, 1123 (3d Cir. 1982), enfg. 259 NLRB 148 (1981), the United 
States Court of Appeals for the Third Circuit endorsed the Board's 
``share or codetermine'' formulation of the joint-employer standard. 
While later Board decisions continued to adhere to this formulation, 
they also began imposing new requirements that the Board now believes 
lacked a clear basis in established common-law agency principles or 
prior Board or judicial decisions. See TLI, Inc., 271 NLRB 798 (1984); 
Laerco Transportation, 269 NLRB 324 (1984). In particular, these 
decisions began requiring (1) that a putative joint employer 
``actually'' exercise control, (2) that such control be ``direct and 
immediate,'' and (3) that such control not be ``limited and routine.'' 
See, e.g., AM Property Holding Corp., 350 NLRB 998, 999-1003 (2007), 
enfd. in relevant part sub nom. Service Employees International Union, 
Local 32BJ v. NLRB, 647 F.3d 435 (2d Cir. 2011); Airborne Express, 338 
NLRB 597, 597 (2002); Flagstaff Medical Center, 357 NLRB 659, 666-667 
(2011).
    In 2015, the Board restored and clarified its traditional, common-
law based standard for determining whether two employers, as defined in 
Section 2(2) of the Act, are joint employers of particular employees 
within the meaning of Section 2(3) of the Act. See Browning-Ferris 
Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 
NLRB 1599 (2015) (BFI). Consistent with established common-law agency 
principles, and rejecting the control-based restrictions that the Board 
had previously established without explanation, the Board announced 
that it would consider evidence of reserved and indirect control over 
employees' essential terms and conditions of employment when analyzing 
joint-employer status.
    While BFI was pending on review before the United States Court of 
Appeals for the District of Columbia Circuit, and following a change in 
the Board's composition, a divided Board issued a notice of proposed 
rulemaking with the goal of establishing a joint-employer standard that 
departed in significant respects from BFI.\4\ During the comment 
period, the District of Columbia Circuit issued its decision in 
Browning-Ferris Industries of California, Inc. v. NLRB, 911 F.3d 1195, 
1222 (D.C. Cir. 2018), upholding ``as fully consistent with the common 
law the Board's determination that both reserved authority to control 
and indirect control can be relevant factors in the joint-employer 
analysis,'' and remanding the case to the Board to refine the new 
standard.\5\
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    \4\ See The Standard for Determining Joint Employer Status, 83 
FR 46681 (Sept. 14, 2018). Then-Member McFerran dissented.
    \5\ The court specifically required that on remand the Board 
clarify its ``articulation and application of the indirect-control 
element'' of the BFI joint-employer standard to the extent that the 
Board had not ``distinguish[ed] between indirect control that the 
common law of agency considers intrinsic to ordinary third-party 
contracting relationships, and indirect control over the essential 
terms and conditions of employment.'' 911 F.3d at 1222-1223. The 
court further instructed the Board on remand to more explicitly 
apply the second part of the BFI standard (``whether the putative 
joint employer possesses sufficient control over employees' 
essential terms and conditions of employment to permit meaningful 
collective bargaining''), and specifically, to clarify ``which terms 
and conditions are `essential' to permit `meaningful collective 
bargaining,' '' and what such bargaining ``entails and how it works 
in this setting.'' Id. at 1221-1222 (quoting 362 NLRB at 1600). 
After accepting the court's remand, a newly constituted Board 
declined to clarify the BFI standard in any respect, instead finding 
that ``retroactive application of any clarified variant of [that 
standard] in this case would be manifestly unjust.'' Browning-Ferris 
Industries of California, Inc., 369 NLRB No. 139, slip op. 1 (2020), 
vacated and remanded, 45 F.4th 38 (D.C. Cir. 2022). As discussed 
below, and contrary to the view of our dissenting colleague, the 
instant rule fully explicates the indirect-control element in 
Section IV and V.
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    Thereafter, on February 26, 2020, the Board promulgated a final 
rule that again introduced control-based restrictions that narrowed the 
joint-employer standard.\6\ In light of the District of Columbia 
Circuit's decision in BFI v. NLRB, the Board modified the proposed rule 
to ``factor in'' evidence of indirect and reserved control over 
essential terms and conditions of employment, but only to the extent 
such indirect and/or reserved control ``supplements and reinforces'' 
evidence that the entity also possesses or exercises direct and 
immediate control over essential terms and conditions of employment.\7\ 
The final rule also explained that establishing that an entity ``shares 
or codetermines the essential terms and conditions of another 
employer's employees'' requires showing that the entity ``possess[es] 
and exercise[s] such substantial direct and immediate control over one 
or more essential terms or conditions of their employment as would 
warrant finding that the entity meaningfully affects matters relating 
to the employment

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relationship with those employees.'' \8\ In turn, the final rule 
defined ``substantial direct and immediate control'' to mean ``direct 
and immediate control that has a regular or continuous consequential 
effect on an essential term or condition of employment of another 
employer's employees'' and ``substantial'' to exclude control that is 
``only exercised on a sporadic, isolated, or de minimis basis.'' \9\ 
The final rule set forth an ``exhaustive'' list of essential terms and 
conditions of employment comprised of ``wages, benefits, hours of work, 
hiring, discharge, discipline, supervision, and direction'' and 
discussed some examples of conduct that would or would not rise to the 
level of direct and immediate control of each term or condition on the 
list.\10\
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    \6\ See Joint Employer Status Under the National Labor Relations 
Act, 85 FR 11184 (Feb. 26, 2020).
    \7\ Id. at 11185-11186, 11194-11198 & 11236. The final rule 
defined ``indirect control'' as ``indirect control over essential 
terms and conditions of employment of another employer's employees 
but not control or influence over setting the objectives, basic 
ground rules, or expectations for another entity's performance under 
a contract.'' Id. at 11236.
    \8\ Id. at 11235.
    \9\ Id. at 11236.
    \10\ Id. at 11235-11236.
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C. The Notice of Proposed Rulemaking

    On September 7, 2022, the Board issued a new joint-employer NPRM. 
87 FR 54641, 54663 (September 7, 2022). In the NPRM, the Board detailed 
recent developments in its joint-employer law. The Board noted that the 
Board's 2020 final rule (2020 rule) marked the first occasion when the 
Board addressed joint-employer doctrine through rulemaking. The NPRM 
stated the Board's preliminary view, subject to comments, that the 2020 
rule's embrace of control-based restrictions unnecessarily narrowed the 
common law and threatened to undermine the goals of Federal labor law. 
The NPRM invited comments on these issues and on all aspects of the 
proposed rule, seeking input from employees, employers, and unions 
regarding their experience in workplaces where multiple entities have 
authority over the workplace.
    The Board set an initial comment period of 60 days with 14 
additional days allotted for reply comments. Thereafter, the Board 
extended these deadlines to allow interested parties to comment for an 
additional 30 days.\11\
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    \11\ The NPRM set the deadline for initial comments as November 
7, 2022, and comments replying to comments submitted during the 
initial comment period were due November 21, 2022. 87 FR at 54641. 
On October 14, 2022, the Board extended the deadlines for submitting 
initial and reply comments for 30 days, to December 7, 2022, and 
December 21, 2022, respectively. 87 FR 63465 (October 19, 2022).
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D. Relevant Common Law Principles

    As discussed in more detail below, the Board has concluded, after 
careful consideration of relevant comments, that the 2020 rule must be 
rescinded because it is contrary to the common-law agency principles 
incorporated into the Act when it was adopted and, accordingly, is not 
a permissible interpretation of the Act.\12\ Although we believe that 
the Board is required to rescind the 2020 rule, we would do so even if 
that rule were valid because it fails to fully promote the policies of 
the Act, as explained below.
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    \12\ Our dissenting colleague suggests that the 2020 rule is 
defensible, as a discretionary choice, to decline to exert joint-
employer jurisdiction over entities who might be statutory employers 
by virtue of reserved but unexercised control, but who have not 
actually exercised their authority to control terms and conditions 
of employment of another entity's employees. Assuming arguendo that 
the Board could exercise its discretion to decline jurisdiction in 
this manner, the 2020 rule nowhere presents that rationale as 
underlying its actual-exercise requirement. Moreover, any such claim 
is inconsistent with our dissenting colleague's additional 
assertion, discussed further below, that the current final rule goes 
``beyond the boundaries of the common law'' by eliminating the 2020 
rule's actual-exercise requirement.
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    First, it is well established--and our dissenting colleague 
agrees--that the statutory terms ``employer'' and ``employee'' have 
their common-law meaning, and that the common law accordingly governs 
the Board's joint-employer analysis. See, e.g., BFI v. NLRB, 911 F.3d 
at 1207-1208. In the preamble to the proposed rule, the Board (quoting 
the District of Columbia Circuit, id. at 1208-1209) acknowledged that 
``Congress has tasked the courts, and not the Board, with defining the 
common-law scope of `employer' '' and that ``the common-law lines 
identified by the judiciary'' thus delineate the boundaries of the 
``policy expertise that the Board brings to bear'' on the question of 
whether a business entity is a joint employer of another employer's 
employees under the Act. 87 FR at 54648. Accordingly, in defining the 
types of control that will be sufficient to establish joint-employer 
status under the Act, the Board looks for guidance from the judiciary, 
including primary articulations of relevant principles by judges 
applying the common law, as well as secondary compendiums, reports, and 
restatements of these common law decisions, focusing ``first and 
foremost [on] the `established' common-law definitions at the time 
Congress enacted the National Labor Relations Act in 1935 and the Taft-
Hartley Amendments in 1947.'' Id. at 1209 (citations omitted).\13\
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    \13\ Our dissenting colleague implicitly criticizes us for 
citing ``a plethora of decisions (including state law cases more 
than a hundred years old), the majority of which focus on 
independent contractor, workers' compensation, and tort liability 
matters.'' We find it entirely appropriate, however, to seek 
guidance on the meaning of common-law terms in the Act in judicial 
opinions where common-law issues most frequently arise, written by 
state judges primarily responsible for applying the common law, from 
time periods that shed light on the meaning of those terms when 
Congress used them.
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    After consideration of relevant comments, the Board has concluded 
that the actual-exercise requirement reflected in the 2020 rule is (as 
described in relevant detail below) is contrary to the common-law 
agency principles that must govern the joint-employer standard under 
the Act and that the Board has no statutory authority to adopt such a 
requirement. The Board has further concluded that the policies of the 
Act, consistent with the common-law principles governing the Act's 
interpretation, make it appropriate for the Board to give determinative 
weight to the existence of a putative joint employer's authority to 
control essential terms and conditions of employment, whether or not 
such control is exercised, and without regard to whether any such 
exercise of control is direct or indirect, such as through an 
intermediary.\14\
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    \14\ Contrary to our dissenting colleague, apart from 
recognizing that the Board must follow common-law agency principles 
in determining who is an ``employer'' and an ``employee'' under Sec. 
2 of the Act, we do not conclude that the common law dictates the 
specific details of the joint-employer standard we articulate 
herein. Rather, as discussed in more detail above and below, the 
final rule reflects our policy choices, within the bounds of the 
common law, in furtherance of the policy of the United States, as 
set forth in Sec. 1 of the Act, to encourage the practice and 
procedure of collective bargaining, including by providing a 
mechanism by which an entity's rights and obligations under the Act 
may be accurately aligned with its authority to control employees' 
essential terms and conditions of employment.
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1. Reserved Control
    First, as previously set forth in the NPRM,\15\ long before the 
1935 enactment of the Act, the Supreme Court recognized and applied a 
common-law rule that ``the relation of master and servant exists 
whenever the employer retains the right to direct the manner in which 
the business shall be done, as well as the result to be accomplished, 
or, in other words, `not only what shall be done, but how it shall be 
done.' '' Singer Mfg. Co. v. Rahn, 132 U.S. 518, 523 (1889) (emphasis 
added) (quoting Railroad Co. v. Hanning, 82 U.S. 649, 657 (1872)). The 
Court in Singer affirmed the holding below that a worker was an 
employee \16\ of a company because the Court concluded that the company 
had contractually reserved such control over

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the performance of the work that it ``might, if it saw fit, instruct 
[the worker] what route to take, or even what speed to drive.'' Id. at 
523. In reaching this conclusion, the Court relied solely on the 
parties' contract and did not discuss whether or in what manner the 
company had ever actually exercised any control over the terms and 
conditions under which the worker performed his work. In other words, 
the Court found a common-law employer-employee relationship based on 
contractually reserved control without reference to whether or how that 
control was exercised.\17\
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    \15\ 87 FR at 54648-54650.
    \16\ As we explained more fully in the NPRM, a ``servant'' is an 
employee. 87 FR at 54645 fn. 28. See, e.g., 30 C.J.S. Employer--
Employee sec. 1 (2022) (``The terms `servant' and `employee' are 
interchangeable.''); Horace Gray Wood, A Treatise on the Law of 
Master and Servant; Covering the Relation, Duties and Liabilities of 
Employers and Employees (1877).
    \17\ See also Chicago Rock Island & Pac. Ry. Co. v. Bond, 240 
U.S. 449, 456 (1916) (worker was not employee of railroad company 
where contract provided ``company reserves and holds no control over 
[worker] in the doing of such work other than as to the results to 
be accomplished,'' and Court found company ``did not retain the 
right to direct the manner in which the business should be done, as 
well as the results to be accomplished, or, in other words, did not 
retain control not only of what should be done, but how it should be 
done.'') (emphasis added); Little v. Hackett, 116 U.S. 366, 376 
(1886) (``[I]t is this right to control the conduct of the agent 
which is the foundation of the doctrine that the master is to be 
affected by the acts of his servant.'') (emphasis added) (quoting 
Bennet v. New Jersey R.R. & Transp. Co., 36 N.J.L. 225 (N.J. 1873)).
    We are puzzled by our colleague's suggestion that Singer somehow 
fails to support the proposition that contractual authority to 
control can establish a joint-employer relationship because the 
company engaged the worker and compensated him for his work. As 
discussed further below, ordinary contract terms providing generally 
for engaging workers and setting general price terms are common 
features of any independent-contractor arrangement, and are, 
accordingly, not relevant to either the joint-employer analysis or 
the common-law employer-employee analysis.
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    Between the Court's decision in Singer and the relevant 
congressional enactments of the NLRA in 1935 and the Taft-Hartley 
amendments in 1947, Federal courts of appeals and State high courts 
consistently followed the Supreme Court in emphasizing the primacy of 
the right of control over whether or how it was exercised in decisions 
that turned on the existence of a common-law employer-employee 
relationship, including in contexts involving more than one potential 
employer. For example, in 1934, the Supreme Court of Missouri examined 
whether a worker was an ``employee'' of two companies under a State 
workers' compensation statute--the terms of which the court construed 
``in the sense in which they were understood at common law''--and 
affirmed that ``the essential question is not what the companies did 
when the work was being done, but whether they had a right to assert or 
exercise control.'' \18\ And, in 1945, the Court of Appeals for the 
District of Columbia Circuit explained that, in distinguishing 
employees from independent contractors, ``it is the right to control, 
not control or supervision itself, which is most important.'' \19\
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    \18\ Maltz v. Jackoway-Katz Cap Co., 82 SW2d 909, 912, 918 (Mo. 
1934). See also McDermott's Case, 186 NE 231, 232-233 (Mass. 1933) 
(``One may be a servant though far away from the master, or so much 
more skilled than the master that actual direction and control would 
be folly, for it is the right to control, rather than the exercise 
of it that is the test.''); Larson v. Independent School Dist No. 
11J of King Hill, 22 P.2d 299, 301 (Idaho 1933) (``It is not 
necessary that control be exercised, if the right of control 
exists.''); Gordon v. S.M. Byers Motor Car Co., 164 A. 334, 335-336 
(Pa. 1932) (``The control of the work reserved in the employer which 
makes the employee a mere servant . . . means a power of control, 
not necessarily the exercise of the power.'') (internal quotation 
and citation omitted); Brothers v. State Industrial Accident 
Commission, 12 P.2d 302, 304 (Or. 1932) (``[T]he true test of the 
relationship of employer and employee is not the actual exercise of 
control, but the right to exercise control.'') (internal quotation 
and citation omitted); Murrays Case, 154 A. 352, 354 (Me. 1931) 
(``Authorities are numerous and uniform that the vital test is to be 
found in the fact that the employer has or not retained power of 
control or superintendence over the employee or contractor. The test 
of the relationship is the right to control. It is not the fact of 
actual interference with the control, but the right to interfere 
that makes the difference between an independent contractor and a 
servant or agent. There is no conflict as to this general rule'') 
(internal quotation and citation omitted); Van Watermeullen v. 
Industrial Commission, 174 NE 846, 847-848 (Ill. 1931) (``One of the 
principal factors which determine whether a worker is an employee or 
an independent worker is the matter of the right to control the 
manner of doing the work, not the actual exercise of that right.''); 
Norwood Hospital v. Brown, 122 So. 411, 413 (Ala. 1929) (``[T]he 
ultimate question . . . is not whether the employer actually 
exercised control, but whether it had a right to control.'').
    \19\ Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir. 1945). See 
also Industrial Commission v. Meddock, 180 P.2d 580, 584 (Ariz. 
1947) (``It is the right to control rather than the fact that the 
employer does control that determines the status of the parties, and 
this right to control is, in turn, tested by those standards 
applicable to the facts at hand.''); D.M. Rose & Co. v. Snyder, 206 
SW 2d 897, 904 (Tenn. 1947) (internal quotations and citations 
omitted) (``[The] right of control is the distinguishing mark which 
differentiates the relation of master and servant from that of 
employer and independent contractor . . . . Wherever the defendant 
has had such right of control, irrespective of whether he exercised 
it or not, he has been held to be the responsible principal or 
master.''); Green Valley Coop. Dairy Co. v. Industrial Comm'n, 27 NW 
2d 454, 457 (Wis. 1947) (citation omitted) (``It is quite immaterial 
whether the right to control is exercised by the master so long as 
he has the right to exercise such control.''); Bobik v. Industrial 
Comm'n, 64 NE 2d, 829, (Ohio 1946) (``[I]t is not, however, the 
actual exercise of the right by interfering with the work but rather 
the right to control which constitutes the test.''); Cimorelli v. 
New York Cent. R. Co., 148 F.2d 575, 578 (6th Cir. 1945) (``The fact 
of actual interference or exercise of control by the employer is not 
material. If the existence of the right or authority to interfere or 
control appears, the contractor cannot be independent.''); Dunmire 
v. Fitzgerald, 37 A.2d 596, 599 (Pa. 1944) (in determining ``who was 
the controlling master of the borrowed employe[e], . . . . The 
criterion is not whether the borrowing employer in fact exercised 
control, but whether he had the right to exercise it.''); Bush v. 
Wilson & Co., 138 P.2d 457, 461 (Kan. 1943) (``[W]hether a person is 
an employee of another depends upon whether the person who is 
claimed to be an employer had a right to control the manner in which 
the work was done. It has been pointed out many times that this 
means not actually the exercise of control, but does mean the right 
to control.''); Ross v. Schneider, 27 SE 2d 154, 157 (Va. 1943) 
(quoting Murray's Case, 154 A. 352, 354 (Me. 1931)) (``Authorities 
are numerous and uniform that the vital test is to be found in the 
fact that the employer has or not retained power of control or 
superintendence over the employee or contractor. `The test of the 
relationship is the right to control. It is not the fact of actual 
interference with the control, but the right to interfere that makes 
the difference between an independent contractor and a servant or 
agent.' Tuttle v. Embury-Martin Lumber Co., [158 NW 875, 879 (Mich. 
1916)].''); Jones v. Goodson, 121 F.2d 176, 179 (10th Cir. 1941) 
(``[T]he legal relationship of employer and employee . . . exists 
when the person for whom services are performed has the right to 
control and direct . . . the details and means by which [the 
service] is accomplished. . . . it is not necessary that the 
employer actually direct or control the manner in which the services 
are performed; it is sufficient if he has the right to do so.''); 
S.A. Gerrard Co. v. Industrial Accident Comm'n, 110 P.2d 377 (Cal. 
1941) (``[T]he right to control, rather than the amount of control 
which was exercised, is the determinative factor.'').
---------------------------------------------------------------------------

    Unsurprisingly, early twentieth century secondary authority 
similarly distills from the cases a common-law rule under which the 
right of control establishes the existence of the common-law employer-
employee relationship, without regard to whether or how such control is 
exercised. For example, in 1922, an American Law Report (A.L.R.) 
annotation states as black-letter law that:

    In every case which turns upon the nature of the relationship 
between the employer and the person employed, the essential question 
to be determined is not whether the former actually exercised 
control over the details of the work, but whether he had a right to 
exercise that control.\20\
---------------------------------------------------------------------------

    \20\ General discussion of the nature of the relationship of 
employer and independent contractor, 19 A.L.R. 226 at sec. 7 & fn. 1 
(1922) (emphasis added) (citations omitted). A 1931 A.L.R. 
annotation similarly reports that ``[i]t is not the fact of actual 
interference or exercise of control by the employer which renders 
one a servant rather than an independent contractor, but the 
existence of the right or authority to interfere or control.'' Tests 
in determining whether one is an independent contractor, 75 A.L.R. 
725 (1931).
    Other, earlier secondary authority was also consistent with this 
view. For example, the second edition of The American & English 
Encyclopedia of Law, published over several years spanning the turn 
of the century, explains that ``[t]he relation of master and servant 
exists where the employer has the right to select the employee; the 
power to remove and discharge him; and the right to direct both what 
work shall be done and the way and manner in which it shall be 
done.'' 20 The American & English Encyclopedia of Law 12 Master and 
Servant (2d ed. 1902) (emphasis added) (citations omitted). 
Likewise, in 1907, the Cyclopedia of Law and Procedure defines 
``master,'' inter alia, as ``[o]ne who not only prescribes the end, 
but directs, or at any time may direct, the means and methods of 
doing the work.'' 26 Cyclopedia of Law and Procedure 966 fn. 2 
Master and Servant (1907) (emphasis added) (citations omitted). The 
1925 first edition of Corpus Juris echoes the same definitions set 
forth in the Cyclopedia, and additionally notes state high court 
common-law authority holding that ``where the master has the right 
of control, it is not necessary that he actually exercise such 
control.'' 39 C.J. Master and Servant sec. 1 Definitions 33 fn. 8 
(1st ed. 1925) (emphasis added) (quoting Tucker v. Cooper, 158 P. 
181 (Cal. 1916)).


[[Page 73950]]


---------------------------------------------------------------------------

    And, the first Restatement of Agency, published in 1933, defines 
``master,'' and ``servant,'' thus:

    (1) A master is a principal who employs another to perform 
service in his affairs and who controls or has the right to control 
the physical conduct of the other in the performance of the service.
    (2) A servant is a person employed by a master to perform 
service in his affairs whose physical conduct in the performance of 
the service is controlled or is subject to the right of control by 
the master.\21\
---------------------------------------------------------------------------

    \21\ Restatement (First) of Agency sec. 2 (Am. Law Inst. 1933) 
(emphasis added). See also id. at sec. 220 (``A servant is a person 
employed to perform a service for another in his affairs and who, 
with respect to his physical conduct in the performance of the 
service, is subject to the other's control or right to control.'') 
(emphasis added). As noted above, the District of Columbia Circuit 
observed in BFI v. NLRB, 911 F.3d at 1211, that ``the `right to 
control' runs like a leitmotif through the Restatement (Second) of 
Agency,'' which, though published in 1958, is relevantly similar to 
the first Restatement.

    Finally, the first edition of American Jurisprudence, published 
between 1936 and 1948, states that ``the really essential element of 
the [employer-employee] relationship is the right of control--the right 
of one person, the master, to order and control another, the servant, 
in the performance of work by the latter, and the right to direct the 
manner in which the work shall be done,'' and ``[t]he test of the 
employer-employee relation is the right of the employer to exercise 
control of the details and method of performing the work.'' \22\
---------------------------------------------------------------------------

    \22\ 35 Am. Jur. Master and Servant sec. 3 (1st ed. 1941) 
(emphasis added).
---------------------------------------------------------------------------

    The Board believes, after careful consideration of relevant 
comments as discussed further below, and based on consultation of this 
and other judicial authority, that when Congress enacted the NLRA in 
1935 and the Taft-Hartley Amendments in 1947, the existence of a 
putative employer's reserved authority to control the details of the 
terms and conditions under which work was performed sufficed to 
establish a common-law employer-employee relationship without regard to 
whether or in what manner such control was exercised.
    From 1947 to today, innumerable judicial decisions and secondary 
authorities examining the common-law employer-employee relationship 
have continued to emphasize the primacy of the putative employer's 
authority to control, without regard to whether or in what manner that 
control has been exercised. For example, in 2014, the Supreme Court of 
California affirmed that ``what matters under the common law is not how 
much control a hirer exercises, but how much control the hirer retains 
the right to exercise.'' \23\ As noted above, the Restatement (Second) 
of Agency relevantly echoes the First Restatement's emphasis on the 
right of control.\24\ Corpus Juris Secundum provides that ``[a]n 
employee/servant is a type of agent whose physical conduct is 
controlled or is subject to the right to control by the master; the 
servant's principal, who controls or has the right to control the 
physical conduct of the servant, is called the master.'' \25\ And, the 
second edition of American Jurisprudence provides that ``the principal 
test of an employment relationship is whether the alleged employer has 
the right to control the manner and means of accomplishing the result 
desired.'' \26\ Based on its examination of this and other judicial and 
secondary authority, the Board agrees with the District of Columbia 
Circuit that ``for what it is worth [the common-law rule in 1935 and 
1947] is still the common-law rule today.'' \27\ The Board also notes 
that, as set forth in greater detail above, this view is in keeping 
with the Board's prior treatment of reserved control in the period 
following the Greyhound decision and before the Board began imposing 
additional control-related restrictions in TLI/Laerco and their 
progeny.
---------------------------------------------------------------------------

    \23\ Ayala v. Antelope Valley Newspapers, Inc., 327 P.3d 165, 
169, 172 (Cal. 2014); see also, e.g., Garcia-Celestino v. Ruiz 
Harvesting, Inc., 898 F.3d 1110, 1121 (11th Cir. 2018) (``We 
emphasize that `it is the right to control, not the actual exercise 
of control that is significant.' ''); Mallory v. Brigham Young 
Univ., 332 P.3d 922, 928-929 (Utah 2014) (``If the principal has the 
right to control the agent's method and manner of performance, that 
agent is a servant whether or not the right is specifically 
exercised.''); Shatto v. McLeod Regional Medical Center, 753 SE2d 
416, 419, 420 (S.C. 2013) (``While evidence of actual control 
exerted by a putative employer is evidence of an employment 
relationship, the critical inquiry is whether there exists the right 
and authority to control and direct the particular work or 
undertaking.''); Anthony v. Okie Dokie Inc., 976 A.2d 901, 906 (D.C. 
2009) (quoting Safeway Stores Inc. v. Kelly, 448 A.2d 856, 860 (D.C. 
1982)) (``The determinative factor `is whether the employer has the 
right to control and direct the servant in the performance of his 
work and the manner in which the work is to be done . . . and not 
the actual exercise of control or supervision.' ''); Universal Am-
Can Ltd. V. WCAB, 762 A.2d 328, 332-333 (Pa. 2000) (``[I]t is the 
existence of the right to control that is significant, irrespective 
of whether the control is actually exercised.''); Reed v. Glyn, 724 
A.2d 464, 466 (Vt. 1998) (``It is to be observed that actual 
interference with the work is unnecessary--it is the right to 
interfere that determines.''); JFC Temps, Inc. v. W.C.A.B. 
(Lindsay), 620 A.2d 862, 864-865 (Pa. 1996) (``The law governing the 
``borrowed'' employee is well-established. . . . The entity 
possessing the right to control the manner of the performance of the 
servant's work is the employer, irrespective of whether the control 
is actually exercised.''); Harris v. Miller, 438 SE 2d 731, 735 
(N.C. 1994) (``The traditional test of liability under the borrowed 
servant rule [provides that] a servant is the employe (sic) of the 
person who has the right of controlling the manner of his 
performance of the work, irrespective of whether he actually 
exercises that control or not.'') (internal quotation and citation 
omitted); Beddia v. Goodin, 957 F.2d 254, 257 (6th Cir. 1992) (``The 
test is whether the employer retained control, or the right to 
control, the modes and manner of doing the work contracted for. It 
is not necessary that the control ever be exercised.''); Ex parte 
Curry, 607 S.2d 230, 232 (Ala. 1992) (``In the last analysis, it is 
the reserved right of control rather than its actual exercise that 
provides the answer.''); ARA Leisure Services, Inc. v NLRB, 782 F.2d 
456, 460 (4th Cir. 1986) (``It is the right to control, rather than 
the actual exercise of control, that is significant.''); NLRB v. 
Associated Diamond Cabs, Inc., 702 F.2d 912, 920 (11th Cir. 1983) 
(``[I]t is the right to control, not the actual exercise of control, 
that is significant.''); Glenmar Cinestate Inc. v. Farrell, 292 SE2d 
366, 369 (Va. 1982) (``It is not the fact of actual interference 
with the control, but the right to interfere, that makes the 
difference between an independent contractor and a servant or 
agent.''); Baird v. Sickler, 433 NE 2d 593, 594-595 (Ohio 1982) 
(``For the relationship to exist, it is unnecessary that such right 
of control be exercised; it is sufficient that the right merely 
exists.''); Seafarers Local 777 (Yellow Cab) v. NLRB, 603 F.2d 862, 
874 (D.C. Cir. 1978) (quoting Williams v. U.S., 126 F.2d 129, 132 
(7th Cir. 1942)) (``[I]t is the right and not the exercise of 
control which is the determining element.''); Combined Insurance Co. 
of America v. Sinclair, 584 P.2d 1034, 1042 (Wyo. 1978) (``The base 
determining factor is whether [putative employer] retained [t]he 
right of control of the manner that [putative employee] operated his 
vehicle and not whether such control was in fact exercised.''); NLRB 
v. Deaton Inc., 502 F.2d 1221, 1225 (5th Cir. 1974) (``It is the 
right and not the exercise of control which is the determining 
element''); Dovell v. Arundel Supply Corp., 361 F.2d 543, 545 (D.C. 
Cir. 1966) (quoting Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir. 
1945)) (``[I]t is the right to control, not control or supervision 
itself, which is most important.''); United Ins. Co. of America v. 
NLRB, 304 F.2d 86, 89 (7th Cir. 1962) (``[I]t is the right and not 
the exercise of control which is the determining element.''); Cohen 
v. Best Made Mfg. Co., 169 A.2d 10, 11-12 (R.I. 1961) (``The final 
test is the right of the employer to exercise power of control 
rather than the actual exercise of such power.''); Fardig v. 
Reynolds, 348 P.2d 661, 663 (Wash. 1960) (``It is well settled in 
this state that . . . [it] is not the actual exercise of the right 
of interference with the work, but the right to control, which 
constitutes the test.'').
    \24\ See Restatement (Second) of Agency secs. 2, 220 (Am. Law 
Inst. 1958).
    \25\ 30 C.J.S. Employer--Employee sec. 1 (2022) (emphasis added) 
(citations omitted).
    \26\ 27 Am. Jur. 2d. Employment Relationship sec. 1 (2022) 
(emphasis added) (citations omitted).
    \27\ BFI v. NLRB, 911 F.3d at 1210 & fn. 6.
---------------------------------------------------------------------------

    Finally, because the facts of many cases do not require 
distinguishing between contractually reserved and actually exercised 
control, many judicial decisions and other authorities spanning the 
last century have articulated versions of the common-law test that do 
not expressly include this distinction. But the Board is not aware of 
any common-law judicial decision or other common-law authority directly 
supporting the proposition that, given the existence of a putative 
employer's

[[Page 73951]]

contractually reserved authority to control, further evidence of direct 
and immediate exercise of that control is necessary to establish a 
common-law employer-employee relationship.
    For these reasons, the Board believes that in light of controlling 
common-law agency principles, it does not have the statutory authority 
to require a showing of actual exercise of direct and immediate control 
in order to establish that an entity is a joint employer of another 
entity's employees. We would not choose to do so, as a matter of 
policy, in any case.
    Our dissenting colleague faults us, in turn, both for seeking 
authority on relevant common-law principles in sources examining the 
distinction between employees and independent contractors and for 
failing to pay sufficient attention to judicial decisions examining 
joint-employer issues under other federal statutes in light of common-
law principles derived from independent-contractor authority. In 
support of the first criticism, our colleague quotes selectively from 
BFI v. NLRB, in which the court rejected a party's contention that the 
joint-employer and independent-contractor tests were ``virtually 
identical.'' 911 F.3d at 1213-1215. We recognize, as did the court 
there, that several of the factors that guide the employee-or-
independent-contractor determination, as articulated in primary 
judicial authority like Darden \28\ and Reid \29\ and in secondary 
compendiums, reports, and restatements of the common law of agency 
bearing on independent-contractor determinations will ``shed no 
meaningful light'' on joint-employer questions, which involve workers 
who are clearly some entity's employees. 911 F.3d at 1214-1215. 
Nevertheless, we agree with the court that ``both tests ultimately 
probe the existence of a common-law master-servant relationship, [a]nd 
central to establishing a master-servant relationship--whether for 
purposes of the independent-contractor inquiry or the joint-employer 
inquiry--is the nature and extent of a putative master's control.'' Id. 
at 1214. The final rule is thus consistent with NLRB v. BFI in seeking 
guidance from common law material bearing on the independent-contractor 
determination to examine, as a threshold matter under Section 
103.40(a), whether a common-law employer-employee relationship exists 
between a putative joint employer and particular employees.\30\ Once 
the party seeking to demonstrate joint-employer status establishes the 
existence of a threshold common-law employment relationship, the final 
rule appropriately provides for an examination, under Section 
103.40(c), of whether the character and objects of such control. i.e., 
who may exercise it, when, and how, extends to essential terms and 
conditions of employment that are the central concern of the joint-
employer analysis within the specific context of the NLRA.\31\
---------------------------------------------------------------------------

    \28\ Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 
322-324 (1992).
    \29\ Community for Creative Non-Violence v. Reid, 490 U.S. 730, 
751 (1989).
    \30\ Our dissenting colleague argues that judicial precedent 
distinguishing between independent contractors and employees is 
``ill-suited to fully resolve joint-employer issues'' in part 
because, he contends, the principal in an independent-contractor 
relationship ``necessarily exercises direct control of at least two 
things that . . . constitute essential terms and conditions,'' by 
engaging the worker and deciding upon the compensation to be paid 
for the work. This argument proves too much, because an entity that 
actually determined which particular employees would be hired and 
actually determined the wage rates of another entity's employees 
would be a joint employer of those employees for the purposes of the 
Act under any joint-employer standard, including the 2020 rule. See 
85 FR at 11235-11236. Because every contract for the performance of 
work includes price terms and provides for engaging at least one 
worker, if such provisions alone were, as our colleague asserts, the 
equivalent of exercising direct control over hiring and wages--
essential terms and conditions of employment under the Act--then no 
joint-employer standard could distinguish between control sufficient 
to establish a joint-employer relationship and control insufficient 
to establish a common-law employment relationship when considering 
only a single principal and a single worker. From this it is clear 
that, contrary to our colleague's assertion, ordinary contract terms 
providing generally for engaging workers and setting general price 
terms do not constitute an exercise of direct control over the 
essential terms and conditions of employment of hiring and wages. As 
discussed further below, Sec. 103.40(f) expressly incorporates this 
distinction by providing that evidence of an entity's control over 
matters that are immaterial to the existence of a common-law 
employment relationship and that do not bear on the employees' 
essential terms and conditions of employment is not relevant to the 
determination of whether an entity is a joint employer. Recognizing 
this commonsense distinction in no way undermines our examination of 
independent-contractor authority for guidance on the common-law 
employment relationship.
    \31\ See BFI v. NLRB, 911 F.3d at 1195 (``[E]mployee-or-
independent-contractor cases can . . . be instructive in the joint-
employer inquiry to the extent that they elaborate on the nature and 
extent of control necessary to establish a common-law employment 
relationship. Beyond that, a rigid focus on independent-contractor 
analysis omits the vital second step in joint-employer cases, which 
asks, once control over workers is found, who is exercising that 
control, when, and how.'') (emphasis in original).
---------------------------------------------------------------------------

    Our dissenting colleague faults us for failing to pay sufficient 
heed to judicial decisions examining joint-employer questions under 
other statutes, especially Title VII of the Civil Rights Act of 
1964,\32\ that he claims are materially similar to the NLRA.\33\ As a 
threshold matter, because many of the decisions our colleague cites 
take independent-contractor authority as the starting point for their 
analysis of joint-employer questions, these cases support the Board's 
similar examination of articulations of common-law principles in 
independent-contractor authority for guidance on the joint-employer 
analysis under the NLRA.\34\
---------------------------------------------------------------------------

    \32\ 42 U.S.C. 2000e et seq.
    \33\ We need not decide whether the statutes our colleague 
refers to are ``materially similar'' to the NLRA, because, as 
discussed below, courts' discussion and application of common-law 
principles in the cases cited by our colleague fully support the 
Board's position. We note, however, that these statutes define 
``employer'' and ``employee'' differently from the Act and examine 
the relationship in different contexts. For instance, Title VII 
excludes entities that would clearly be statutory employers under 
the NLRA by defining ``employer'' as ``a person engaged in an 
industry affecting commerce who has fifteen or more employees for 
each working day in each of twenty or more calendar weeks in the 
current or preceding calendar year, and any agent of such a 
person,'' subject to exclusions that also differ from the exclusions 
provided under Sec. 2 of the Act. Compare 42 U.S.C. 2000e(b) with 29 
U.S.C. 152. Moreover, joint-employer questions under Title VII and 
similar statutes primarily arise in the context of assigning 
liability for workplace discrimination in violation of employees' 
individual rights. Under the NLRA, by contrast, such questions arise 
in an additional forward-looking context: in order to correctly 
allocate prospective bargaining rights and obligations in support of 
employees' collective right to bargain. Assuming that Title VII and 
similar statutes, like the Act, require reference to the content of 
the common-law terms ``employer'' and ``employee,'' the necessity 
under the Act of prospectively defining bargaining obligations may 
tend to focus the common-law inquiry on questions involving reserved 
or indirect control more frequently than is likely under primarily 
backward-looking individual-rights-protecting statutes.
    \34\ See, e.g., Felder v. U.S. Tennis Assn., 27 F.4th 834, 843 
(2d Cir. 2022) (relying, inter alia, on Reid and Restatement 
(Second) of Agency Sec.  220); Garcia-Celestino v. Ruiz Harvesting, 
Inc., 843 F.3d 1276, 1286-1287 (11th Cir. 2016) (relying on Darden 
and Reid); Al-Saffy v. Vilsack, 827 F.3d 85 (D.C. Cir. 2016) 
(relying, inter alia, on ``traditional agency law principles'' 
citing Darden); Faush v. Tuesday Morning, Inc., 808 F.3d 208 (3d 
Cir. 2015) (``the common-law test outlined in Darden governs''); 
Plaso v. IJKG, LLC, 553 Fed. Appx. 199, 203-204 (3d Cir. 2015) 
(considering Darden factors).
    Some of the decisions our colleague cites are less clearly 
relevant, because they employ an ``economic realities'' test, or a 
hybrid test that incorporates elements of both a common-law control 
test and an economic-realities test. See, e.g., Perry v. VHS San 
Antonio, LLC, 990 F.3d 918, 928-929 (5th Cir. 2021) (applying 
``hybrid economic realities/common law control test''); Frey v. 
Hotel Coleman, 903 F.3d 671, 676 (7th Cir. 2018) (applying ``an 
`economic realities' test which is, in essence, an application of 
general principles of agency law to the facts of the case''); Al-
Saffy v. Vilsack, 827 F.3d at 96 (noting one of two recognized 
``articulations of the test for identifying joint-employer status. . 
. . speaks in terms of the `economic realities' of the work 
relationship''). Of course, as we note elsewhere, the Board is 
precluded by Supreme Court decisions interpreting the Taft-Hartley 
amendments from applying an economic-realities test. See, e.g., NLRB 
v. United Insurance Co. of America, 390 U.S. 254, 256 (1968). Given 
that our colleague elsewhere expresses his agreement with our view 
that the Board must apply common-law agency principles in making 
joint-employer determinations under the Act, we find his observation 
that NLRB v. Hearst Publications, 322 U.S. 111 (1944), involved a 
question of employee-or-independent-contractor status rather than a 
question of joint-employer status to be something of a non sequitur.
    Finally, some of the cases our colleague relies upon are at best 
attenuated sources of authority on the content of the common law to 
the extent that they articulate a joint-employer standard ultimately 
derived from Board decisions--including Board decisions imposing an 
actual-exercise requirement without reference to any common-law 
authority. See, e.g., Nethery v. Quality Care Investors, L.P., 814 
Fed. Appx. 97 (6th Cir. 2020) (applying ``share-or-codetermine'' 
standard derived from NLRB v. Browning-Ferris Industries of 
Pennsylvania, Inc. (NLRB v. BFI of Pennsylvania), 691 F.2d 1117, 
1124 (3d Cir. 1982), via Carrier Corp. v. NLRB, 768 F.2d 778, 781 
(6th Cir. 1985)); Al-Saffy v. Vilsack, 827 F.3d at 96 (noting one of 
two recognized ``articulations of the test for identifying joint-
employer status. . . . borrows language from'' NLRB v. BFI of 
Pennsylvania, above); Plaso v. IJKG, LLC, 553 Fed. Appx. at 204 
(relying in part on NLRB v. BFI of Pennsylvania for ``significant 
control'' formulation); Whitaker v. Milwaukee County, 772 F.3d 802, 
810 (7th Cir. 2014) (discussed further below, noting ``joint 
employer concept derives from labor law,'' and citing post-TLI/
Laerco NLRA precedent); Graves v. Lowery, 117 F.3d 723, 727 (3d Cir. 
1997) (drawing guidance from Board ``cases which have found joint 
employment status when two entities exercise significant control 
over the same employees'') (citing NLRB v. BFI of Pennsylvania and 
post-TLI/Laerco NLRA precedent).

---------------------------------------------------------------------------

[[Page 73952]]

    Moreover, far from supporting our colleague's claim that the Board 
has ``gone beyond the boundaries of the common law'' by eliminating the 
2020 rule's actual-exercise requirement, none of the decisions he cites 
articulates a common-law principle that would preclude finding a joint-
employer relationship based on evidence of reserved unexercised control 
or indirectly exercised control. To the contrary, several of the cited 
cases affirmatively support the Board's conclusion that the common law 
permits the finding of a joint-employer relationship based solely upon 
reserved, unexercised control or upon control exercised indirectly, 
such as through an intermediary.\35\
---------------------------------------------------------------------------

    \35\ In Garcia-Celestino v. Ruiz Harvesting, Inc., for example, 
the court concluded that, under the common-law standard applicable 
to the joint-employer question before it--which it derived from 
Supreme Court independent-contractor precedent--``the proper focus 
is on the hiring entity's right to control the manner and means by 
which the product is accomplished.'' 843 F.3d at 1292-1293 
(quotation omitted) (emphasis added). After remand to a district 
court to apply the common-law analysis, the court later emphasized 
that under the applicable common-law control test ``it is the right 
to control, not the actual exercise of control, that is 
significant.'' 898 F.3d 1110, 1121 (11th Cir. 2018) (quoting NLRB v. 
Associated Diamond Cabs, 702 F.2d 912, 919-920 (11th Cir. 1983)) 
(emphasis in original). See also discussion of Butler v. Drive 
Automotive Industries of Am., 793 F.3d 404 (4th Cir. 2015) and EEOC 
v. Global Horizons, Inc., 915 F.3d 631 (9th Cir. 2019), infra.
---------------------------------------------------------------------------

    To begin, several of the cases our colleague cites articulate a 
version of the joint-employer analysis that provides that an entity is 
a common-law employer if it ``exercises significant control'' over 
certain terms and conditions of workers' employment.\36\ We agree that 
an entity's actual exercise of control may be sufficient to establish 
an employment relationship, but nothing about this formulation entails 
or supports our colleague's further contention that the actual exercise 
of control is necessary. As discussed above, the facts of many cases do 
not require distinguishing between reserved control and actually 
exercised control, or between control that is exercised directly or 
indirectly. Where no question of reserved or indirect control is 
presented, it is unsurprising that judges articulate the test in a 
manner that does not make such distinctions, and such articulations, 
absent a specific claim that actual exercise of control is a necessary 
component of the analysis, have little to say to the specific 
disagreement between the Board and our dissenting colleague.
---------------------------------------------------------------------------

    \36\ See Adams v. C3 Pipeline Constr. Inc., 30 F.4th 943, 961 
(10th Cir. 2021) (quoting Knitter v. Corvias Mil. Living, LLC, 758 
F.3d 1214, 1226 (10th Cir. 2014) (``Both entities are employers if 
they both exercise significant control over the same employees.'') 
(internal quotation and citation omitted); Plaso v. IJKG, LLC, 553 
Fed. Appx. at 204 (3d Cir. 2015) (``a joint employment relationship 
exists when `two entities exercise significant control over the same 
employees.' '') (quoting Graves, above); Bristol v. Bd. of Cnty. 
Comm'rs of Cnty. of Clear Creek, 312 F.3d 1213, 1218 (10th Cir. 
2002) (``Courts applying the joint-employer test . . . look to 
whether both entities `exercise significant control over the same 
employees.' '') (quoting Graves, above).
---------------------------------------------------------------------------

    Relatedly, our colleague cites Felder v. U.S. Tennis Association 
for its statement that, under a common-law analysis drawn from the 
Supreme Court's decision in Reid, ``the exercise of control is the 
guiding indicator.'' But he fails to acknowledge the Felder court's 
explanation that sharing significant control under common-law 
principles ``means that an entity other than the employee's formal 
employer has power to pay an employee's salary, hire, fire, or 
otherwise control the employee's daily employment activities, such that 
we may properly conclude that a constructive employer-employee 
relationship exists.'' 27 F.4th 834, 844 (2d Cir. 2022) (emphasis 
added).\37\ Our colleague further asserts that Felder ``quoted with 
approval cases from other circuits requiring proof that the putative 
joint employer `exercise[d] significant control.' '' However, a closer 
examination of the cases cited by Felder reveals that they similarly 
support only the proposition that the exercise of control is sufficient 
to establish the relationship, not that the exercise of control is 
necessary to establish the relationship.\38\ As we have explained, the 
final rule is entirely consistent with the proposition that, as these 
cases hold, a joint-employment relationship exists when two entities 
exercise significant control over the same employees.\39\ Moreover, 
each of the cases cited in Felder that our colleague relies upon--and 
many others--also discussed the requisite control in terms of the 
putative joint-employer's ``right,'' ``ability,'' ``power,'' or 
``authority'' to control terms and conditions of employment, consistent 
with the common-law principle consistently articulated in the primary 
judicial authority discussed

[[Page 73953]]

above, that it is the authority to control that matters, without 
respect to whether or how such control is exercised.\40\
---------------------------------------------------------------------------

    \37\ Significantly, because Felder involved a Title VII claim of 
discriminatory denial of credentials necessary to perform certain 
work, the alleged discriminatee never performed work for the 
putative joint employer, and the court's analysis necessarily 
examined whether the putative joint employer ``would have exerted 
control over the terms and conditions of [the employee's] 
anticipated employment, by, for example, training, supervising, and 
disciplining [the employee]''--in other words, whether it had the 
power, though never exercised, to exert the requisite control under 
appropriate circumstances. Id. at 845. The court concluded that the 
court below had not erred in dismissing the discriminatee's Title 
VII claims with respect to the putative joint employer because the 
alleged discriminatee failed to allege that the putative joint 
employer ``would have significantly controlled the manner and 
means'' of his work so as to establish an employment relationship.
    \38\ See Knitter, above, 758 F.3d at 1226 (quoting Bristol, 
above, 312 F.3d at 1218 (``Under the joint employer test, two 
entities are considered joint employer . . . if they both `exercise 
significant control over the same employees.' '')), and Plaso, 
above, 553 Fed. Appx. at 204 (quoting Graves, above, 117 F.3d at 727 
(``[A] joint employment relationship exists when `two entities 
exercise significant control over the same employees.' '')).
    \39\ As we have noted above, courts focused on particular 
factual records that do not turn on the precise role of reserved or 
indirect control have frequently and reasonably refrained from 
articulating versions of a common-law employer-employee or joint-
employer standard that expressly address whether such control can 
suffice alone to establish the relationship. See, e.g., BFI v. NLRB, 
above, 911 F.3d at 1213 (``[B]ecause the Board relied on evidence 
that Browning-Ferris both had a right to control and had exercised 
that control, this case does not present the question whether the 
reserved right to control, divorced from any actual exercise of 
authority, could alone establish a joint-employer relationship.''). 
In crafting a Final Rule of general prospective applicability, 
however, our task is different. We must, accordingly, seek guidance 
from those judicial articulations of common-law standards that have 
expressly addressed the question of whether or how authority to 
control must be exercised in order to establish the relevant 
relationship. No number of cases holding only that the direct 
exercise of control is sufficient can rationally establish that the 
direct exercise of control is necessary. Conversely, though, the 
large body of authority expressly stating that the direct exercise 
of control is not necessary, and, in many cases finding the relevant 
relationship without any direct exercise of control, weighs heavily 
in favor of our conclusion that the Board may not, consistent with 
controlling common-law agency principles, impose such a requirement 
as part of a joint-employer standard.
    \40\ See Knitter, 758 F.3d at 1226 (considering ``right to 
terminate'' employment, and ``ability to promulgate work rules and 
assignments, and set conditions of employment including 
compensation, benefits, and hours'') (emphasis added) (quotations 
and citations omitted); Bristol, 312 F.3d at 1215 (holding putative 
joint employer ``lack[ed] the power to control the hiring, 
termination, or supervision of [undisputed employer's] employees, or 
otherwise control the terms and conditions of their employment) 
(emphasis added); Plaso, 553 Fed. Appx. at 204 (considering, inter 
alia, putative joint employer's ``authority to hire and fire 
employees promulgate work rules and assignments, and set conditions 
of employment, including compensation, benefits and hours'') 
(emphasis added); Graves, 117 F.3d at 728 (``when an employer has 
the right to control the means and manner of an individual's 
performance . . . an employer-employee relationship is likely to 
exist.'') (emphasis added) (citation omitted); see also, e.g., 
Adams, 30 F.4th at 961, (considering ``right to terminate'' 
employment relationship, and ``ability to promulgate work rules and 
assignments, and set conditions of employment, including 
compensation, benefits, and hours'') (quoting Knitter, above); 
Perry, 990 F.3d at 929 (``The right to control the employee's 
conduct is the most important component of determining a joint 
employer. . . . [including a] focus on the right to hire and fire, 
the right to supervise, and the right to set the employees' work 
schedule.'') (citations omitted).
---------------------------------------------------------------------------

    The single case cited by our colleague that arguably articulates a 
standard under which the exercise of control would be necessary to find 
a joint-employer relationship, Whitaker v. Milwaukee County, does not 
purport to draw this principle from the common law, but rather applies 
a standard derived from decisions under the NLRA at a time that the 
Board had, as we have explained above, adopted an actual-exercise 
requirement that was unsupported by and insupportable under the common 
law.\41\ Thus, Whitaker drew its articulation of the standard from G. 
Heileman Brewing Co. v. NLRB, which enforced a Board Decision and Order 
that had adopted, without relevant comment, an administrative law 
judge's finding that two entities were joint employers under Laerco 
based on their direct negotiation of a contract that set the overall 
framework of terms and conditions of employment of the employees.\42\ 
Because the Board is not a primary source of authority for the common-
law of agency, and did not, in any case purport to draw the control-
based restrictions imposed by Laerco and related decisions from the 
common law, Whitaker's statement of the joint-employer standard has 
little to say regarding the common-law principles applicable to the 
final rule.\43\
---------------------------------------------------------------------------

    \41\ See Whitaker v. Milwaukee County, 772 F.3d 802, 810 (7th 
Cir. 2014) (``An entity other than the actual employer may be 
considered a `joint employer' `only if it exerted significant 
control over' the employee.'') (emphasis added) (quoting G. Heileman 
Brewing Co. v. NLRB, 879 F.2d 1526, 1530 (7th Cir. 1989), enfg. 290 
NLRB 991 (1988)).
    \42\ See G. Heileman Brewing Co., 290 NLRB 991, 999 (1988), 
enfd. 879 F.2d 1256 (7th Cir. 1989).
    \43\ In any case, the court in Whitaker concluded, relying in 
part on an EEOC Compliance Manual, that the ultimate question of 
liability at issue in that case did not turn on the ``technical 
outcome of the joint employer inquiry,'' but on whether the putative 
joint employer had ``participated in the alleged discriminatory 
conduct or failed to take corrective measures within its control'' 
which the court found it had not. 772 F.3d at 811-812. The court's 
suggestion that liability might have been found based on the 
putative joint employer's failure to take corrective measures within 
its control supports the final rule's treatment of reserved control. 
For example, under the final rule, but not under the 2020 rule, an 
entity that had contractually reserved but never exercised a right 
to veto another entity's disciplinary actions could plausibly be 
held jointly responsible if it failed to prevent the second entity's 
issuance of unlawful discriminatory discipline to discourage conduct 
protected by the Act. Cf. EEOC v. Global Horizons, Inc., 915 F.3d 
631, 640-641 (9th Cir. 2019) (discussed further below, holding two 
fruit growers could be liable for discrimination in labor supplier's 
provision to workers of certain non-wage benefits based on growers' 
never-exercised authority to control the manner in which benefits 
were provided).
---------------------------------------------------------------------------

    Our dissenting colleague further seeks support from the court's 
statement in Butler v. Drive Automotive Industries of America that 
``the [joint-employer] doctrine's emphasis on determining which 
entities actually exercise control over an employee is consistent with 
Supreme Court precedent interpreting Title VII's definitions.'' 793 
F.3d 404, 409 (4th Cir. 2015) (emphasis added). In context, though, it 
is clear that the Butler court's discussion of which entity ``actually 
exercised'' control meant something entirely different from what our 
colleague means by the phrase. At issue in Butler was whether a 
manufacturer was a joint employer of a worker supplied to it by a 
temporary employment agency. The court found that the agency discharged 
the employee after the manufacturer requested that she be replaced. An 
agency manager also testified that he could not recall an instance when 
the manufacturer requested that an agency employee be disciplined or 
discharged and it was not done. Based primarily on this evidence that 
the manufacturer thus exercised indirect control over discipline and 
tenure of employment of the agency's employees, the court held, as a 
matter of law, that the manufacturer was a joint-employer of the 
discharged employee.\44\ The court's observation, in this context, that 
the joint-employer doctrine emphasizes ``which entities actually 
exercise control'' had nothing to do with any question involving 
reserved, unexercised control, but rather with the question of whether, 
despite the appearance that the agency was responsible for the 
discharge, the manufacturer had actually, though indirectly, brought it 
about. The court observed that the joint-employer test ``specifically 
aims to pierce the legal formalities of an employment relationship to 
determine the loci of effective control over an employee . . . . 
Otherwise, an employer who exercises actual control could avoid Title 
VII liability by hiding behind another entity.'' 793 F.3d at 415. In 
other words, far from suggesting that reserved, unexercised control can 
never suffice to establish a joint-employment relationship under the 
common law, Butler tends rather to support the final rule's treatment 
of indirect control, discussed further below.
---------------------------------------------------------------------------

    \44\ As discussed further below, we disagree with our colleague 
and the 2020 rule's characterization of control exercised through an 
intermediary as direct and immediate rather than as indirect or 
mediated.
---------------------------------------------------------------------------

    Our colleague further claims that ``[n]ot a single circuit has held 
or even suggested that an entity can be found to be the joint employer 
of another entity's employees based solely on a never-exercised 
contractual reservation of right to affect essential terms . . . i.e., 
conduct other than actually determining (alone or in collaboration with 
the undisputed employer) employees' essential terms and conditions of 
employment.'' But the Court of Appeals for the Ninth Circuit did just 
that in EEOC v. Global Horizons, Inc., 915 F.3d 631 (9th Cir. 2019).
    Global Horizons involved an EEOC Title VII enforcement action 
against two agricultural employers (the Growers) alleged to be joint 
employers of certain foreign workers (the Thai workers) supplied to the 
Growers by a labor contractor, Global Horizons, under the H-2A guest 
worker program. Global Horizons and the Growers contracted for Global 
Horizons to pay the workers and provide certain nonwage benefits 
required under Department of Labor regulations governing the H-2A 
program in exchange for the Growers' agreement to compensate Global 
Horizons for the workers' wages and benefits and pay Global Horizons an 
additional fee for its services. 915 F.3d at 634-635. The workers 
sought to hold the Growers responsible as joint employers for alleged 
unlawful discrimination in Global Horizons' provision of nonwage 
benefits, including housing, meals, and transportation. Id. at 636.
    The court analyzed the joint-employer question under a common-law 
agency test derived from Darden and Clackamas Gastroenterology 
Associates, P.C. v. Wells, 538 U.S. 440, 448-449 (2003). 915 F.3d at 
638-639. The court

[[Page 73954]]

concluded that, while most of the factors it would typically consider 
in applying the common-law agency test under Darden did not apply on 
the specific facts before it, ``the common law's `principal 
guidepost'--the element of control--[was] determinative.'' 915 F.3d at 
640-641. Because the Growers were legally obligated, under H-2A 
regulations, to provide the workers with wages and the nonwage benefits 
at issue, the court concluded that the Growers ``possessed ultimate 
authority over those matters,'' and their ``power to control the manner 
in which housing, meals, transportation, and wages were provided to the 
Thai workers, even if never exercised, [was] sufficient to render the 
Growers joint employers'' of those workers. Id. at 641 (emphasis added) 
(citing BFI v. NLRB, 911 F.3d 1195 (D.C. Cir. 2018)).\45\ Global 
Horizons is thus consistent with the large body of common-law authority 
discussed above in strongly supporting the Board's conclusion that the 
2020 rule's actual-exercise requirement is inconsistent with the common 
law governing the Board's joint-employer standard.
---------------------------------------------------------------------------

    \45\ Contrary to our dissenting colleague's suggestion, the 
court in Global Horizons expressly applied a common-law agency test, 
not a test derived from the definition of ``employer'' in the H-2A 
regulation, to the Title VII joint-employer issue. See 915 F.3d at 
639. The fact that the Growers' authority derived from regulation, 
not contract, does not undermine the impact of the court's 
conclusion that the existence of that authority, even if never 
exercised, sufficed to render the Growers joint employers. In any 
case, Global Horizons is far from unique: in fact, numerous federal 
and state high courts have long concluded, in non-NLRA contexts, 
that an entity was or could be a common-law employer of another 
employer's employees based solely on the entity's reserved right of 
control over those employees. See, e.g., Mallory v. Brigham Young 
University, 332 P.3d 922, 928-929 (Utah 2014) (city was common-law 
employer of university's employee performing traffic control, 
despite absence of evidence of actual exercise of control by city, 
where city retained right to control the manner in which workers 
performed city's ``nondelegable duty of traffic control'' because 
``[i]f the principal has the right to control the agent's method and 
manner of performance, the agent is a servant whether or not the 
right is specifically exercised'') (citation omitted); Rouse v. Pitt 
County Memorial Hosp., Inc., 470 SE 2d 44, 52-53 (N.C. 1996) 
(attending physicians could be found employers of resident 
physicians employed by hospital based on evidence that hospital 
contractually delegated to attending physicians its responsibility 
to supervise and control resident physicians' performance of duties, 
despite absence of evidence of specific instances of attending 
physicians' control of resident physicians' performance because 
``[w]here the parties have made an explicit agreement regarding the 
right of control, this agreement will be dispositive;'') (citation 
omitted); Dunn v. Conemaugh & Black Lick RR, 267 F.2d 571, 577 (3d 
Cir. 1959) (railroad was employer of manufacturer's employee based 
on railroad's right to command employee's performance without 
reference to any instance of exercise of that right because ``the 
person is the servant of him who has the right to control the manner 
of performance of the work, regardless of whether or not he actually 
exercises that right;'') (citation omitted); S.A. Gerrard Co. v. 
Industrial Accident Comm'n, 110 P.2d 377, 378 (Cal. 1941) (landowner 
was joint employer of farmer's employee based on contract provision 
that picking should be done under the supervisions of and in 
accordance with landowner's direction without reference to whether 
such direction was ever given because ``the right to control, rather 
than the amount of control which was exercised, is the determinative 
factor.'') (citation omitted).
---------------------------------------------------------------------------

2. Indirect Control, Including Control Exercised Through an 
Intermediary
    After careful consideration of relevant comments, as discussed in 
more detail below, the Board has concluded that evidence that an 
employer has actually exercised control over essential terms and 
conditions of employment of another employer's employees, whether 
directly or indirectly, such as through an intermediary, also suffices 
to establish the existence of a joint-employer relationship. As the 
District of Columbia Circuit has recognized, ``[t]he common law . . . 
permits consideration of those forms of indirect control that play a 
relevant part in determining the essential terms and conditions of 
employment.'' BFI v. NLRB, 911 F.3d at 1199-1200. In addition, the 
District of Columbia Circuit has explained that the definition of 
``employer'' set forth in Section 2(2) of the Act ``textually indicates 
that the statute looks at all probative indicia of employer status, 
whether exercised `directly or indirectly' '' and therefore that the 
Act ``expressly recognizes that agents acting `indirectly' on behalf of 
an employer could also count as employers.'' Id. at 1216.
    Judicial decisions and secondary authorities addressing the common-
law employer-employee relationship confirm that indirect control, 
including control exercised through an intermediary, can establish the 
existence of an employment relationship. The Restatement (Second) of 
Agency explicitly recognized the significance of indirect control, both 
in providing that ``the control or right to control needed to establish 
the relation of master and servant may be very attenuated'' and in 
discussing the subservant doctrine, which deals with cases in which one 
employer's control may be exercised indirectly, while a second entity 
directly controls employees.\46\ As the District of Columbia Circuit 
explained in BFI v. NLRB, ``the common law has never countenanced the 
use of intermediaries or controlled third parties to avoid the creation 
of a master-servant relationship.'' \47\ Similarly, as discussed in 
more detail above, the Fourth Circuit has held that an entity was a 
joint employer of another employer's employees based primarily on the 
entity's exercise of indirect control over the employees' discipline 
and discharge by recommending discipline and discharge decisions which 
were implemented by the employees' direct employer. Butler, above, 793 
F.3d at 415.\48\
---------------------------------------------------------------------------

    \46\ Restatement (Second) of Agency sections 5(2), comments e, 
f, and illustration 6; 220(1), comment d; 226, comment a (1958).
    \47\ 911 F.3d at 1217 (citing Nicholson v. Atchison, T. & S. F. 
Ry. Co., 147 P. 1123, 1126 (Kan. 1915) (use of a ``branch company'' 
as a ``mere instrumentality'' ``did not break the relation of master 
and servant existing between the plaintiff and the [putative 
master]''). The 2020 Rule, and our dissenting colleague, seek to 
avoid the District of Columbia Circuit's endorsement of considering 
indirect control exercised through an intermediary as probative of 
joint-employer status by recharacterizing such control as direct and 
immediate. But an action taken through an intermediary is, by 
definition, mediated, that is, not immediate or direct. We 
accordingly join the District of Columbia Circuit in characterizing 
such control as indirect. See 911 F.3d at 1216-1217 (``[C]ommon-law 
decisions have repeatedly recognized that indirect control over 
matters commonly determined by an employer can, at a minimum, be 
weighed in determining one's status as an employer or joint 
employer, especially insofar as indirect control means control 
exercised through an intermediary.'') (internal quotation and 
citation omitted).
    \48\ See also Al-Saffy, above, 827 F.3d 85, 97 (District of 
Columbia Circuit in Title VII context relying in part on evidence 
that officials working for putative joint-employer had recommended 
employee's dismissal as evidence supporting reversal of summary 
judgment on the joint-employer issue).
---------------------------------------------------------------------------

    Consistent with these longstanding common-law principles, the Board 
has concluded, after careful consideration of comments as discussed 
further below, that evidence showing that a putative joint employer 
wields indirect control over one or more of the essential terms and 
conditions of employment of another employer's employees can establish 
a joint-employer relationship. Ignoring relevant evidence of indirect 
control over essential terms and conditions of employment would, in the 
words of the District of Columbia Circuit, ``allow manipulated form to 
flout reality,'' \49\ contrary to the teachings of the common law. 
Under the final rule, for example, evidence that a putative joint 
employer communicates work assignments and directives to another 
entity's managers or exercises detailed ongoing oversight of the 
specific manner and means of employees' performance of the individual 
work tasks may demonstrate the type of indirect control over essential 
terms and conditions of employment that is sufficient to

[[Page 73955]]

establish a joint-employer relationship.\50\
---------------------------------------------------------------------------

    \49\ NLRB v. BFI, 911 F.3d at 1219.
    \50\ Cf. Cognizant Technology Solutions U.S. Corp. & Google LLC, 
372 NLRB No. 108, slip op. at 1 (2023) (finding joint-employer 
relationship based in part on Google's exercise of authority over 
supervision through intermediary employees of Cognizant, treated as 
direct and immediate control under the terms of the 2020 rule).
---------------------------------------------------------------------------

    Our dissenting colleague contends that the final rule fails 
adequately to ``distinguish evidence of indirect control that bears on 
workers' essential terms and conditions of employment from evidence 
that simply documents the routine parameters of company-to-company 
contracting,'' as required by the D.C. Circuit in BFI v. NLRB.\51\ To 
the contrary, Section 103.40(f) of the final rule expressly provides 
that evidence of an entity's control over matters that are immaterial 
to the existence of an employment relationship under common-law agency 
principles and that do not bear on the employees' essential terms and 
conditions of employment is not relevant to the determination of 
whether the entity is a joint employer. Pursuant to this provision, the 
Board will, in individual cases arising under the rule, examine any 
proffered evidence of indirect control and determine, as necessary, 
whether that evidence is indicative of a kind of control that is an 
ordinary incident of company-to-company contracting or is rather 
indicative of a common-law employment relationship. If the former, the 
rule provides that the Board will not consider that evidence as 
probative of the existence of a joint-employer relationship. 
Specifically, pursuant to Section 103.40(f) and consistent with the 
court's instruction in BFI v. NLRB, the Board will not consider any 
evidence of indirect control that the common law would see as part of 
an ordinary true independent-contractor relationship as evidence of a 
common-law employer-employee relationship.\52\ If, on the other hand, 
such evidence shows that a putative joint employer is actually 
exercising (or has reserved to itself) a kind of control that the 
common law takes to be indicative of an employer-employee relationship, 
the Board will consider such evidence in the course of its joint-
employer analysis.\53\
---------------------------------------------------------------------------

    \51\ Id. at 1226. The court's discussion and its instruction to 
the Board to draw this distinction on remand suggests, as we 
conclude, that it will be possible to determine, in future 
adjudications on specific factual records, that an entity's exercise 
of certain kinds of indirect control, such a through an 
intermediary, would be independently probative of its joint-employer 
status. See id. at 1219 (``If . . . a company entered into a 
contract . . . under which that company made all of the decisions 
about work and working conditions, day in and day out, with [the 
workers' direct employer's] supervisors reduced to ferrying orders 
from the company's supervisors to the workers, the Board could 
sensibly conclude that the company is a joint employer.'').
    \52\ See BFI v. NLRB, above, 911 F.3d at 1221 (The Board's 
fleshing out the operation of the joint-employer standard through 
case-by-case adjudication ``depends on the Board's starting with a 
correct articulation of the governing common-law test. Here, that 
legal standard is the common-law principle that a joint employer's 
control--whether direct or indirect, exercised or reserved--must 
bear on the essential terms and conditions of employment and not on 
the routine components of a company-to-company contract.'') 
(internal quotation and citation omitted).
    \53\ Cf. Butler, above, 793 F.3d at 415 (considering testimony 
from temporary employment agency manager that he could not recall an 
instance when manufacturer requested an agency employee to be 
disciplined or terminated and it was not done as evidence that 
manufacturer was joint employer of agency's employees).
---------------------------------------------------------------------------

    Our colleague also criticizes us for failing exhaustively to 
define, ex ante, what factual circumstances will evidence indirect 
control that is relevant to the joint-employer analysis. But, as 
discussed above, the joint-employer inquiry is essentially factual and 
requires examining all of the incidents of a particular relationship on 
a particular record. Small differences in how control has been 
indirectly exercised, when, and over what will predictably determine 
whether the exercise of such control in individual cases counts, under 
the common law, as an ordinary incident of a company-to-company or true 
independent-contractor relationship or as evidence of the existence of 
a common-law employer-employee relationship. Because of the innumerable 
variations in the ways that companies interact with each other, and 
with each other's employees, it would be impossible for the Board to 
provide a usefully comprehensive and detailed set of examples of when 
an entity's exercise of indirect control over another company's 
employees will count as evidence of a common-law employment 
relationship. We decline to try to do so as part of this 
rulemaking.\54\ Instead, we expect the contours of the Board's 
application of this rule in particular scenarios to be defined through 
the future application of the final rule to specific factual 
records.\55\
---------------------------------------------------------------------------

    \54\ Cf. 85 FR at 11187 (2020 rule omitting previously proposed 
hypothetical scenarios illustrating specific applications of the 
Board's joint-employer standard). For similar reasons, we decline to 
speculate about the application of the final rule to the various 
hypothetical scenarios proposed by our dissenting colleague.
    \55\ See BFI v. NLRB, 911 F.3d at 1221 (``In principle, there is 
nothing wrong with the Board fleshing out the operation of a legal 
test that Congress has delegated to the Board to administer through 
case-by-case adjudication.'') (citing Eastex, Inc. v. NLRB, 437 U.S. 
556, 574-575 (1978) (``[T]he nature of the problem, as revealed by 
unfolding variant situations, requires an evolutionary process for 
its rational response, not a quick definitive formula as a 
comprehensive answer.'') (internal quotation and citation omitted)).
---------------------------------------------------------------------------

    Finally, our colleague claims that courts which have examined the 
common-law employer-employee relationship in a joint-employer context 
in decisions under Title VII and similar statutes, discussed above, 
have applied a significantly more demanding standard than the final 
rule articulates. We disagree. Thus far, our discussion has primarily 
been concerned with what common-law principles have to say to the role 
of reserved or indirect control in the joint-employer test. Of course, 
however, the common-law cases are also concerned with, and provide 
authority about, the objects of that control. We recognize that 
``whether [an entity] possess[es] sufficient indicia of control to be 
an `employer' is essentially a factual issue,'' \56\ that ``factors 
indicating a joint-employment relationship may vary depending on the 
case,'' and that ``any relevant factor[ ] may . . . be considered so 
long as [it is] drawn from the common law of agency.'' \57\ Where 
courts articulating relevant common-law principles have identified an 
entity's authority to control specific elements of the working 
relationship as relevant to the analysis, such articulations are 
primary authority to which the Board will look in deciding, in 
individual cases, whether ``all of the incidents of the relationship'' 
\58\ indicate that the entity is a common-law employer of particular 
employees.\59\ Furthermore, the final rule requires the Board to 
inquire specifically into whether a putative joint employer possesses 
the authority to control or exercises the power to control one or more 
of the employees' essential terms and conditions of employment 
implicated by the Act's protection of employees' forward-looking 
collective right to bargain with each employer that can control their 
terms and conditions of employment. Thus, the final rule both 
incorporates the common law's broad focus on all of the incidents of 
the relationship in examining whether an entity is a common-law 
employer of particular employees and narrows the focus of the Board's 
inquiry to essential

[[Page 73956]]

terms and conditions of employment in the context of the specific 
rights and obligations provided by the plain language of Section 
8(a)(5) and 8(d) of the Act.\60\
---------------------------------------------------------------------------

    \56\ Boire v. Greyhound, 376 U.S. at 481.
    \57\ Felder, above, 27 F.4th at 844 (alternations in original) 
(internal quotation omitted). See also NLRB v. United Insurance Co., 
above, 390 U.S. at 258 (``What is important is that the total 
factual context is assessed in light of the pertinent common-law 
agency principles.'').
    \58\ NLRB v. United Insurance Co., above, 390 U.S. at 258.
    \59\ See, e.g., Felder, above 27 F.4th at 838 (``[F]actors drawn 
from the common law of agency, including control over an employee's 
hiring, firing, training, promotion, discipline, [and] supervision . 
. . are relevant to [the joint-employer] inquiry.'').
    \60\ See 29 U.S.C. 158(a)(5) (``It shall be an unfair labor 
practice for an employer--to refuse to bargain collectively with the 
representatives of his employees.''); 29 U.S.C. 158(d) (``[T]o 
bargain collectively is the performance of the mutual obligation of 
the employer and the representative of the employees to meet at 
reasonable times and confer in good faith with respect to wages, 
hours, and other terms and conditions of employment.'').
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II. Summary of Changes to the Proposed Rule

    In this section, we provide a summary overview of changes to the 
proposed rule.

A. Overview

    The final rule, like the proposed rule, recognizes that common-law 
agency principles define the statutory employer-employee relationship 
under the Act and affirms the Board's traditional definition of joint 
employers as two or more common-law employers of the same employees who 
share or codetermine those matters governing those employees' essential 
terms and conditions of employment. Consistent with primary judicial 
statements and secondary authority describing the common-law employer-
employee relationship, the final rule, like the proposed rule, provides 
that a common-law employer of particular employees shares or 
codetermines those matters governing employees' essential terms and 
conditions of employment if the employer possesses the authority to 
control (whether directly, indirectly, or both) or exercises the power 
to control (whether directly, indirectly, or both) one or more of the 
employees' essential terms and conditions of employment, regardless of 
whether the employer exercises such control or the manner in which such 
control is exercised.
    However, as described below and in response to comments, the Board 
has modified the proposed rule (1) to clarify the definition of 
``essential terms and conditions of employment,'' (2) to identify the 
types of control that are necessary to establish joint-employer status 
and the types that are irrelevant to the joint-employer inquiry, and 
(3) to describe the bargaining obligations of joint employers.

B. Definition of ``Essential Terms and Conditions of Employment''

    The proposed rule provided an illustrative, rather than exclusive, 
list of essential terms and conditions of employment. The Board has 
modified this definition, for the reasons discussed below and in 
response to comments, to provide an exhaustive list of seven categories 
of terms or conditions of employment that will be considered 
``essential'' for the purposes of the joint-employer inquiry. These 
are: (1) wages, benefits, and other compensation; (2) hours of work and 
scheduling; (3) the assignment of duties to be performed; (4) the 
supervision of the performance of duties; (5) work rules and directions 
governing the manner, means, and methods of the performance of duties 
and the grounds for discipline; (6) the tenure of employment, including 
hiring and discharge; and (7) working conditions related to the safety 
and health of employees.

C. Type of Control Sufficient To Establish Joint-Employer Status

    The proposed rule provided that a common-law employer's possession 
of unexercised authority to control or exercise of the power to control 
indirectly, such as through an intermediary, one or more terms or 
conditions of employment would be sufficient to establish status as a 
joint employer. For the reasons discussed below and in response to 
comments, the Board has modified this provision to clarify that, in 
each instance, the relevant object of control must be an essential term 
or condition of employment as defined by the rule. The Board has also 
reformatted and streamlined this portion of the proposed rule to avoid 
surplusage.

D. Type of Control Not Relevant to Joint-Employer Status

    The proposed rule provided that evidence of an employer's control 
over matters that are immaterial to the existence of a common-law 
employment relationship or control over matters not bearing on 
employees' essential terms and conditions of employment is not relevant 
to the joint-employer inquiry. For the reasons discussed below and in 
response to comments, the Board has modified this provision to make it 
clear that the provision excludes only evidence that is immaterial to 
both the common-law employment relationship and an employer's control 
over employees' essential terms and conditions of employment, and that 
the Board does not presuppose the ``employer'' status of an entity--
such as the principal in a true independent-contractor relationship--
that possesses or exercises only such immaterial forms of control.

E. Bargaining Obligations of Joint Employers

    The proposed rule did not specifically address or delineate the 
bargaining obligations of joint employers in the proposed regulatory 
text.\61\ For the reasons discussed below and in response to comments, 
the Board has modified the final rule to provide that a joint employer 
of particular employees must bargain collectively with the 
representative of those employees with respect to any term or condition 
of employment that it possesses the authority to control or exercises 
the power to control (regardless of whether that term or condition is 
deemed to be an essential term or condition of employment under the 
rule). However, such entity is not required to bargain with respect to 
any term or condition of employment that it does not possess the 
authority to control or exercise the power to control.
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    \61\ The NPRM stated the Board's initial views in supplementary 
information, subject to comments, that (1) the proposed rule would 
only require a putative joint employer to bargain over those 
essential terms and conditions of employment it possesses the 
authority to control or over which it exercises the power to 
control, and (2) the Act's purposes are best served when two or more 
statutory employers that each possess some authority to control or 
exercise the power to control employees' essential terms and 
conditions of employment are parties to bargaining over those 
employees' working conditions. 87 FR at 54645 & fn. 26.
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III. Justification for Using Rulemaking, Rather Than Adjudication, To 
Revise the Joint-Employer Standard

A. Authority To Engage in Rulemaking

    Section 6 of the Act provides that ``[t]he Board shall have 
authority from time to time to make, amend, and rescind, in the manner 
prescribed by the Administrative Procedure Act, such rules and 
regulations as may be necessary to carry out the provisions of this 
Act.'' 29 U.S.C. 156. See also NLRB v. Bell Aerospace Co., 416 U.S. 
267, 294 (1974) (``[T]he choice between rulemaking and adjudication 
lies in the first instance within the Board's discretion.''); NLRB v. 
Wyman-Gordon Co., 394 U.S. 759 (1969). In the past, the Board has 
exercised its discretion to use the authority delegated by Congress to 
engage in substantive rulemaking. See American Hospital Assn. v. NLRB, 
499 U.S. 606 (1991).
    Section 6 authorizes the final rule as necessary to carry out 
Sections 2, 7, 8, 9, and 10 of the Act, 29 U.S.C. 152, 157, 158, 159, 
and 160, respectively. Specifically, as set forth above, Section 2(2) 
of the Act defines ``employer,'' and Section 2(3) defines ``employee.'' 
Section 7 sets forth employees' rights

[[Page 73957]]

under the Act, including the right to bargain collectively through 
representatives of employees' own choosing, the right to engage in 
concerted activities for the purpose of mutual aid or protection, and 
the right to refrain from these activities. Section 8 of the Act 
defines unfair labor practices under the Act, and Section 8(a)(5) makes 
it an unfair labor practice for an employer to refuse to bargain 
collectively with employees' bargaining representative. Section 9 of 
the Act describes the Board's responsibilities when conducting 
representation elections. Section 10 of the Act authorizes the Board to 
investigate, prevent, and remedy unfair labor practices. The Board's 
joint-employer doctrine bears on each of these provisions of the Act, 
and Section 6 permits the Board to promulgate rules carrying out these 
provisions.

B. The Preference for Rulemaking Over Adjudication

    In the NPRM, we expressed our preliminary belief that rulemaking in 
this area of the law is desirable for several reasons. First, the NPRM 
set forth the Board's preliminary view that the 2020 rule departed from 
common-law agency principles and threatened to undermine the goals of 
Federal labor law. Second, the NPRM stated that, in the Board's 
preliminary view, establishing a definite, readily available standard 
would assist employers and labor organizations in complying with the 
Act. Finally, the NPRM expressed the Board's view that because the 
joint-employer standard has changed several times in the past decade, 
there was a heightened need to seek public comment and input from a 
wide variety of interested stakeholders.\62\
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    \62\ 87 FR at 54644-54645.
---------------------------------------------------------------------------

    After carefully considering nearly 13,000 comments, the Board 
believes that it is necessary and appropriate to rescind the 2020 rule, 
which was contrary to the Act insofar as it was inconsistent with the 
common law of agency. The 2020 rule's approach to defining joint-
employer status again incorporated the control-based restrictions that 
deviated from common-law agency principles between the 1980s and the 
Board's 2015 decision in Browning-Ferris. Not only was this approach 
inconsistent with relevant court decisions, including the District of 
Columbia Circuit's 2018 decision in Browning-Ferris Industries of 
California, Inc. v. NLRB (BFI v. NLRB), 911 F.3d 1195 (D.C. Cir. 2018), 
as many commenters have persuasively argued, it also undermines the 
goals of Federal labor law. Accordingly, we rescind the 2020 rule in 
its entirety.\63\ Although we believe that the Board is required to 
rescind the 2020 rule, we would do so even if that rule were valid 
because it fails to fully promote the policies of the Act.
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    \63\ As discussed at greater length below, we note that even if 
we had not decided to promulgate a new standard through rulemaking, 
we would nevertheless have chosen to rescind the 2020 rule in its 
entirety because of these infirmities. See Sec. IV.C., J., K., and 
V, below.
---------------------------------------------------------------------------

    The Board also believes that setting forth a revised joint-employer 
standard through rulemaking is desirable. The NPRM offered a proposal 
to restore the Board's focus on whether a putative joint employer 
possesses the authority to control or exercises the power to control 
particular employees' essential terms and conditions of employment, 
consistent with the common law and relevant judicial decisions. The 
Board received many helpful comments from individuals and entities with 
considerable legal expertise and relevant experience. Having considered 
those comments, the Board has refined the proposed rule in several 
ways, as outlined above in Section II and discussed more fully below in 
Sections IV and V. We believe the proposed rule, as modified, 
appropriately defines the essential elements of a joint-employer 
relationship and will reduce uncertainty and litigation over the basic 
parameters of joint-employer status.

IV. Response to Comments

    The Board received almost 13,000 comments from interested 
organizations, labor unions, trade associations, business owners, 
United States Senators and Members of Congress, State Attorneys 
General, academics, and other individuals. The Board has carefully 
reviewed and considered these comments, as discussed below.

A. Comments Regarding the Definitions of ``Employer'' and ``Joint 
Employer'' and Basing These Definitions on Common-Law Agency Principles

    The Board received numerous comments regarding the role of common-
law agency principles in the Board's joint-employer analysis and on the 
development of joint-employer doctrine under the Act. In general, the 
comments acknowledge the accuracy of the Board's description of the 
role common-law agency principles have played in determining joint-
employer status, as briefly summarized above in Section I.
    Some commenters criticize the Board's preliminary view that the 
common law of agency is the primary guiding principle in its joint-
employer analysis.\64\ These commenters argue that because the Taft-
Hartley amendments did not specify that the common law limits the 
joint-employer standard, Congress did not intend such a constraint, and 
the Board may establish a joint-employer standard guided solely by the 
policies of the Act. Contrary to these comments, authoritative or 
relevant judicial decisions establish that common-law agency principles 
must guide the Board's joint-employer inquiry. See, e.g., NLRB v. Town 
& Country Electric, Inc., 516 U.S. 85, 92-95 (1995) (where Congress 
uses the term ``employee'' in a statute without clearly defining it, 
the Court assumes that Congress ``intended to describe the conventional 
master-servant relationship as understood by common-law agency 
doctrine''); BFI v. NLRB, 911 F.3d at 1206 (``[U]nder Supreme Court and 
circuit precedent, the National Labor Relations Act's test for joint-
employer status is determined by the common law of agency.'').\65\
---------------------------------------------------------------------------

    \64\ Comments of Los Angeles County Federation of Labor AFL-CIO 
& Locals 396 and 848 of the International Brotherhood of Teamsters; 
Professors Sachin S. Pandya, Andrew Elmore, and Kati Griffith.
    \65\ See also Clackamas Gastroenterology Associates, P.C. v. 
Wells, 538 U.S. 440, 448-449 (2003); Nationwide Mutual Insurance Co. 
v. Darden, 503 U.S. 318, 322-324 (1992); Community for Creative Non-
Violence v. Reid, 490 U.S. 730, 740, 752 fn. 31 (1989); Kelley v. 
Southern Pacific Co., 419 U.S. 318, 323-324 (1974); NLRB v. United 
Insurance Co. of America, 390 U.S. 254, 256-258 (1968).
---------------------------------------------------------------------------

    Most commenters confirm that it is appropriate and desirable for 
the Board to rely on common-law agency principles in defining the terms 
``employer'' and ``joint employer'' under the Act.\66\ Certain of these 
commenters note that by acting to overrule the Supreme Court's decision 
in NLRB v. Hearst Publishing, 322 U.S. 111 (1944), Congress evinced its 
intention to make

[[Page 73958]]

common-law agency principles the cornerstone of the definition of 
``employee'' under the Act.\67\ These commenters also emphasized post-
Taft-Hartley judicial decisions interpreting the term ``employee'' in 
statutes that do not provide more specific definitions using common-law 
agency principles.\68\ Some commenters note that common-law agency 
principles play an important functional role in the Board's definition 
of the terms ``employer'' and ``employee,'' observing that making an 
agency relationship the first step of the joint-employer analysis 
ensures that the appropriate entities are included while properly 
excluding entities who neither possess nor exercise sufficient control 
over employees' essential terms and conditions of employment.\69\ These 
commenters generally agree with the proposed rule's view that 
appropriate sources of common-law agency principles include the 
Restatement (Second) of Agency and other compendiums, reports, and 
restatements, along with judicial decisions applying the common 
law.\70\
---------------------------------------------------------------------------

    \66\ Comments of American Federation of Labor and Congress of 
Industrial Organizations (AFL-CIO); Americans for Prosperity 
Foundation; American Federation of State, County & Municipal 
Employees (AFSCME); American Hotel & Lodging Association; Center for 
Law and Social Policy; Communications Workers of America, AFL-CIO 
(CWA); Congressman Robert C. ``Bobby'' Scott, Chairman of the House 
of Representatives Committee on Education and Labor, and 52 other 
Members of Congress (Congressman Scott et al.); Economic Policy 
Institute (EPI); General Counsel Abruzzo; Independent Bakers 
Association; Nicholas Crawford; McGann, Ketterman & Rioux; National 
Federation of Independent Business (NFIB); National Partnership for 
Women & Families; North Carolina Justice Center; Public Justice 
Center; Restaurant Law Center and National Restaurant Association; 
Southern Poverty Law Center (SPLC); TechEquity Collaborative; The 
Washington Center for Equitable Growth; United States Chamber of 
Commerce; Washington Legal Foundation; William E. Morris Institute 
for Justice.
    \67\ See, e.g., comments of American Hotel & Lodging 
Association.
    \68\ Comments of NFIB; Washington Legal Foundation.
    \69\ See, e.g., comments of AFSCME.
    \70\ See, e.g., comments of General Counsel Abruzzo; Michigan 
Regional Council of Carpenters and Millwrights.
---------------------------------------------------------------------------

    Some commenters urge the Board to clarify what common-law sources 
it will consult in the final rule. Others ask the Board to limit its 
consideration to particular sources, arguing that because the common 
law is vast, amorphous, or vague, failing to impose such a limitation 
prevents the rule from functioning as self-contained guidance.\71\ 
Other commenters dispute the enduring relevance of the Restatement 
(Second) of Agency.\72\ In particular, some of these commenters take 
the position that because the Restatement (Second) of Agency primarily 
focuses on assigning liability in tort or contract matters, it is 
inapposite or poorly adapted to resolving questions related to the 
employment relationship.\73\ Some commenters propose instead that the 
Board solely consult judicial decisions applying common-law 
principles,\74\ or the Restatement of Employment Law.\75\
---------------------------------------------------------------------------

    \71\ Comments of Americans for Tax Reform; Coalition for a 
Democratic Workplace (CDW); Freedom Foundation; International 
Franchise Association (IFA); McDonald's USA, LLC; Promotional 
Products Association International (PPAI); Texas Public Policy 
Foundation.
    \72\ Comments of Washington Legal Foundation; IFA; U.S. Chamber 
of Commerce.
    \73\ Comments of IFA; U.S. Chamber of Commerce.
    \74\ Comments of Washington Legal Foundation.
    \75\ Comments of U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    As we preliminarily indicated in the proposed rule, relevant 
sources of common-law agency principles are not difficult to find. We 
respond to commenters seeking more definitive guidance that some 
relevant sources of common-law agency principles include articulations 
of these principles by common-law judges, compendiums, reports, and 
restatements of common-law decisions, and early court decisions 
addressing ``master-servant relations.'' \76\ Contrary to those 
commenters who suggest the common law is too vast or amorphous to give 
effect to the terms ``employer'' and ``employee'' in the final rule, we 
find it persuasive that the Supreme Court has viewed common-law agency 
principles as sufficiently familiar and tractable to assist parties in 
interpreting and complying with other labor and employment statutes 
that use these terms.\77\
---------------------------------------------------------------------------

    \76\ As we explained more fully in the NPRM, the employer-
employee relationship under the Act is the common-law employer-
employee relationship. Beginning in the late 19th century, American 
legal commentators began using the terms ``master-servant'' and 
``employer-employee'' interchangeably. See, e.g., Horace Gray Wood, 
A Treatise on the Law of Master and Servant; Covering the Relation, 
Duties and Liabilities of Employers and Employees (1877). The 
Restatement (Second) of Agency uses both sets of terms synonymously. 
We therefore refer elsewhere in the NPRM to ``employer-employee'' 
relations and the ``employer-employee relationship.''
    \77\ See, e.g., Clackamas Gastroenterology Associates, 538 U.S. 
at 448-449 (Americans with Disabilities Act); Darden, 503 U.S. at 
322-324 (Employee Retirement Income Security Act of 1974); Kelley, 
419 U.S. at 323-324 (Federal Employers' Liability Act).
---------------------------------------------------------------------------

    Contrary to some commenters, we adhere to the view preliminarily 
set forth in the NPRM that the Restatement (Second) of Agency (1958) is 
a particularly persuasive source of common-law agency principles. As we 
explained in the NPRM, the Supreme Court has acknowledged the 
persuasiveness of the Restatement (Second) of Agency when construing 
the common-law definition of ``employer.'' \78\ So, too, has the 
District of Columbia Circuit, acknowledging this controlling Supreme 
Court precedent.\79\ Finally, we follow the District of Columbia 
Circuit in rejecting the view set forth by some commenters that the 
Restatement was developed to address issues of liability for tort 
matters and breaches of contract and is therefore inapposite.\80\ 
Further, we dispute these commenters' premise. Many early common-law 
decisions that helped define the common-law relationship in The 
Restatement (Second) of Agency emerged in cases involving rights and 
duties under state workers' compensation laws.\81\ More importantly, 
all common-law cases, whether involving tort or contract liability or 
statutory rights and obligations, focus on whether a common-law agency 
relationship exists, and control is the touchstone of that inquiry 
under the common law.
---------------------------------------------------------------------------

    \78\ See, e.g., Clackamas Gastroenterology Associates, 538 U.S. 
at 448; Kelley, 419 U.S. at 323-324.
    \79\ See BFI v. NLRB, 911 F.3d at 1213 (``[C]ontrolling 
precedent makes the Restatement (Second) of Agency a relevant source 
of traditional common-law agency standards in the National Labor 
Relations Act context.'').
    \80\ See id.
    \81\ See, e.g., Maltz v. Jackoway-Katz Cap Co., 82 SW2d 909, 
912, 918 (Mo. 1934).
---------------------------------------------------------------------------

    Some commenters argue that by assessing whether an entity possesses 
the authority to control or indirectly controls essential terms and 
conditions of employment, the Board's proposed definition of 
``employer'' exceeds common-law boundaries.\82\ While we will address 
commenters' arguments regarding the role reserved and indirect control 
play in the proposed rule's definition of ``joint employer'' at length 
below, at the outset we simply note our agreement with the District of 
Columbia Circuit's view that these forms of control bear on the common-
law employer-employee inquiry, BFI v. NLRB, 911 F.3d at 1216.\83\ 
Accordingly, we respectfully disagree with those commenters who suggest 
the proposed rule's definition of ``employer'' exceeds common-law 
boundaries.
---------------------------------------------------------------------------

    \82\ Comments of American Hotel & Lodging Association; Bicameral 
Congressional Signatories; Council on Labor Law Equality (COLLE); 
Independent Bakers Association; National Lumber & Building Material 
Dealers Association; National Waste & Recycling Association; North 
American Meat Institute; Restaurant Law Center and National 
Restaurant Association; U.S. Chamber of Commerce.
    \83\ The court also stated that Sec. 2(2) of the Act ``textually 
indicates that the statute looks at all probative indicia of 
employer status'' because it ``expressly recognizes that agents 
acting `indirectly' on behalf of an employer could also count as 
employers.'' 911 F.3d at 1216 (quoting 29 U.S.C. 152(2)).
---------------------------------------------------------------------------

    Finally, some of these commenters argue that the proposed rule's 
definition of ``employer'' is inappropriate because direct supervision 
over an employee is a necessary prerequisite to a finding of an 
employment relationship for purposes of the Act, citing the Supreme 
Court's decision in Allied Chemical & Alkali Workers of America, Local 
Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 167-168 
(1971).\84\ Respectfully, we find Allied Chemical, which concluded that 
retired workers were not ``employees'' because the Act's legislative 
history and policies

[[Page 73959]]

contemplate individuals who are currently ``active'' in the workplace, 
inapposite. Nothing in the Court's decision in Allied Chemical or 
subsequent cases applying it suggests that the Court thereby attempted 
to modify ordinary common-law agency principles or engraft additional 
``direct supervision'' requirements onto the statutory meaning of 
``employer.''
---------------------------------------------------------------------------

    \84\ Comments of Restaurant Law Center and National Restaurant 
Association; Retail Industry Leaders Association (RILA).
---------------------------------------------------------------------------

B. Comments Regarding the Definition of ``Joint Employer''

    The proposed rule set forth a definition of ``joint employer'' 
that, like the definition provided in the 2020 rule, would apply in all 
contexts under the Act, including both the representation-case and 
unfair-labor-practice case context. No commenter has suggested that any 
joint-employer standard the Board adopts should only apply in one 
context or the other. We therefore find it appropriate to apply the new 
standard set forth in the final rule in both the representation-case 
and unfair-labor-practice case contexts.
    Our dissenting colleague and several commenters argue that, 
although the Board is properly guided by common-law agency principles 
when determining joint-employer status, the proposed rule's definition 
of ``joint employer'' exceeds the boundaries of the common law of 
agency.\85\ These commenters generally contend that defining ``joint 
employer'' to include entities who possess but do not exercise control 
over essential terms and conditions of employment or entities who do 
not exercise direct control over essential terms and conditions of 
employment is beyond the permissible scope of the common law.\86\ As 
these arguments primarily relate to the treatment of reserved and 
indirect control in proposed paragraphs (c), (e), and (f), we discuss 
them in greater detail below. However, as noted above, we agree with 
the District of Columbia Circuit's view that the common law requires 
the Board to evaluate ``all probative indicia of employer status'' in 
determining whether entities are ``employers'' or ``joint employers'' 
under the Act, including forms of indirect and reserved control.\87\
---------------------------------------------------------------------------

    \85\ Comments of Americans for Prosperity Foundation; Associated 
Builders and Contractors (ABC); Contractor Management Services, LLC; 
Independent Bakers Association; Independent Lubricant Manufacturers 
Association; LeadingAge; The Mackinac Center for Public Policy; 
National Retail Federation; Taxpayers Protection Alliance.
    \86\ Comments of Americans for Prosperity Foundation; National 
Retail Federation; Washington Legal Foundation.
    \87\ See BFI v. NLRB, 911 F.3d at 1216.
---------------------------------------------------------------------------

    A group of United States Senators and Members of Congress suggests 
that by seeking to define ``joint employer'' in the manner set forth in 
the proposed rule, the Board is effectively legislating and thereby 
usurping the role of Congress.\88\ This commenter also mentions that 
the broader definition of ``joint employer'' set forth in the 
Protecting the Right to Organize Act of 2021 (PRO Act), H.R. 842, 
failed to secure Senate approval.\89\ With respect, the standard set 
forth in the proposed rule and the final rule we announce today 
represents a faithful attempt to exercise the authority Congress has 
delegated to the Board in Section 6 of the Act. Further, as discussed 
previously, we are guided by Supreme Court decisions instructing the 
Board to consult the common law of agency when interpreting the term 
``employer'' in Section 2(2) of the Act. We do not see the definition 
of ``joint employer'' in the PRO Act as relevant to our task, which is 
to interpret the term ``employer'' that appears in the current version 
of the National Labor Relations Act, consistent with the guidance of 
relevant judicial decisions.
---------------------------------------------------------------------------

    \88\ See comments of Bicameral Congressional Signatories.
    \89\ See id.; see also comments of RILA.
---------------------------------------------------------------------------

    Some commenters specifically argue that the proposed definition of 
``joint employer'' is insufficiently responsive to the District of 
Columbia Circuit's request that the Board ``erect some legal 
scaffolding'' \90\ to remain within the boundaries of the common 
law.\91\ Other commenters take the view that the proposed definitions 
of ``employer'' and ``joint employer'' are consistent with the District 
of Columbia Circuit's view of common-law agency principles and that the 
proposed rule establishes adequate guideposts to satisfy the court's 
request.\92\ Again, because commenters espousing both views of this 
issue anchor their rationale in matters that principally relate to 
paragraphs (c), (e), and (f) of the proposed rule, we deal with these 
contentions at greater length below.
---------------------------------------------------------------------------

    \90\ BFI v. NLRB, 911 F.3d at 1220.
    \91\ Comments of ABC; Center for Workplace Compliance; IFA; 
National Association of Convenience Stores; NFIB; National Retail 
Federation.
    \92\ Comments of AFL-CIO; Center for American Progress (CAP); 
General Counsel Abruzzo; National Employment Law Project (NELP); 
Professors Pandya, Elmore, and Griffith; United Brotherhood of 
Carpenters & Joiners of America (UBC); U.S. Senate HELP Committee 
Chair Patty Murray & 21 of her Senate Democratic colleagues (Senator 
Murray et al.).
---------------------------------------------------------------------------

    Other commenters raise industry-specific concerns regarding the 
proposed definition of ``joint employer.'' Some commenters contend that 
the proposed, generally applicable definition of ``joint employer'' 
stands in tension with how other sections of the Act treat building and 
construction industry employers and unions and how the Supreme Court 
has interpreted those provisions.\93\ Specifically, these commenters 
urge that the Court's decision in NLRB v. Denver Building & 
Construction Trades Council, 341 U.S. 675, 689-690 (1951), stands for 
the proposition that general contractors and subcontractors in the 
construction industry have separate status and identities that, from 
the outset, preclude the Board from treating them as joint 
employers.\94\
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    \93\ Comments of ABC; Associated General Contractors of America 
(AGC); COLLE; U.S. Chamber of Commerce.
    \94\ Comments of ABC; AGC; American Road & Transportation 
Builders Association (ARTBA); National Roofing Contractors 
Association; U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    We do not read Denver Building so broadly. Instead, Denver Building 
held that a construction industry general contractor's overall 
responsibility for a project or worksite does not itself create an 
employment relationship between the general contractor and the 
employees of subcontractors working on the jobsite. See id. The 
proposed definition of ``joint employer,'' which we include in the 
final rule, requires not only a showing that the putative joint 
employer has a common-law employment relationship with particular 
employees, but also a further showing that a putative joint employer 
``share or codetermine those matters governing employees' essential 
terms and conditions of employment.'' As a result, the proposed rule, 
which focuses on the particular control an entity wields over terms and 
conditions of employment, is consistent with Denver Building, which 
cautions the Board not to categorically treat all employees of a 
subcontractor as the employees of a general contractor without more 
specific evidence of control. We further note that nothing in the 
relevant provisions of the Act, including Sections 2(2), 8(a)(5), 8(d), 
and 9(a), suggests that the Board is required--or permitted--to adopt a 
joint-employer standard in the construction industry that differs from 
the generally applicable definition. Nor is there any historical 
precedent for the Board treating the construction industry differently 
than other industries for joint-employer purposes.\95\
---------------------------------------------------------------------------

    \95\ Instead, the Board historically treated employers in the 
construction industry in the same manner as other employers for 
joint-employer purposes. See, e.g., Tradesmen International, Inc., 
351 NLRB 399, 403 & fn. 11 (2007) (adopting administrative law 
judge's finding that two construction-industry entities were joint 
employers); Ref-Chem Co., 169 NLRB 376 (1968) (finding that two 
entities were joint employers of a craft unit of construction 
employees performing insulation maintenance work), enf. denied on 
other grounds 418 F.2d 127 (5th Cir. 1969). See also Adams & 
Associates, Inc. v. NLRB, 871 F.3d 358, 378-379 (5th Cir. 2017) 
(upholding joint-employer finding where prime contractor and 
subcontractor jointly developed employees' wage structure, consulted 
with each other on human resources matters, and coordinated on 
hiring decisions and on-site operations).

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[[Page 73960]]

    Some commenters state that, since the 1974 Health Care amendments 
extended the coverage of the Act to include nonprofit hospitals, the 
Board has treated hospitals differently than other employers.\96\ They 
urge the Board to do so again in the final rule.\97\ In support of the 
view that hospitals should be entirely excluded from the ambit of the 
joint-employer rule, these commenters point to the Board's 1989 health 
care rule, which established eight appropriate bargaining units for 
acute-care hospitals.\98\ The commenters argue that by broadening the 
definition of ``joint employer,'' the Board risks authorizing a 
proliferation of bargaining units, contrary to the stated aims of the 
health care rule.
---------------------------------------------------------------------------

    \96\ See, e.g., comments of American Hospital Association (AHA).
    \97\ See, e.g., comments of AHA; Federation of American 
Hospitals; U.S. Chamber of Commerce; Virginia Hospital & Healthcare 
Association.
    Certain of these commenters suggest that the Board's failure to 
conduct a ``hospital-specific analysis'' violates the APA and is 
grounds for withdrawing the proposed rule. They also raise concerns 
regarding the interaction of the proposed rule with Federal 
healthcare reimbursement formulas or calculations. See, e.g., 
comments of AHA. Given our discussion of the distinctive concerns of 
hospitals above, we respectfully disagree with these commenters' 
view that the Board has not sufficiently considered the effect of 
the proposed rule on hospitals.
    \98\ Comments of AHA; U.S. Chamber of Commerce; Virginia 
Hospital & Healthcare Association (citing 29 CFR 103.30). A few 
commenters also observe that Sec. 8(d) and 8(g) of the Act set forth 
distinctive notice requirements before the termination or 
modification of collective-bargaining agreements and before work 
stoppages at hospitals. See comments of AHA; U.S. Chamber of 
Commerce; 29 U.S.C. 158 (d) & (g). These commenters likewise argue 
that the Board has at times adapted other generally applicable 
doctrines for the hospital setting, including solicitation and 
distribution law. See comments of AHA; U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    While we acknowledge the specific concerns raised by these 
commenters, we are not persuaded to create a hospital-specific 
exclusion from the joint-employer standard. First, we note that no pre-
2020 Board decision involving the joint-employer standard ever created 
such an exclusion.\99\ In keeping with the preliminary view we 
expressed in the NPRM, we are of the mind that the common-law agency 
principles that we apply in defining ``employer'' apply uniformly to 
all entities that otherwise fall within the Board's jurisdiction. We 
see no clear basis in the text or structure of the Act for exempting 
particular groups or types of employers from the final rule, nor do we 
believe that the Act's policies are best served by such an exemption. 
That said, we share these commenters' general views that the proper 
application of the final rule in particular cases will require the 
Board to consider all relevant evidence regarding the surrounding 
context.\100\ Finally, we reject the suggestion, raised by commenters 
and our dissenting colleague, that the final rule's definition of 
``joint employer'' will cause the proliferation of bargaining units or 
disrupt the application of the 1989 health care rule, which deals with 
the unrelated question of which classifications of employees constitute 
appropriate bargaining units for purposes of filing a representation 
petition pursuant to Section 9 of the Act.
---------------------------------------------------------------------------

    \99\ Instead, pre-2020 Board decisions applied the same standard 
when one putative joint employer of particular employees was a 
hospital. See, e.g., Flagstaff Medical Center, 357 NLRB 659, 666-667 
(2011) (applying the TLI/Laerco test and finding that a hospital 
contractor was not a joint employer of a hospital's housekeeping 
employees).
    \100\ Our dissenting colleague also forecasts that the final 
rule will negatively affect hospitals and the healthcare sector. In 
particular, he anticipates that the final rule will make it more 
difficult for hospitals to rely on firms that supply travel nurses 
to fill staffing gaps without risking a joint-employer finding. We 
reject our colleague's characterization of the final rule and 
emphasize that in determining whether a joint-employer finding is 
appropriate in any given context, the Board will consider all 
relevant evidence regarding whether a putative joint employer 
possesses or exercises the requisite control over one or more 
essential terms and conditions of particular employees' employment.
---------------------------------------------------------------------------

    We similarly decline other commenters' invitation to exempt other 
kinds of businesses, including cooperative businesses,\101\ franchise 
businesses,\102\ and firms and independent contractors operating in the 
insurance and financial advice industry,\103\ from the joint-employer 
standard we adopt in this final rule.\104\ As discussed at greater 
length in Section VI below, we also decline some commenters' invitation 
to create an across-the-board exemption for small businesses.\105\ One 
commenter observes that many Federal labor and employment statutes 
exempt employers who have less than a minimum number of employees and 
suggests that this provides support for a similar exemption from the 
final rule. However, we find further support for our view that the Act 
requires the Board to apply its joint-employer standard uniformly to 
all entities otherwise covered by the Board's jurisdiction in the fact 
that the Act contains no similar minimum-employee threshold to those 
present in other labor and employment statutes. Instead, we observe 
that the Board has statutory jurisdiction over those private-sector 
employers whose activity in interstate commerce exceeds a minimal 
level.\106\
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    \101\ Comments of National Grocers Association.
    \102\ Comments of American Association of Franchisees and 
Dealers; IFA; Restaurant Law Center and National Restaurant 
Association.
    \103\ Comments of National Association of Insurance and 
Financial Advisors.
    \104\ Relatedly, we also decline the request of one commenter to 
explicitly state that the final rule covers the relationship between 
local unions and national or international unions. See comments of 
IFA.
    \105\ Comments of Independent Bakers Association; National 
Association of Home Builders (NAHB).
    \106\ See 29 U.S.C. 152(6) & (7); NLRB v. Fainblatt, 306 U.S. 
601, 606-607 (1939). The Board also uses its discretion to decline 
to exercise its statutory jurisdiction over a subset of smaller 
employers. See, e.g., Siemons Mailing Service, 122 NLRB 81 (1959) 
(describing Board's discretionary commerce standard). The Board has 
historically combined the gross revenues of joint employers when 
applying its discretionary standard. See, e.g., Central Taxi 
Service, 173 NLRB 826, 827 (1968); Checker Cab Co., 141 NLRB 583, 
586-587 (1963), enfd. 367 F.2d 692 (6th Cir. 1966); see also CID-SAM 
Management Corp., 315 NLRB 1256, 1256 (1995). The scope of this 
rulemaking does not encompass any changes to the Board's precedent 
governing application of its discretionary commerce standard.
---------------------------------------------------------------------------

    Finally, one commenter asks the Board to clarify that the proposed 
rule's definition of ``joint employer'' does not preclude the Board 
from adopting rebuttable presumptions to guide it in applying the 
joint-employer standard in the future.\107\ For example, this commenter 
suggests, the Board could treat an entity's possession or exercise of 
certain forms of control over essential terms and conditions of 
employment as giving rise to a presumption of joint-employer 
status.\108\ In light of our extensive discussions and guidance below 
regarding whether particular forms of control are material to the 
existence of an employment relationship under common-law agency 
principles, we decline the invitation to make this proposed 
clarification.
---------------------------------------------------------------------------

    \107\ Comments of Professors Pandya, Elmore, and Griffith.
    \108\ See id.
---------------------------------------------------------------------------

C. Comments About Definition of ``Share or Codetermine''

    As set forth above, the proposed rule sought to codify the Board's 
holding, endorsed by the Third Circuit in NLRB v. Browning-Ferris 
Industries of Pennsylvania, Inc., 691 F.2d 1117, 1124 (3d Cir. 1982), 
enfg. 259 NLRB 148 (1981), that entities are ``joint employers'' if 
they ``share or codetermine those matters governing essential terms and 
conditions of employment.'' Nearly all commenters

[[Page 73961]]

agree that the basic ``share or codetermine'' formulation is the 
appropriate starting point for the Board's joint-employer 
analysis.\109\ As discussed at length below, however, commenters' views 
regarding what forms of control suffice to establish that entities 
``share or codetermine'' matters governing particular employees' 
essential terms and conditions of employment diverge 
significantly.\110\
---------------------------------------------------------------------------

    \109\ See, e.g., comments of CWA; National Women's Law Center; 
North American Meat Institute; TechEquity Collaborative; Women 
Employed. Other commenters implicitly approve the formulation, 
taking it as the starting point for their analysis of the proposed 
rule.
    \110\ Comments of American Hotel & Lodging Association; IFA; 
Leading Age; National Retail Federation; North American Meat 
Institute; Society for Human Resource Management (SHRM).
---------------------------------------------------------------------------

    Paragraph (c) of the proposed rule sought to define the phrase 
``share or codetermine those matters governing employees' essential 
terms and conditions of employment'' to mean ``for an employer to 
possess the authority to control (whether directly, indirectly, or 
both), or to exercise the power to control (whether directly, 
indirectly, or both), one or more of the employees' essential terms and 
conditions of employment.'' \111\
---------------------------------------------------------------------------

    \111\ 87 FR at 54663.
---------------------------------------------------------------------------

    One commenter suggests that because the Third Circuit's formulation 
of the ``share or codetermine'' standard (and the formulation used in 
paragraph (c) of the proposed rule) speaks in terms of ``matters'' 
governing essential terms and conditions of employment, a putative 
joint employer must possess the authority to control or exercise 
control over more than one essential term or condition of employment to 
meet the standard.\112\ We do not find this argument persuasive as an 
analytical or logical matter. First, we do not construe the word 
``matters'' in the standard to refer to essential terms or conditions 
of employment themselves, but rather to the workplace issues related to 
those terms or conditions. Second, we disagree that control over one 
essential term or condition of employment is necessarily insufficient. 
For example, as discussed at length below, commenters are unanimous 
that wages are an essential term or condition of employment. Given the 
centrality of wages to the employment relationship, it would be 
difficult to argue that a common-law employer's control over wages, 
standing alone, is insufficient to create an employment relationship.
---------------------------------------------------------------------------

    \112\ Comments of Freedom Foundation.
---------------------------------------------------------------------------

    A number of commenters challenge the premise that possessing but 
not exercising the authority to control or exercising indirect control 
over one or more essential terms and conditions of employment can ever 
serve as evidence of joint-employer status.\113\ Some of these 
commenters, especially those writing on behalf of small businesses, 
suggest that forms of reserved control that amount to ``contractual 
fine print'' that are never put into action should not result in a 
joint-employer finding.\114\ While others appear to concede that there 
may be circumstances in which indirect or reserved control is probative 
of joint-employer status, those commenters emphasize that requiring 
evidence that an entity actually exercises control is preferable.\115\
---------------------------------------------------------------------------

    \113\ Comments of American Staffing Association; Independent 
Lubricant Manufacturers Association; QuickChek; RaceTrac, Inc.; Rio 
Grande Foundation.
    \114\ Comments of Energy Marketers of America; Independent 
Lubricant Manufacturers Association; M. M. Fowler, Inc.; One Energy 
Inc.; Ready Training Online; Reid Stores, Inc. d/b/a Crosby's.
    \115\ Comments of American Trucking Associations; Americans for 
Prosperity Foundation; ANB Bank; California Policy Center; 
Competitive Enterprise Institute; Goldwater Institute; Home Care 
Association of America; Independent Electrical Contractors; National 
Black McDonald's Operators Association; RaceTrac, Inc.; Rachel 
Greszler.
---------------------------------------------------------------------------

    Consistent with the preliminary view set forth in our NPRM, we are 
unpersuaded by comments suggesting that forms of indirect or reserved 
control can never serve as evidence of joint-employer status. In our 
view, this argument is undermined by both the weight of common-law 
authority and relevant judicial decisions, including the District of 
Columbia Circuit's decision in BFI v. NLRB. See 911 F.3d at 1213 & 1216 
(``[T]he Board's conclusion that an employer's authorized or reserved 
right to control is relevant evidence of a joint-employer relationship 
wholly accords with traditional common-law principles of agency,'' and 
``indirect control can be a relevant factor in the joint-employer 
inquiry.'').
    Moreover, ``contractual fine print'' bearing on the allocation of 
authority to control the details of the manner and means by which work 
is performed, and the terms and conditions of employment of those 
performing the work, has legal force and effect without respect to 
whether or not contractually reserved authority to control is ever 
exercised. By incorporating such contractual allocations of control 
into the Board's joint-employer analysis, the final rule permits 
business entities to evaluate and control their potential status as 
joint employers under the Act, ex ante, based on their freely chosen 
contractual arrangements. By contrast, a standard that turns on an ex-
post analysis of whether and to what extent a party has actually 
exercised contractually reserved control impedes contracting parties' 
ability to reliably determine ahead of time whether or not they will 
have obligations under the Act related to employees of another 
employer. This distinction may be particularly important, for example, 
in successorship situations involving an incumbent union, where 
questions about bargaining obligations may arise before sufficient time 
has passed for parties to reliably ascertain whether and to what extent 
contractually reserved authority to control will be actually 
exercised.\116\
---------------------------------------------------------------------------

    \116\ For this reason, we reject our dissenting colleague's 
suggestion that the final rule will have an adverse effect in 
successorship situations. In successorship situations where a 
transaction is structured in such a way that more than one entity in 
the resulting structure could potentially be considered an employer, 
the final rule has the distinct advantage of permitting all parties 
to determine and define their NLRA rights and obligations, ex ante, 
by contract. Under the 2020 rule, by contrast, the rights and 
obligations of contracting businesses could not be ascertained at 
the outset of a business relationship but would instead turn on 
contingent facts about whether or not one party chose to exercise 
rights it had reserved to itself by contract.
---------------------------------------------------------------------------

    Another group of commenters suggests that while an entity's 
indirect or reserved control over essential terms and conditions of 
employment may be probative, it is not sufficient, standing alone, to 
confer joint-employer status.\117\ These commenters argue that the 
Board has never held that a single instance of unexercised control was 
sufficient to create a joint-employer relationship and generally 
criticize the NPRM's discussion of the Board's precedent in the two 
decades after Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964), 
issued and before TLI, supra, 271

[[Page 73962]]

NLRB 798, and Laerco, supra, 269 NLRB 324, were decided.\118\
---------------------------------------------------------------------------

    \117\ Comments of ABC; American Hotel & Lodging Association; 
Center for Workplace Compliance; CDW; COLLE; Competitive Enterprise 
Institute; Control Transportation Services, Inc.; HR Policy 
Association; IFA; International Foodservice Distributors Association 
(IFDA); NATSO & SIGMA; National Asian/Pacific Islander American 
Chamber of Commerce and Entrepreneurship (National ACE); National 
Association of Convenience Stores; National Taxpayers Union; 
National Waste & Recycling Association; New Civil Liberties Alliance 
& Institute for the American Worker; RILA; Restaurant Law Center and 
National Restaurant Association; SHRM; The Mackinac Center for 
Public Policy; U.S. Chamber of Commerce.
     One of these commenters draws an analogy to the Board's 
treatment of primary and secondary indicia of supervisory status in 
cases involving Sec. 2(11) of the Act, 29 U.S.C. 152(11). Comments 
of COLLE. The scope of the definition of ``supervisor'' is an 
express exception to the definition of ``employee'' under Sec. 2(3) 
of the Act. See, e.g., NLRB v. Kentucky River Community Care, Inc., 
532 U.S. 706, 711 (2001). Unlike the definition of ``employee,'' 
then, the definition of supervisor turns on questions of statutory 
interpretation, not common-law agency principles. Accordingly, we 
find this analogy inapposite.
    \118\ Comments of CDW; HR Policy Association; IFA; NATSO & 
SIGMA; New Civil Liberties Alliance & Institute for the American 
Worker; RILA; Small Business & Entrepreneurship Council; Tesla, 
Inc.; U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    As set forth more fully in the NPRM, we disagree with these 
commenters' view of the Board's pre-TLI/Laerco precedent. Instead, we 
view cases from that time period as supportive of the view that the 
right to control employees' work and terms and conditions of employment 
is determinative in the joint-employer analysis. Cases decided during 
the two decades after Boire issued did not tend to turn on whether both 
putative joint employers actually or directly exercised control. For 
example, in Jewel Tea Co., 162 NLRB 508 (1966), the Board found that an 
entity's contractually reserved power to set working hours and to 
reject or terminate workers was sufficient to establish that entity's 
status as a joint employer. In addition, in Value Village, 161 NLRB 
603, 607 (1966), the Board found a joint-employment relationship where 
one entity reserved control over ``the manner and method of work 
performance'' and to terminate the contract at will in an operating 
agreement, emphasizing that ``the power to control is present by virtue 
of the operating agreement.'' \119\
---------------------------------------------------------------------------

    \119\ Our dissenting colleague criticizes our reliance on Jewel 
Tea and Value Village as support for our view that pre-TLI/Laerco 
precedent did not require evidence of a putative joint employer's 
direct exercise of control, noting that other pre-TLI/Laerco 
precedent relied on record evidence of actually exercised or direct 
control. As we note in Sec. I.D. above, however, it is unsurprising 
that cases where the record establishes that an entity has directly 
exercised control have not addressed the question of whether 
reserved or indirect control could also independently suffice to 
establish the relationship. Our colleague cites no pre-TLI/Laerco 
precedent holding that actual exercise of direct control was 
necessary, and no number of cases holding only that the direct 
exercise of control is sufficient can rationally establish that 
proposition. Conversely, Jewel Tea, Value Village, and the many 
other pre-TLI/Laerco decisions cited above in which the Board has 
expressly stated that control need not be actually exercised, or 
exercised in any particular way, in order to establish a joint-
employer relationship clearly establish that the Board's historic 
joint-employer standard did not include any such requirement. See 
also fn. 2, above.
---------------------------------------------------------------------------

    Some commenters specifically criticize the proposed rule's 
treatment of reserved control, suggesting that it might be difficult to 
assess whether forms of reserved control are sufficient to give rise to 
liability or a bargaining obligation.\120\ One commenter notes that 
reservations of control are often ``boilerplate'' inclusions in 
contracts that should not give rise to a joint-employer finding.\121\ 
Certain of these commenters express concerns that the standard might be 
susceptible to outcome-driven applications or other unfair 
results.\122\
---------------------------------------------------------------------------

    \120\ Comments of Home Care Association of America; IFA; U.S. 
Chamber of Commerce.
    \121\ Comments of IFA.
    \122\ Comments of AGC; American Pizza Community; Americans for 
Prosperity Foundation; Competitive Enterprise Institute; HR Policy 
Association; IFA; James Bitzonis; National Association of 
Manufacturers (NAM); NAHB; National Retail Federation; National 
Roofing Contractors Association; Restaurant Law Center and National 
Restaurant Association.
---------------------------------------------------------------------------

    Many commenters agree with the NPRM's discussion of how the common 
law treats forms of reserved control.\123\ One of these commenters 
cites the District of Columbia Circuit's discussion in BFI v. NLRB, 911 
F.3d at 1211, of how ``the `right to control' runs like a leitmotif 
through the Restatement (Second) of Agency.'' \124\ In particular, some 
commenters cited approvingly to the NPRM's discussion of common-law 
judicial decisions that treat reserved control as an especially 
probative indication of an agency relationship.\125\ See, e.g., Dovell 
v. Arundel Supply Corp., 361 F.2d 543, 545 (D.C. Cir. 1966) (quoting 
Grace v. Magruder, 148 F.2d 679, 681 (D.C. Cir. 1945)) (``[I]t is the 
right to control, not control or supervision itself, which is most 
important.'').
---------------------------------------------------------------------------

    \123\ Comments of AFL-CIO; Congressman Scott et al.; General 
Counsel Abruzzo; NELP. A few of these commenters suggest that the 
Board omit references to ``reserved'' and ``indirect'' control in 
the final rule to eschew any suggestion that the joint-employer 
analysis requires control to be taxonomized. See comments of AFL-
CIO; International Union of Operating Engineers (IUOE). As we hope 
to make clear in our discussion of the comments we received and the 
final rule, our intention is for the final rule to reflect the 
common law's view that control is the touchstone of an agency 
relationship, regardless of how it is wielded. While this does not 
require forms of control to be categorized in any particular way, 
the terminology used is reflective of the language contained in the 
legal precedent upon which we rely.
    \124\ Comments of NELP.
    \125\ Comments of AFL-CIO.
---------------------------------------------------------------------------

    The final rule also adheres to the view that reserved control is 
probative and that it is appropriate for the Board to find that joint-
employer status is established based on a putative joint employer's 
reserved control over an essential term or condition of employment. As 
set forth more fully in the NPRM,\126\ the reservation of authority to 
control essential terms or conditions of employment is an important 
consideration under common-law agency principles. We agree with the 
District of Columbia Circuit that common-law sources treat the right to 
control as central to the joint-employer inquiry and that forms of 
reserved control can reveal an entity's right to control essential 
terms or conditions of employment.\127\ As discussed above, 
incorporating parties' contractual allocations of control into the 
Board's joint-employer analysis also enhances contracting parties' 
ability to evaluate and control their statutory obligations with 
respect to other employers' employees at the inception of their 
business relationships.
---------------------------------------------------------------------------

    \126\ 87 FR at 54648-54650.
    \127\ BFI, 911 F.3d at 1213 (``[T]he Board's conclusion that an 
employer's authorized or reserved right to control is relevant 
evidence of a joint-employer relationship wholly accords with 
traditional common-law principles of agency.'').
---------------------------------------------------------------------------

    Certain commenters specifically take issue with the proposed rule's 
view that indirect control can establish joint-employer status.\128\ A 
number of these commenters argue that only direct control can or should 
be relevant to the joint-employer inquiry.\129\ They urge that control 
exercised through an intermediary should not itself be sufficient to 
establish status as a joint employer, contending that this aspect of 
the proposed rule threatens to interfere with parties' reliance on the 
use of independent contractors or vendors to perform services.\130\ One 
of these commenters observes that courts interpreting the Fair Labor 
Standards Act have at times treated forms of routine indirect control 
as immaterial to the existence of a joint-employer relationship and 
urges the Board to follow suit.\131\
---------------------------------------------------------------------------

    \128\ Comments of American Pizza Community; Americans for Tax 
Reform; American Trucking Associations; ANB Bank; Connie Cessante; 
Goldwater Institute; NAHB; National Roofing Contractors Association; 
One Energy Inc.; Ready Training Online; Reid Stores, Inc. d/b/a 
Crosby's; Robert Kulik; TechNet.
    \129\ Comments of Competitive Enterprise Institute; Energy 
Marketers of America; FreedomWorks Foundations; Home Care 
Association of America; IFA; National Retail Federation; One Energy 
Inc.; QuickChek; RaceTrac, Inc.; The Mackinac Center for Public 
Policy.
    \130\ Comments of American Hotel & Lodging Association; FMI--The 
Food Industry Association; International Bancshares Corporation; New 
Civil Liberties Alliance & Institute for the American Worker; Rio 
Grande Foundation; SHRM; Small Business & Entrepreneurship Council; 
U.S. Black Chambers, Inc.; U.S. Chamber of Commerce. Some commenters 
cite Computer Associates International, Inc., 324 NLRB 285, 286 
(1987), for the proposition that Sec. 8(b) of the Act reflects 
Congress's intention to protect employers' autonomy in their 
selection of independent contractors. See, e.g., comments of SHRM. A 
number of individuals raised similar concerns, noting that they fear 
the proposed rule might harm their prospects of being hired as 
independent contractors in the future. See, e.g., comments of Monica 
Cichosz; Gregg Micalizio.
    \131\ Comments of National Retail Federation.
---------------------------------------------------------------------------

    Other commenters, citing sources of common-law agency principles 
and judicial decisions applying common-law principles, stress that an 
entity itself need not actually exercise control over particular 
employees for the Board to

[[Page 73963]]

find that an agency relationship exists.\132\ Many commenters approve 
of the Board's discussion of the Restatement (Second) of Agency in the 
preamble to the proposed rule and cite portions of the Restatement 
contemplating that an agency relationship can be premised on indirect 
control.\133\ Some of these commenters specifically addressed the 
``subservant'' doctrine. See Restatement (Second) of Agency, section 
5(2), cmts. e, f, and illus. 6; section 220(1), cmt. d; section 226, 
cmt. a (1958). One of these commenters, citing the District of Columbia 
Circuit's decision in BFI v. NLRB, 911 F.3d at 1218, argues that the 
subservant doctrine demonstrates the common law's recognition of the 
important role that forms of indirect control can play in an agency 
relationship.\134\
---------------------------------------------------------------------------

    \132\ Comments of American Civil Liberties Union (ACLU); AFL-
CIO; Congressman Scott et al.; CWA; General Counsel Abruzzo; IUOE; 
Lawyers' Committee for Civil Rights Under Law; Los Angeles County 
Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT; NELP; 
Restaurant Opportunities Centers United; State Attorneys General; 
The Leadership Conference on Civil and Human Rights; The Strategic 
Organizing Center; United Electrical, Radio and Machine Workers of 
America (UE); UNITE HERE International Union; United Steelworkers.
     Among these commenters, several suggest that if the Board 
decides to promulgate a final rule (rather than simply rescind the 
2020 rule), the Board should delete references to direct and 
indirect control in proposed subparagraph (c). See comments of AFL-
CIO; IUOE. We address this aspect of these comments in our 
discussion below.
    \133\ Comments of CWA; General Counsel Abruzzo; Los Angeles 
County Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT.
    \134\ Comments of State Attorneys General.
---------------------------------------------------------------------------

    As noted above, because we agree with the commenters who discuss 
common-law precedent and the District of Columbia Circuit's statements 
regarding the role indirect control plays in the joint-employer 
analysis,\135\ we respectfully reject the view of commenters who 
suggest that evidence of indirect control over essential terms or 
conditions of employment is insufficient to establish joint-employer 
status. The final rule adheres to the Board's preliminary view that 
forms of indirect control may be evidence of joint-employer status. As 
set forth in the NPRM, we are persuaded by the District of Columbia 
Circuit's view that the common-law standard requires consideration of 
indirect control. See BFI v. NLRB, 911 F.3d at 1216-1217 (``Common law 
decisions have repeatedly recognized that indirect control over matters 
commonly determined by an employer can, at a minimum, be weighed in 
determining one's status as an employer of joint employer, especially 
insofar as indirect control means control exercised through an 
intermediary.'').\136\ We further agree with the views of some 
commenters that the 2020 rule reintroduced control-based restrictions, 
notably the requirement of ``substantial direct and immediate 
control,'' that are contrary to the common-law view of how agency 
relationships are created. For this reason, independent of our decision 
to promulgate a new rule, we rescind the 2020 rule because it is 
inconsistent with common-law agency principles and therefore 
inconsistent with the National Labor Relations Act. Moreover, we are 
further persuaded that there is value in codifying the principle that 
forms of indirect control over one or more essential terms or 
conditions of employment are probative of joint-employer status in the 
final rule text, as discussed below.
---------------------------------------------------------------------------

    \135\ See BFI v. NLRB, 911 F.3d at 1216 (``[I]ndirect control 
can be a relevant factor in the joint-employer inquiry.'').
    \136\ Similarly, as one commenter observed, the Supreme Court's 
decision in Boire v. Greyhound, 376 U.S. 473, 481 (1964), made no 
distinction on the basis of whether an entity wields direct or 
indirect control. See comments of NELP.
---------------------------------------------------------------------------

D. Comments About the Definition of ``Essential Terms and Conditions of 
Employment''

    Paragraph (d) of the proposed rule defined ``essential terms and 
conditions of employment'' to ``generally include'' but not be limited 
to ``wages, benefits, and other compensation; hours of work and 
scheduling; hiring and discharge; discipline; workplace health and 
safety; supervision; assignment; and work rules and directions 
governing the manner, means, or methods of work performance.'' \137\ In 
setting forth a nonexhaustive list of essential terms and conditions of 
employment, the proposed rule relied in part on the Board's 2015 BFI 
decision, which took the same approach.\138\ As mentioned above, the 
phrase ``essential terms and conditions of employment'' derives from 
the Third Circuit's formulation of the joint-employer standard in NLRB 
v. Browning-Ferris Industries of Pennsylvania, Inc., 691 F.2d 1117, 
1124 (3d Cir. 1982), enfg. 259 NLRB 148 (1981), where the court stated 
that entities are ``joint employers'' if they ``share or codetermine 
those matters governing essential terms and conditions of employment.''
---------------------------------------------------------------------------

    \137\ 87 FR at 54663.
    \138\ Id. at 54643 (citing BFI, supra, 362 NLRB at 1613).
---------------------------------------------------------------------------

    Although some commenters approve of the proposed rule's use of an 
open-ended, nonexhaustive list of ``essential terms and conditions of 
employment,'' \139\ many commenters criticize that aspect of the 
proposed rule.\140\ Notably, the United States Small Business 
Administration Office of Advocacy, along with many individuals and 
small business owners, express concerns about how parties covered by 
the Act will successfully comply with their potential obligations as 
joint employers without more clarity regarding the scope of ``essential 
terms and conditions of employment.'' \141\ Some commenters suggest 
that the Board adopt an exhaustive list of essential terms and 
conditions of employment and make any further refinements to that list 
in a future rulemaking proceeding.\142\
---------------------------------------------------------------------------

    \139\ Comments of AFL-CIO; Center for Law and Social Policy; 
International Brotherhood of Teamsters (IBT); Lawyers' Committee for 
Civil Rights Under Law; Los Angeles County Federation of Labor AFL-
CIO & Locals 396 and 848 of the IBT; National Partnership for Women 
& Families; National Women's Law Center; NELP; Public Justice 
Center; Restaurant Opportunities Centers United; SPLC; State 
Attorneys General; TechEquity Collective; The Leadership Conference 
on Civil and Human Rights; William E. Morris Institute for Justice; 
Women Employed.
    \140\ Comments of American Staffing Association; ANB Bank; Asian 
McDonald's Operators Association; ABC; California Policy Center; 
Center for Workplace Compliance; CDW; Energy Marketers of America; 
Freedom Foundation; Goldwater Institute; Home Care Association of 
America; HR Policy Association; International Bancshares 
Corporation; IFDA; IFA; LeadingAge; McDonald's USA, LLC; NATSO and 
SIGMA; National Association of Convenience Stores; NAHB; National 
Association of Insurance and Financial Advisors; NAM; National 
Association of Realtors; National Black McDonald's Operators 
Association; National Retail Federation; National Roofing 
Contractors Association; New Civil Liberties Alliance & Institute 
for the American Worker; PPAI; Rachel Greszler; RILA; Subcontracting 
Concepts, LLC; The Mackinac Center for Public Policy; U.S. Chamber 
of Commerce.
    \141\ Comments of Luis Acosta; Escalante Organization; 
Independent Electrical Contractors; M. M. Fowler, Inc.; One Energy 
Inc.; QuickChek; RaceTrac, Inc.; Ready Training Online; Reid Stores, 
Inc. d/b/a Crosby's; SBA Office of Advocacy.
    \142\ Comments of CDW; IFA; The Mackinac Center for Public 
Policy.
---------------------------------------------------------------------------

    Another group of commenters propose that the Board modify the 
proposed rule by explicitly tying the definition of ``essential terms 
and conditions of employment'' to the concept of mandatory subjects of 
bargaining for purposes of Section 8(d) of the Act.\143\ These 
commenters generally also favor a flexible approach to defining the 
scope of a joint

[[Page 73964]]

employer's bargaining obligation.\144\ Relatedly, some commenters 
request that the Board consider amending the proposed rule to 
incorporate a statement regarding the scope of a joint employer's 
bargaining obligation that appeared in the NPRM's preamble,\145\ while 
others suggest that the Board should clarify how to allocate bargaining 
responsibilities between two entities that share or codetermine one or 
more essential terms and conditions of employment.\146\
---------------------------------------------------------------------------

    \143\ Comments of General Counsel Abruzzo; IBT; IUOE; Jobs with 
Justice and Governing for Impact; Los Angeles County Federation of 
Labor AFL-CIO & Locals 396 and 848 of the IBT; State Attorneys 
General; UE. One of these commenters cites Sun-Maid Growers of 
California v. NLRB, 618 F.2d 56, 59 (9th Cir. 1980) in support of 
this view. See Los Angeles County Federation of Labor AFL-CIO & 
Locals 396 and 848 of the IBT.
    \144\ Comments of Los Angeles County Federation of Labor AFL-CIO 
& Locals 396 and 848 of the IBT; NELP.
    \145\ See 87 FR at 54645 fn. 26. Comments of IBT; IUOE; Service 
Employees International Union (SEIU); U.S. Chamber of Commerce.
    \146\ Comments of RILA; SHRM.
---------------------------------------------------------------------------

    One of these commenters observes that the Board should be careful 
to distinguish control over essential terms and conditions of 
employment that is material to the existence of a common-law employment 
relationship from control over matters that the Act requires parties to 
bargain over.\147\ Another commenter acknowledges that an entity's 
control over certain mandatory subjects of bargaining, like cafeteria 
prices, see Ford Motor Co. v. NLRB, 441 U.S. 488, 498 (1979), may 
control a term of employment to which a bargaining duty attaches but 
not possess or exercise control over an essential term or condition of 
employment so as to be regarded as a common-law employer.\148\
---------------------------------------------------------------------------

    \147\ Comments of UNITE HERE.
    \148\ See reply comments of AFL-CIO.
---------------------------------------------------------------------------

    We have taken these comments into consideration in revising the 
final rule's treatment of essential terms and conditions of employment 
and in adding paragraph (h) to the final rule. The final rule responds 
to commenters who suggest tying the definition of essential terms and 
conditions of employment to Section 8(d) of the Act by emphasizing 
that, once an entity is found to be a joint employer because it 
possesses the authority to control or exercises the power to control 
one or more essential terms or conditions of employment identified in 
the rule, that entity has a statutory duty to bargain over all 
mandatory subjects of bargaining it possesses the authority to control 
or exercises the power to control. That duty is common to all employers 
under the Act. See Management Training, 317 NLRB 1355 (1995). The scope 
of a joint employer's duty to bargain, however, is distinct from the 
issue of joint-employer status. As in other cases involving the scope 
of the duty to bargain, if a joint employer contests its duty to 
bargain over a particular issue, the Board will assess whether a 
particular subject of bargaining is mandatory on a case-by-case basis, 
applying familiar and longstanding precedent. However, the final rule 
provides the clarity and predictability other commenters sought by 
specifically enumerating the essential terms and conditions of 
employment that will, as a threshold matter, give rise to a finding 
that an entity is a joint employer if that entity possesses the 
authority to control or exercises the power to control one or more of 
the listed terms. Moreover, by adding paragraph (h), the final rule 
likewise responds to those commenters who requested that the Board 
include a statement of the nature of a joint employer's bargaining 
obligation in the text of the rule itself.\149\
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    \149\ See comments of American Staffing Association; RILA; SHRM; 
Texas Public Policy Foundation. One commenter notes that Board 
precedent already addresses the contours of a joint employer's 
bargaining obligation and suggests that this obviates the need for a 
clearer articulation of the duty in the text of a final rule. 
Comments of AFL-CIO.
---------------------------------------------------------------------------

    As mentioned above, the final rule incorporates an exhaustive list 
of essential terms and conditions of employment. These essential terms 
and condition of employment are: ``(1) wages, benefits, and other 
compensation; (2) hours of work and scheduling; (3) the assignment of 
duties to be performed; (4) the supervision of the performance of 
duties; (5) work rules and directions governing the manner, means, and 
methods of the performance of duties and the grounds for discipline; 
(6) the tenure of employment, including hiring and discharge; and (7) 
working conditions related to the safety and health of employees.'' 
\150\ Because these essential terms and conditions of employment are 
substantively the same as those offered as illustrations in the 
proposed rule, we next address commenters' particular concerns 
regarding the proposed rule's treatment of specific terms and 
conditions of employment as ``essential.''
---------------------------------------------------------------------------

    \150\ The list of essential terms and conditions of employment 
is discussed further in Section V.D., below.
---------------------------------------------------------------------------

    Commenters who addressed the proposed rule's treatment of specific 
``essential terms and conditions of employment'' unanimously agree that 
certain terms and conditions of employment are ``essential'' for 
purposes of the joint-employer standard. These include wages and 
benefits,\151\ hours of work,\152\ hiring, discipline, and 
discharge,\153\ assignment,\154\ and supervision.\155\ Many commenters 
specifically state that, at a minimum, they approve of the list of 
essential terms and conditions of employment that was used in the 2020 
rule, including scheduling, hiring, termination, discipline, assignment 
of work, and instruction.\156\
---------------------------------------------------------------------------

    \151\ Comments of Association of Women's Business Centers; 
Center for Law and Social Policy; General Counsel Abruzzo; IFA; 
Lawyers' Committee for Civil Rights Under Law; NAM; National Women's 
Law Center; North Carolina Justice Center; Public Justice Center; 
RILA; SPLC; TechEquity Collective; The Leadership Conference on 
Civil and Human Rights; William E. Morris Institute for Justice; 
Women Employed.
    \152\ Comments of Center for Law and Social Policy; General 
Counsel Abruzzo; Lawyers' Committee for Civil Rights Under Law; 
National Partnership for Women & Families; National Women's Law 
Center; North Carolina Justice Center; Public Justice Center; SPLC; 
TechEquity Collective; The Leadership Conference on Civil and Human 
Rights; RILA; William E. Morris Institute for Justice; Women 
Employed.
    \153\ Comments of California Policy Center; General Counsel 
Abruzzo; IBT; NAM.
    Our dissenting colleague generally agrees that matters relating 
to particular employees' hiring and discharge are essential, but he 
expresses concern that the formulation used in the final rule--
``tenure of employment, including hiring and discharge''--is too 
broad and runs the risk of ``making general contractors in the 
construction industry joint employers per se.'' With respect, we 
reject our colleague's characterization. General contractors in the 
construction industry will be deemed joint employers only if all 
requirements of the standard are established, including the 
threshold requirement that they have a common-law employment 
relationship with particular employees. We use the phrase ``tenure 
of employment, including hiring and discharge'' to encompass a range 
of actions that determine or alter individuals' employment status, 
offering hiring and discharge as examples. As discussed elsewhere, 
nothing in the final rule intends to treat general contractors in 
the construction industry--or, indeed, any entities--as joint 
employers on a per se or categorical basis.
    \154\ Comments of IBT; NELP.
    \155\ Comments of General Counsel Abruzzo; IBT.
    \156\ See, e.g., comments of IFA; NFIB; National Women's Law 
Center.
---------------------------------------------------------------------------

    A number of commenters and our dissenting colleague contend that 
workplace health and safety should not be considered an essential term 
or condition of employment for purposes of the joint-employer 
standard.\157\ These commenters emphasize the role that government 
regulation plays in setting minimum standards for workplace

[[Page 73965]]

health and safety,\158\ especially in certain industries, including the 
trucking, food and consumer goods, and waste and recycling 
industries.\159\ Other commenters strenuously urge the Board to include 
workplace health and safety as essential.\160\ In fact, one commenter 
suggests that, in light of the Covid-19 pandemic, the Board should make 
explicit that workplace health and safety is an essential condition of 
all in-person employment.\161\
---------------------------------------------------------------------------

    \157\ Comments of American Association of Port Authorities 
(AAPA); American Trucking Associations; Association of Women's 
Business Centers; FMI--The Food Industry Association; Home Care 
Association of America; IFA; NATSO & SIGMA; National Association of 
Convenience Stores; NAM; National Retail Federation; New Civil 
Liberties Alliance & Institute for the American Worker; North 
American Meat Institute; Rio Grande Foundation; Trucking Industry 
Stakeholders.
     One of these commenters argues that workplace health and safety 
was not historically regarded as an essential term or condition of 
employment under the common law and should therefore be omitted. See 
comments of IFA.
    \158\ Comments of AAPA; American Trucking Associations; Home 
Care Association of America; National Association of Convenience 
Stores. As an example, one commenter notes that health and safety in 
the trucking industry is pervasively regulated by several other 
Federal agencies, including ``the Department of Labor's Occupational 
Safety and Health Administration (OSHA) and the Department of 
Transportation's Federal Motor Carrier Safety Administration 
(FMCSA).'' Comments of American Trucking Associations. Contrary to 
the suggestion of this commenter, the Board is aware of the 
expertise these regulators have in setting substantive health and 
safety standards and does not intend to prescribe any particular 
health and safety standards in the final rule.
    \159\ Comments of American Trucking Associations; FMI--The Food 
Industry Association; National Waste & Recycling Association; 
Trucking Industry Stakeholders.
    \160\ Comments of Center for Law and Social Policy; IBT; 
Lawyers' Committee for Civil Rights Under Law; National Partnership 
for Women & Families; National Women's Law Center; NELP; North 
Carolina Justice Center; Public Justice Center; SPLC; TechEquity 
Collective; The Leadership Conference on Civil and Human Rights; The 
Strategic Organizing Center; William E. Morris Institute for 
Justice; Women Employed.
    \161\ Comments of State Attorneys General.
---------------------------------------------------------------------------

    A few commenters express the view that scheduling should not be an 
essential term or condition of employment for joint-employer 
purposes.\162\ In this regard, some commenters note that determining 
the hours of operation for a facility should not be treated as 
comparable to determining hours of work for all individuals who perform 
services in that facility,\163\ while others characterize scheduling as 
related to ``routine'' contractual provisions that speak to the timing 
for completion of a project.\164\ Certain commenters note that treating 
control over scheduling as indicative of a common-law employment 
relationship may disproportionately affect entities operating in the 
manufacturing and staffing industries.\165\ Other commenters observe 
that scheduling practices are intertwined with employees' hours of work 
and should therefore be considered essential.\166\
---------------------------------------------------------------------------

    \162\ Comments of American Pizza Community; Association of 
Women's Business Centers; NAM; SBA Office of Advocacy.
    \163\ Comments of American Hotel & Lodging Association; FMI--The 
Food Industry Association; National Retail Federation.
    \164\ Comments of SBA Office of Advocacy.
    \165\ Comments of FMI--The Food Industry Association; NAM; Clark 
Hill PLC.
    \166\ Comments of General Counsel Abruzzo; IBT; National Women's 
Law Center.
---------------------------------------------------------------------------

    Some commenters argue that work rules and directions governing the 
manner, means, or methods of work performance should not be essential 
for purposes of the joint-employer standard.\167\ These commenters 
express concern that including work rules and directions potentially 
sweeps too broadly and risks exposing small business owners to 
substantial new liability.\168\ Similarly, our dissenting colleague 
expresses concern that including work rules and directions on the list 
of essential terms and conditions of employment sweeps too broadly, 
potentially allowing the Board to make a joint-employer finding on the 
strength of ambiguous language in work rules. He also predicts that 
including work rules and directions as essential will lead to more 
frequent joint-employer findings in the staffing, healthcare, and 
franchise industries. Commenters who favor including work rules and 
directions on the list of essential terms and conditions of employment 
generally argue that entities reserving or exercising control over work 
rules and directions thereby exert considerable influence over the 
manner and means of particular employees' work.\169\
---------------------------------------------------------------------------

    \167\ Comments of Americans for Prosperity Foundation; Americans 
for Tax Reform; NAM; Rio Grande Foundation.
    \168\ Comments of Americans for Tax Reform; Rio Grande 
Foundation.
    \169\ Comments of General Counsel Abruzzo; NELP.
---------------------------------------------------------------------------

    Several commenters propose additional terms and conditions of 
employment that the Board should consider essential. A few commenters 
propose adding practices related to surveillance and monitoring to the 
list.\170\ One comment goes further, suggesting that the Board adopt a 
rebuttable presumption that an entity is a joint employer if it imposes 
certain requirements on another entity or that entity's employees 
(among others, retaining discretion to hire or fire that entity's 
employees and requiring that entity's employees to enter into 
noncompete agreements or other restraints on operating a business in 
the same trade or industry during or after the contract).\171\
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    \170\ Comments of Center for Law and Social Policy; Jobs with 
Justice and Governing for Impact.
    \171\ Comments of Professors Pandya, Elmore, and Griffith.
---------------------------------------------------------------------------

    As noted above, the Board has determined to include an exhaustive 
list of essential terms and conditions of employment in the final rule. 
While commenters broadly agree on the content of the proposed rule's 
list, we briefly address commenters' specific concerns about our 
decision to include scheduling, workplace health and safety, and work 
rules and directions governing the manner, means, or methods of work 
performance.
    With respect to scheduling, we begin by noting several commenters' 
approval of the 2020 Rule's inclusion of scheduling along with hours of 
work as an essential term or condition of employment.\172\ We find that 
Section 2 of the Restatement (Second) of Agency provides support for 
including both ``hours of work and scheduling'' on the list of 
essential terms and conditions of employment. We further note that 
Board law has long treated scheduling as probative of joint-employer 
status.\173\ We are also persuaded by the view set forth by some 
commenters that scheduling practices are often intertwined with hours 
of work.
---------------------------------------------------------------------------

    \172\ See comments of General Counsel Abruzzo; IBT; National 
Women's Law Center.
    \173\ See, e.g., Continental Winding Co., 305 NLRB 122, 123 fn. 
4 (1991).
---------------------------------------------------------------------------

    Having carefully considered the valuable input of commenters on the 
proposed rule's inclusion of workplace health and safety on our list of 
essential terms and conditions of employment (and the views of our 
dissenting colleague), we are persuaded to retain this aspect of the 
proposed rule. We find common-law support for including workplace 
health and safety as an essential term or condition of employment in 
references to the importance of an employer's control over ``the 
physical conduct'' of an employee ``in the performance of the service'' 
to the employer.\174\ While many commenters and our dissenting 
colleague have observed that workplace health and safety is subject to 
substantive regulation by many federal, state, and local authorities, 
especially in certain industries, we do not seek to displace or 
interfere with those regulatory schemes by recognizing that control 
over workplace health and safety is indicative of a joint-employment 
relationship. As discussed further below, we do not consider 
contractual terms that do nothing more than incorporate regulatory 
requirements, without otherwise reserving authority to control or 
exercising power to control the performance of work or terms and 
conditions of employment, indicative of

[[Page 73966]]

joint-employer status.\175\ Finally, as noted above, many commenters 
confirmed our preliminary view that the experience of the Covid-19 
pandemic demonstrated the importance of treating workplace health and 
safety as essential.
---------------------------------------------------------------------------

    \174\ Restatement (Second) of Agency, sec. 2 (1958). While our 
colleague does not find our reference to this ``general statement'' 
in the Restatement persuasive, we believe that ``the physical 
conduct'' of an employee ``in the performance of the service'' to 
the employer encompasses workplace health and safety.
    \175\ Contrary to our dissenting colleague's suggestion, if an 
employer's compliance with health and safety regulations or OSHA 
standards involves choosing among alternative methods of satisfying 
its legal obligation, a contract term that merely memorializes the 
employer's choice regarding how to comply with the regulation would 
not indicate joint-employer status. To the extent that an employer 
reserves further authority or discretion over health and safety 
matters, however, such reserved control (or control exercised 
pursuant to such a reservation) would bear on the joint-employer 
inquiry.
---------------------------------------------------------------------------

    We also adhere to the view set forth in the proposed rule that work 
rules and directions governing the manner, means, or methods of work 
performance are properly included as essential terms and conditions of 
employment. As with our discussion of scheduling above, we note that 
many commenters found it appropriate for the Board to follow the 2020 
rule's lead in treating work rules and directions as essential. 
Moreover, we find support for including work rules and directions on 
the list of essential terms and conditions of employment in Sections 2 
and 220 of the Restatement (Second) of Agency.\176\ In this regard, we 
agree with the views set forth by some commenters that possessing or 
exercising control over work rules or directions governing the manner, 
means, or methods of work performance illuminates the extent of control 
an employer exercises over the details of the work to be 
performed.\177\
---------------------------------------------------------------------------

    \176\ Id., sec. 2 & 220.
    \177\ We reject our dissenting colleague's suggestion that the 
Board will seize upon ambiguous language in work rules to make a 
joint-employer finding. Instead, we consider work rules or 
directions essential because they may be especially clear indicators 
of a putative joint employer's authority to control or exercise of 
control over the details of particular employees' work. Cf. 
Cognizant Technology Solutions U.S. Corp. & Google LLC, 372 NLRB No. 
108, slip op. at 1 (2023) (finding joint-employer relationship under 
2020 rule based in part on entity's maintenance of ```workflow 
training charts' which govern[ed] the details of employees' 
performance of specific tasks.'').
---------------------------------------------------------------------------

    Finally, in light of the clarification we make regarding the 
content of a joint employer's bargaining obligation in paragraph (h) of 
the final rule, we do not find it necessary to add other terms or 
conditions of employment to the final rule's list of ``essential'' 
terms or conditions of employment. However, we believe the final rule 
is responsive to commenters' insights that bargaining over certain of 
these subjects, like workplace surveillance, may be very important to 
employees who organize and seek to bargain collectively. As a result, 
the final rule recognizes that once an entity is found to be a joint 
employer on the basis of its control of one or more essential terms or 
conditions of employment, that entity will be subject to a duty to 
bargain over all mandatory subjects of employment that it 
controls.\178\
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    \178\ Contrary to the view of our dissenting colleague, 
providing an exhaustive list of essential terms and conditions of 
employment is not intended to address the District of Columbia 
Circuit's concerns about the forms of indirect control that bear on 
the joint-employer inquiry, but to instead respond to the court's 
guidance, on remand, that the Board ``explain which terms and 
conditions are `essential' to permit `meaningful collective 
bargaining,''' and to ``clarify what `meaningful collective 
bargaining' entails and how it works in this setting.'' BFI v. NLRB, 
911 F.3d at 1221-1222 (quoting BFI, 362 NLRB at 1600).
---------------------------------------------------------------------------

E. Comments About Forms of Control Sufficient To Establish Status as a 
Joint Employer

    Proposed paragraph (e) of the proposed rule provided that whether 
an employer possesses the authority to control or exercises the power 
to control one or more of the employees' terms and conditions of 
employment is determined under common-law agency principles. Possessing 
the authority to control is sufficient to establish status as a joint 
employer, regardless of whether control is exercised. Exercising the 
power to control indirectly is sufficient to establish status as a 
joint employer, regardless of whether the power is exercised directly. 
Control exercised through an intermediary person or entity is 
sufficient to establish status as a joint employer.\179\
---------------------------------------------------------------------------

    \179\ 87 FR at 54663.
---------------------------------------------------------------------------

    Some commenters specifically request that the Board modify this 
paragraph of the proposed rule to specify what quantum or degree of 
indirect or reserved control will be sufficient to give rise to a 
joint-employer finding.\180\ Many commenters commended the 2020 rule 
for returning to TLI/Laerco's ``substantial direct and immediate 
control'' formulation as the threshold that would give rise to a joint-
employer finding and treating ``limited and routine'' instances of 
control as irrelevant to the joint-employer inquiry, with some noting 
the practical benefits of that standard for the construction, 
franchise, retail, restaurant, and staffing industries.\181\ Our 
dissenting colleague likewise expresses his preference for the 2020 
rule's treatment of the forms of control that are sufficient to 
establish status as a joint employer. Some commenters suggest that 
Congress, in enacting the Taft-Hartley amendments, implicitly 
contemplated that only substantial direct and immediate control could 
suffice to establish a joint-employer relationship.\182\ In addition, 
some of these commenters urge that it is especially important for the 
Board to ascertain whether an entity will possess or exercise control 
on a prospective basis as a precondition to imposing a bargaining 
obligation.\183\
---------------------------------------------------------------------------

    \180\ Comments of American Trucking Associations; COLLE; 
Competitive Enterprise Institute; Escalante Organization; NAHB; SBA 
Office of Advocacy; SHRM. Some commenters suggest that the proposed 
rule is sufficiently vague that it could have negative effects on 
the residential construction industry, exposing homeowners who 
control access to job sites, working hours, and many day-to-day 
conditions of employment to classification as potential joint 
employers. See comments of NAHB; Restaurant Law Center and National 
Restaurant Association. Another commenter questions whether a 
franchisor would be deemed a joint employer by virtue of providing 
optional tools and resources to a franchisee. See comments of 
Escalante Organization.
    \181\ Comments of AGC; American Pizza Community; Americans for 
Tax Reform; American Staffing Association; California Policy Center; 
Escalante Organization; Independent Electrical Contractors; IFA; 
Michael Remick; National Association of Realtors; National Black 
McDonald's Operators Association; National Demolition Association; 
National Retail Federation; National Taxpayers Union; New Civil 
Liberties Alliance & Institute for the American Worker; North 
American Meat Institute; Restaurant Law Center and National 
Restaurant Association; RILA; The Mackinac Center for Public Policy; 
Yum! Brands. One commenter also argues that there must be a showing 
of regular and continuous control, not merely sporadic and de 
minimis control. See comments of SHRM. Another commenter likewise 
suggests that the Board incorporate a de minimis limitation in the 
final rule. See comments of UNITE HERE.
    \182\ Comments of American Hotel & Lodging Association; COLLE; 
RILA.
    \183\ Comments of RILA; SHRM.
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    With respect, we disagree with the view of some commenters and our 
dissenting colleague that only ``substantial direct and immediate 
control'' should be relevant to the Board's joint-employer inquiry. As 
set forth in the NPRM, once it is shown that an entity possesses or 
exercises relevant control over particular employees, the Board is not 
aware of any common-law authority standing for the proposition that 
further evidence of the direct and immediate exercise of that control 
is necessary to establish a common-law employment relationship. While 
we acknowledge that some commenters found the 2020 rule's formulation 
beneficial, because we are bound to apply common-law agency principles, 
we are not free to maintain a definition of ``joint employer'' that 
incorporates the restriction that any relevant control an entity 
possesses or exercises must be ``direct and immediate.'' \184\ Finally, 
we

[[Page 73967]]

hope to satisfy those commenters seeking guidance regarding the quantum 
or type of control that is sufficient to establish status as a joint 
employer in the discussion that follows.
---------------------------------------------------------------------------

    \184\ The District of Columbia Circuit has recently emphasized 
that it ``took great pains to inform the Board that the failure to 
consider reserved or indirect control is inconsistent with the 
common law of agency.'' Sanitary Truck Drivers & Helpers Local 350, 
International Brotherhood of Teamsters v. NLRB, 45 F.4th 38, 47 
(D.C. Cir. 2022).
---------------------------------------------------------------------------

    Others approve of the proposed rule's explicit recognition that 
control exercised through an intermediary should be sufficient to 
establish joint-employer status, offering examples of the role 
intermediaries play in sharing or codetermining essential terms and 
conditions of employment in certain industries, including the 
franchise, staffing, and temporary employment industries.\185\ One 
commenter highlights how the proposed rule, which would find indirect 
control over workplace health and safety sufficient to establish joint-
employer status, could benefit employees with disabilities, who it 
represents are overrepresented in temporary employment and often face 
distinctive health and safety challenges that may require multiple 
firms to play a role in addressing.\186\
---------------------------------------------------------------------------

    \185\ Comments of Jobs with Justice and Governing for Impact; 
Public Justice Center; The Leadership Conference on Civil and Human 
Rights.
    \186\ Comments of The Leadership Conference on Civil and Human 
Rights. Other commenters likewise argue that temporary employees 
frequently receive less safety training and are more vulnerable to 
retaliation for reporting injuries than their permanent-employee 
counterparts. See comments of North Carolina Justice Center.
---------------------------------------------------------------------------

    In addition, these commenters emphasize that taking all relevant 
forms of control, including indirect control, into account is essential 
to ensuring that bargaining is effective, especially in industries 
characterized by the widespread use of contracting, including the 
property services, staffing, and construction industries.\187\ Some 
commenters observe that making indirect control part of the joint-
employer inquiry may foster compliance with labor and employment laws 
and encourage an appropriate sharing of responsibility among multiple 
firms that codetermine terms and conditions of employment.\188\ Some of 
these commenters charge that by imposing a requirement of ``substantial 
direct and immediate control'' over essential terms and conditions of 
employment, the 2020 rule effectively rendered forms of indirect 
control irrelevant to the joint-employer analysis, in contravention of 
the common-law agency principles that must guide the Board's 
application of its joint-employer standard.\189\ As one of these 
commenters adds, this error is especially pronounced in light of the 
District of Columbia Circuit's later statement in Sanitary Truck 
Drivers and Helpers Local 350, International Brotherhood of Teamsters 
v. NLRB, 45 F.4th 38, 46-47 (D.C. Cir. 2022), that the Board was not 
free to apply an analysis that effectively ignored reserved and 
indirect control.\190\
---------------------------------------------------------------------------

    \187\ Comments of ACLU; AFL-CIO; BCTGM; Congressman Scott et 
al.; CWA; Jobs with Justice and Governing for Impact; Lawyers' 
Committee for Civil Rights Under Law; Los Angeles County Federation 
of Labor AFL-CIO & Locals 396 and 848 of the IBT; National Women's 
Law Center; Public Justice Center; Restaurant Opportunities Centers 
United; SEIU; Signatory Wall and Ceiling Contractors Alliance; 
TechEquity Collaborative; The Leadership Conference on Civil and 
Human Rights; The Strategic Organizing Center; UBC; UE; Women 
Employed.
    \188\ Comments of Bakery, Confectionary, Tobacco Workers and 
Grain Millers International Union (BCTGM); General Counsel Abruzzo; 
Public Justice Center; Richard Eiker; TechEquity Collaborative.
    \189\ Comments of AFL-CIO; NELP; UNITE HERE. One of these 
commenters makes the further suggestion that, in situations where 
one firm dominates another or where parties have an exclusive 
service relationship, the Board should consider applying a rule of 
per se joint-employer liability. See comments of NELP.
    \190\ Comments of AFL-CIO.
---------------------------------------------------------------------------

    Certain commenters who generally agree with the Board's proposed 
approach to treating indirect control as probative to the joint-
employer analysis argue that certain employer actions should, in 
general, be regarded as amounting to the exercise of indirect control 
over particular employees.\191\ For example, one commenter proposes 
that the Board state that using surveillance technology amounts to 
indirect control over the employees being surveilled.\192\ Another 
commenter suggests that certain forms of control that franchisors or 
user firms exert over the nonwage cost items in franchisees' or 
supplier firms' budgets are tantamount to indirect control over 
wages.\193\ One commenter offers illustrations of forms of control she 
regards as material to the existence of a common-law employment 
relationship. One example includes a contract provision granting a user 
employer the right to require mandatory overtime by supplied 
employees.\194\ Some suggest that the Board add corresponding examples 
or hypotheticals to the final rule to clarify that these forms of 
control are sufficient.\195\
---------------------------------------------------------------------------

    \191\ Comments of Center for Law and Social Policy; Los Angeles 
County Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT.
    \192\ Comments of Center for Law and Social Policy. Other 
commenters likewise suggest that, at least in certain contexts, 
surveillance might demonstrate sufficient indirect control over 
employees' essential terms and conditions of employment to justify a 
joint-employer finding, but they do not recommend modifying the 
proposed rule to include this observation. See, e.g., comments of 
IBT; Jobs with Justice and Governing for Impact; NELP.
    \193\ Comments of Los Angeles County Federation of Labor AFL-CIO 
& Locals 396 and 848 of the IBT.
    \194\ Comments of General Counsel Abruzzo.
    \195\ See, e.g., comments of CWA; RILA; State Attorneys General; 
U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    While we appreciate the views set forth by commenters who 
illustrate why forms of indirect control are frequently relevant to the 
joint-employer analysis, we decline the invitation to modify the text 
of the proposed rule to incorporate these insights.\196\ By maintaining 
the general language of the proposed rule, which provides that control 
is to be determined by reference to common-law agency principles, we 
aim to permit the application of the final rule to a diverse 
arrangement of mechanisms that grant third parties or other 
intermediaries authority to share or codetermine matters governing 
particular employees' essential terms and conditions of employment. In 
this regard, as we apply the final rule to new facts, we will be guided 
by Sec.  103.40(e)(2) of the final rule, which is consistent with the 
District of Columbia Circuit's statement that ``the common law has 
never countenanced the use of intermediaries or controlled third 
parties to avoid the creation of a master-servant relationship.'' \197\
---------------------------------------------------------------------------

    \196\ As discussed below, however, we have reformatted Sec.  
103.40(e) of the final rule to include two subsections and have 
streamlined its text to avoid surplusage.
    \197\ BFI v. NLRB, 911 F.3d at 1217. Our dissenting colleague 
questions our decision not to include an extensive list of examples 
of forms of indirect control that may be relevant to the joint-
employer inquiry and asks what other forms of indirect control may 
be relevant. As set forth in Sec. I.D. above, we will address 
whether other mechanisms that grant third parties control over 
particular employees' terms and conditions of employment establish 
joint-employer status in the course of applying the rule. In so 
doing, we will be guided by the District of Columbia Circuit's 
treatment of indirect control and common-law agency principles.
---------------------------------------------------------------------------

    Another group of comments raises concerns about situations where a 
putative joint employer in fact possesses the authority to control or 
exercises the power to control essential terms or conditions of 
employment only because it is required to do so by law or 
regulation.\198\ Some of these commenters state that the Federal 
Government possesses reserved and indirect control over certain terms 
and conditions of employment of the employees of companies it contracts 
with.\199\ For example, one commenter

[[Page 73968]]

describes the use of ``flow-down'' clauses in contracting relationships 
and how prime contractors are sometimes required to impose obligations 
under the Service Contract Act, 41 U.S.C. 351 et seq., and similar 
local and municipal laws setting minimum wage and benefit standards on 
their subcontractors.\200\ Similarly, some commenters suggest that 
control over essential terms or conditions of employment is less 
probative of joint-employer status if it is possessed or exercised in 
the service of setting basic expectations or ground rules for a third-
party contractor or contracted service.\201\
---------------------------------------------------------------------------

    \198\ Comments of American Hospital Association; American 
Trucking Associations; CDW; Federation of American Hospitals; Home 
Care Association of America; Independent Bakers Association; NAHB; 
National Retail Federation.
    \199\ Comments of COLLE; Goldwater Institute; National Small 
Business Association; SBA Office of Advocacy; Thomas Jefferson 
Institute for Public Policy. One commenter provides several examples 
of such contract provisions. See comments of Center for Workplace 
Compliance.
    \200\ Comments of American Council of Engineering Companies.
    \201\ Comments of ARTBA.
---------------------------------------------------------------------------

    In response to these commenters, we note that if a law or 
regulation actually sets a particular term or condition of employment 
(like minimum wages, driving time limits for truck drivers, or 
contractor diversity requirements), an entity that does nothing more 
than embody or memorialize such legal requirements in its contracts for 
goods and services, without otherwise reserving the authority to 
control or exercising the power to control terms or conditions of 
employment, does not thereby become the employer of particular 
employees subject to those legal requirements. This is because the 
embodiment of such legal requirements is not a matter within the 
entity's discretion subject to collective bargaining.\202\ We remind 
commenters who express concern about the role of entities exempt from 
the Board's jurisdiction that, under longstanding Board precedent, if a 
common-law employer of particular employees lacks control over some of 
those employees' terms and conditions of employment because those terms 
and conditions are controlled by an exempt entity, that common-law 
employer is not required to bargain about those terms and conditions of 
employment.\203\ Consistent with this precedent, the final rule 
provides that a joint employer will be required to bargain over only 
those mandatory subjects of bargaining that it possesses or exercises 
the authority to control. Finally, as discussed in more detail above 
and below, if an entity possesses or exercises some control over 
particular employees' terms and conditions of employment, including 
indirect control, only by the terms of a third-party contract that sets 
basic expectations or ground rules for the production or delivery of 
goods or services, without otherwise reserving the authority or 
exercising the power to control the details of the manner and methods 
by which the work is performed, the entity does not thereby become an 
employer of those employees. This is because such control, as a normal 
incident of a third-party contract, does not establish the common-law 
employment relationship that is the threshold requirement for finding a 
joint-employer relationship.\204\
---------------------------------------------------------------------------

    \202\ Of course, if an employer has discretion over how to 
comply with a statutory mandate, it must bargain about how to 
exercise that discretion. See, e.g., Roseburg Forest Products Co., 
331 NLRB 999, 1003 (2000) (requiring an employer to bargain with the 
union over how to satisfy its obligations to keep an employee's 
medical information confidential under the Americans with 
Disabilities Act, 42 U.S.C. 12101, et seq., while meeting its duty 
to furnish requested information to the union under the NLRA).
    \203\ Cf. Management Training Corp., 317 NLRB 1355 (1995).
    \204\ For these reasons, we also reject the hypotheticals our 
dissenting colleague puts forward to suggest that the final rule 
exceeds the boundaries of the common law. Our colleague downplays 
the importance of the final rule's threshold requirement of a 
common-law employment relationship and thereby concludes that 
entities with highly attenuated relationships to particular 
employees will be deemed joint employers. In applying the final 
rule, and consistent with the common law, we will perform the 
required threshold analysis.
---------------------------------------------------------------------------

    Several commenters raise concerns about the possibility that, in 
contexts where a public entity contracts with a private entity to 
render a service or perform a contract, the proposed joint-employer 
standard risks enmeshing that public entity in the Board's 
jurisdiction.\205\ One commenter, citing the Board's decision in 
Management Training Corp., 317 NLRB 1355 (1995), argues that the 2020 
rule would better ensure the proper application of the joint-employer 
standard in contracting situations.\206\ One commenter expresses 
particular concern about the implications of a joint-employer 
relationship between a public charter school and third-party vendors or 
contractors it uses.\207\
---------------------------------------------------------------------------

    \205\ Comments of AGC; COLLE; Goldwater Institute; Home Care 
Association of America.
    \206\ Comments of COLLE.
    \207\ Comments of National Alliance for Public Charter Schools.
---------------------------------------------------------------------------

    We reject these commenters' views that the proposed rule creates 
any novel risks for public or private entities who contract with one 
another. The final rule we adopt requires, as a threshold matter, that 
each putative joint employer meet the definition of ``employer'' in 
Section 2(2) of the Act.\208\ Section 2(2) excludes from the definition 
of ``employer'' public entities, including, in relevant part, ``the 
United States or any wholly owned Government corporation, or any 
Federal Reserve Bank, or any State or political subdivision thereof.'' 
\209\ While some commenters suggest that public entities possess or 
exercise control over essential terms and conditions of employment, we 
note that these facts are insufficient to establish a joint-employment 
relationship for purposes of the Act because the public entity is 
excluded from the statutory definition of ``employer.'' Finally, we 
regard the Board's decision in Management Training Corp., above, as 
persuasive in addressing some commenters' concerns that applying the 
joint-employer standard we adopt might cause distinctive problems for 
government contractors. As one commenter suggests, that case permits 
the Board to find one entity is an employer for purposes of Section 
2(2) even if another, exempt entity also possesses or exercises control 
over particular employees' essential terms or conditions of 
employment.\210\ We note that reviewing courts have broadly approved of 
the Board's assertion of jurisdiction over government contractors.\211\
---------------------------------------------------------------------------

    \208\ 29 U.S.C. 152(2).
    \209\ Id. The Board uses the test approved by the Supreme Court 
in NLRB v. National Gas Utility District of Hawkins County, 402 U.S. 
600 (1971) to determine whether an entity is a ``political 
subdivision'' within the meaning of Sec. 2(2) of the Act and 
therefore exempt from the Board's jurisdiction.
    \210\ See reply comments of AFL-CIO (citing Management Training 
Corp., 317 NLRB at 1358).
    \211\ See Teledyne Economic Development v. NLRB, 108 F.3d 56, 59 
(4th Cir. 1997) (``By its terms, section 2(2) exempts only 
government entities or wholly owned government corporations from its 
coverage--not private entities acting as contractors for the 
government.''). See also NLRB v. YWCA, 192 F.3d 1111, 1117 (8th Cir. 
1999) (``We find ourselves in agreement with the opinions of our 
sister circuits on the issue of whether or not the Board can assert 
jurisdiction over an employer without regard to whether or not the 
employer's control over its ability to collectively bargain is 
hampered or impeded by the employer's operating agreement with the 
government.''); Aramark Corp. v. NLRB, 179 F.3d 872, 879 (10th Cir. 
1999) (``The Board's consistent view that governmental contractors 
fall outside section 2(2)'s political subdivision exemption and 
inside that provision's definition of an employer `is entitled to 
great respect.' ''); Pikeville United Methodist Hospital of 
Kentucky, Inc. v. United Steelworkers of America, 109 F.3d 1146, 
1152-1153 (6th Cir. 1997).
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F. Control Over Matters That Are Immaterial to the Existence of an 
Employment Relationship Under Common-Law Agency Principles or That Do 
Not Bear on Essential Terms and Conditions of Employment

    Proposed paragraph (f) provided that ``[e]vidence of an employer's 
control over matters that are immaterial to the existence of an 
employment relationship under common-law agency principles or control 
over matters that do not bear on the employees' essential terms and 
conditions of employment is not relevant to the determination of

[[Page 73969]]

whether the employer is a joint employer.'' \212\ As set forth more 
fully above, the preamble to the proposed rule expressed agreement with 
the District of Columbia Circuit's view that ``routine components of a 
company-to-company contract'' will generally not be material to the 
existence of an employment relationship under common-law agency 
principles.\213\ The proposed rule cited two examples given by the 
District of Columbia Circuit as potential kinds of company-to-company 
contract provisions that will not generally be probative of joint-
employer status: a ``very generalized cap on contract costs''; or ``an 
advance description of the tasks to be performed under the contract.'' 
\214\ While noting that the proposed rule did not intend to 
exhaustively detail the kinds of business arrangements that might bear 
on the existence of a common-law employment relationship, the Board 
specifically solicited commenters' input on other kinds of company-to-
company contract provisions that might not be material to the existence 
of an employment relationship under common-law agency principles.\215\ 
Many commenters accepted the Board's invitation to provide these 
examples, and we have carefully considered the helpful insights 
commenters shared, as discussed below.
---------------------------------------------------------------------------

    \212\ 87 FR at 54663.
    \213\ Id. at 54651 (quoting BFI v. NLRB, 911 F.3d at 1221).
    \214\ Id.
    \215\ Id.
---------------------------------------------------------------------------

    First, some commenters specifically addressed the two examples 
identified by the District of Columbia Circuit and in the proposed 
rule. A few commenters appeared to suggest that a generalized cap on 
contract costs might in certain circumstances be probative of a common-
law employment relationship, especially if such a cap is coupled with a 
cost-plus arrangement or other explicit limitations on employee wages 
and benefits.\216\ But many other commenters generally expressed their 
agreement with the view set forth in the proposed rule and by the 
District of Columbia Circuit that generalized caps on contract costs 
typically resemble other ordinary price or quantity terms that do not 
have any necessary connection to the existence of a common-law 
employment relationship.\217\
---------------------------------------------------------------------------

    \216\ See, e.g., comments of General Counsel Abruzzo; IBT. We 
address cost-plus contract provisions below.
    \217\ Comments of RILA.
---------------------------------------------------------------------------

    No commenter expresses any concerns about treating advance 
descriptions of the tasks to be performed under the contract (including 
provisions setting forth objectives, ground rules, or expectations, or 
providing for oversight) as generally immaterial to the existence of a 
common-law employment relationship, while several commenters expressly 
indicate their approval of the proposed rule's discussion of such 
provisions.\218\ One commenter suggests that it is common practice to 
include a ``statement of work'' to define a new project and that the 
Board should regard these types of contract provisions as akin to 
advance descriptions of the tasks to be performed (and therefore not 
material to the existence of a common-law employment 
relationship).\219\ A few of these commenters make the further 
suggestion that the Board modify the text of proposed paragraph (f) to 
expressly reflect that descriptions of the tasks to be performed are 
not material to the existence of a common-law employment 
relationship.\220\
---------------------------------------------------------------------------

    \218\ Comments of Escalante Organization; IFDA; RILA; Tesla, 
Inc.; The Mackinac Center for Public Policy.
    \219\ Comments of Tesla, Inc.
    \220\ Comments of IFDA; The Mackinac Center for Public Policy.
---------------------------------------------------------------------------

    A number of commenters encourage the Board to modify the proposed 
rule to provide examples of contractual provisions that would not give 
rise to a finding of joint-employer status or to otherwise illustrate 
or give examples about how the Board will apply the joint-employer 
rule.\221\ These commenters offer a range of suggested ``routine 
components of a company-to-company contract'' \222\ to exclude as 
probative of joint-employer status. These contractual provisions 
include, among others, those that set forth: the objectives, basic 
ground rules, and expectations of the relationship; \223\ instructions 
regarding work standards or expectations and about what work to 
perform, or where and when to perform work; \224\ minimum staffing 
requirements; \225\ quality, productivity, timing, and safety terms 
about providing a service or completing a project; \226\ requirements 
that deliveries be made during limited windows of time; \227\ 
requirements about monitoring or maintaining brand standards or the 
design, d[eacute]cor, logo, or image of a business; \228\ uniform 
requirements; \229\ generally applicable rules for individuals visiting 
a facility; \230\ general price terms or terms governed by third-party 
or customer demand; \231\ authority to cancel a contract, including at 
will; \232\ requirements that employees undergo background checks or 
drug tests, comply with equal employment opportunity, 
nondiscrimination, and antiharassment policies, and satisfy licensure 
requirements; \233\ authority to bar certain individuals from the 
premises or reject particular employees; \234\ terms related to an 
entity's control over its property, premises, or equipment, including 
training and safety requirements; \235\ provisions related to the 
nondisclosure or confidentiality of trade secrets, proprietary 
information, or intellectual property; \236\ construction project 
schedule requirements or safety programs or other site-specific 
requirements for entities visiting marine terminals, railyards, or 
other supply

[[Page 73970]]

chain hubs; \237\ parties' obligations under law or regulations; \238\ 
provisions requiring hospitals to superintend contract employees as 
part of their patient-care mission; \239\ goals related to diversity, 
equity, inclusion, and access (DEIA), corporate social responsibility 
(CSR), or environmental, social, and governance (ESG); \240\ cost-plus 
arrangements; \241\ minimum compensation requirements as determined by 
public contracting rules or regulations, including the Davis-Bacon Act, 
40 U.S.C. 3141 et seq.\242\
---------------------------------------------------------------------------

    \221\ Comments of American Hotel & Lodging Association; American 
Staffing Association; HR Policy Association; RILA; Tesla, Inc.; U.S. 
Chamber of Commerce; U.S. Small Business Association; U.S. Black 
Chambers, Inc.
    \222\ BFI v. NLRB, 911 F.3d at 1220.
    \223\ Comments of American Hotel & Lodging Association; CDW; 
Contractor Management Services, LLC; International Warehouse 
Logistics Association; SHRM; Tesla, Inc.; The Mackinac Center for 
Public Policy.
    \224\ Comments of American Hotel & Lodging Association (citing 
Service Employees International Union, Local 32BJ v. NLRB, 647 F.3d 
435, 443 (2d Cir. 2011); Local 254, SEIU, 324 NLRB 743, 746-749 
(1997)); Independent Lubricant Manufacturers Association; Restaurant 
Law Center and National Restaurant Association; Tesla, Inc.; U.S. 
Chamber of Commerce.
    \225\ Comments of American Hotel & Lodging Association.
    \226\ Comments of American Hotel & Lodging Association; ARTBA; 
CDW; Energy Marketers of America; SHRM; Tesla, Inc.
    \227\ Comments of Control Transportation Services, Inc.; Energy 
Marketers of America; Michael Remick; M. M. Fowler, Inc.; QuickChek; 
U.S. Chamber of Commerce. Notably, several of these commenters raise 
observations regarding the timing of deliveries at retail motor fuel 
locations, arguing that energy marketers often dictate when fuel can 
be delivered safely. See, e.g., comments of Energy Marketers of 
America.
    \228\ Comments of American Hotel & Lodging Association; Home 
Care Association of America; IFA; Independent Lubricant 
Manufacturers Association; M. M. Fowler, Inc.; McDonald's USA, LLC; 
National Association of Convenience Stores; SHRM; U.S. Chamber of 
Commerce; Yum! Brands.
    \229\ Comments of American Hotel & Lodging Association; IFA.
    \230\ Comments of American Hotel & Lodging Association; CDW; 
Contractor Management Services, LLC; Home Care Association of 
America; National Association of Convenience Stores; Restaurant Law 
Center and National Restaurant Association; SHRM.
    \231\ Comments of Restaurant Law Center and National Restaurant 
Association; SHRM.
    \232\ Comments of RILA; SHRM.
    \233\ Comments of Center for Workplace Compliance; Home Care 
Association of America; National Retail Federation; RILA; SHRM; U.S. 
Chamber of Commerce.
    \234\ Comments of American Hotel & Lodging Association; Energy 
Marketers of America; Independent Lubricant Manufacturers 
Association; National Retail Federation; Tesla, Inc.
    \235\ Comments of SHRM; Tesla, Inc.; U.S. Chamber of Commerce.
    \236\ Comments of U.S. Chamber of Commerce.
    \237\ Comments of ABC; AGC; ARTBA; Trucking Industry 
Stakeholders. Several commenters identify AIA Document A201-2017, a 
standard form document setting forth the general conditions for 
construction projects, and the Federal Acquisition Regulation and 
other contracting laws and regulations, as important sources of 
contract terms that memorialize employers' respective duties and 
obligations on construction jobsites. See comments of AGC. Others 
point to TSA requirements, marine terminal operators' rules, and the 
requirements of the Uniform Intermodal Interchange Agreement (UIIA) 
as playing a role in defining terms and conditions of employment for 
employees who work at job sites governed by those rules and 
agreements. See, e.g., comments of AAPA; Trucking Industry 
Stakeholders.
    \238\ Comments of ABC; American Trucking Associations; CDW; 
Center for Workplace Compliance; Home Care Association of America; 
IFA; Independent Bakers Association; IFDA; NAHB; National Retail 
Federation; SBA Office of Advocacy; SHRM; Tesla, Inc.; U.S. Chamber 
of Commerce.
     One of these commenters specifically observes that provisions 
that do no more than memorialize parties' existing obligations to 
adhere to legally imposed minimum standards should not be material 
to the existence of a common-law employment relationship. See 
comments of CDW.
    \239\ Comments of AHA; Federation of American Hospitals; U.S. 
Chamber of Commerce.
    \240\ Comments of Center for Workplace Compliance; CDW; HR 
Policy Association; IFA; Retail Industry Leaders Association; Tesla, 
Inc.; U.S. Chamber of Commerce.
    \241\ Comments of RILA; SHRM; U.S. Chamber of Commerce. However, 
as noted above, one commenter identified cost-plus contracting as 
potentially probative of a user employer's indirect control over the 
wages of a supplier employee. Comments of General Counsel Abruzzo.
    \242\ Comments of ABC; ARTBA.
---------------------------------------------------------------------------

    Some commenters helpfully responded to the Board's request for 
comment on this issue by providing sample or actual contractual 
language that they argue correspond to some of the categories of 
company-to-company contract provisions listed above.\243\ After 
reviewing the wide range of contract provisions commenters shared with 
the Board, we are persuaded that the approach taken in the proposed 
rule, which did not attempt to categorize company-to-company contract 
provisions ex ante, is the most prudent path forward.\244\ Because the 
language used in contract provisions that ostensibly address the same 
subject matter may vary widely, we believe that case-by-case 
adjudication applying the joint-employer standard is a better approach. 
To do otherwise might risk problems of both over- and under-inclusion 
and overlook important context that might be relevant to the Board's 
analysis.
---------------------------------------------------------------------------

    \243\ Comments of CDW; U.S. Chamber of Commerce.
    \244\ See BFI v. NLRB, 911 F.3d at 1221 (``In principle, there 
is nothing wrong with the Board fleshing out the operation of a 
legal test that Congress has delegated to the Board to administer 
through case-by-case adjudication.'').
---------------------------------------------------------------------------

    In addition to contractual provisions, other commenters suggest 
that the Board modify the proposed rule to recognize certain business 
practices as aspects of routine company-to-company dealings that are 
not material to the existence of a common-law employment relationship. 
For example, several commenters urge the Board to specify that 
monitoring a third party's performance for the purposes of quality 
assurance or auditing for compliance with contractual obligations will 
not be viewed as probative of joint-employer status.\245\ A few others 
urge the Board to clarify that the mere communication of work 
assignments, delivery times, or other details necessary to perform work 
under a contract is not material to the joint-employer inquiry if it is 
not accompanied by other evidence showing a common-law employment 
relationship.\246\ We decline to modify the proposed rule as suggested 
by these commenters for largely the same reasons we decline to offer an 
ex ante categorization of company-to-company contract provisions. Given 
the diversity of business practices these commenters describe, we 
believe that case-by-case adjudication applying the joint-employer 
standard will be the soundest approach.
---------------------------------------------------------------------------

    \245\ Comments of IFA; RILA; SHRM; U.S. Chamber of Commerce.
    \246\ Comments of National Home Delivery Association; SHRM.
---------------------------------------------------------------------------

    Another group of commenters urge the Board not to provide specific 
examples of contractual provisions that are immaterial to the existence 
of a common-law employment relationship, emphasizing that it is very 
difficult to assess the effect of such provisions absent consideration 
of the surrounding context.\247\ Others take issue with particular 
examples of company-to-company contractual provisions that other 
commenters suggest should not be considered material to the existence 
of a common-law employment relationship.\248\ For example, one 
commenter notes that, in its experience, provisions authorizing an 
entity to remove or reject an employee are sometimes used to retaliate 
against individuals who engage in union and protected concerted 
activities.\249\ One commenter suggests that the Board modify proposed 
paragraph (f) to clearly identify that decisions made as an exercise of 
``entrepreneurial control'' are generally not probative of the 
existence of a common-law employment relationship.\250\ For the same 
reasons set forth above, we are not inclined to adopt these commenters' 
suggestions that we specifically categorize contractual provisions or 
business practices in the final rule. Instead, we are persuaded that it 
would be most prudent to consider whether certain contractual 
provisions or business practices are probative of a common-law 
employment relationship when applying the final rule.
---------------------------------------------------------------------------

    \247\ Comments of AFL-CIO; Los Angeles County Federation of 
Labor AFL-CIO & Locals 396 and 848 of the IBT; State Attorneys 
General.
    \248\ Comments of General Counsel Abruzzo; SEIU.
    \249\ Comments of SEIU.
    \250\ Comments of AFL-CIO.
---------------------------------------------------------------------------

    Additionally, some commenters argue that the Board should treat 
employment relationships in the construction industry in a distinctive 
manner for purposes of analyzing what forms of control are material to 
the existence of a common-law employment relationship.\251\ While these 
commenters acknowledge that multiple firms reserve and exercise control 
over construction jobsites, citing Denver Building, supra, 341 U.S. at 
689-690, they explain that this shared control is inherent in the 
industry and should not be probative of joint-employer status.\252\ As 
discussed above, we agree that the Supreme Court's decision in Denver 
Building precludes treating a general contractor as the employer of a 
subcontractor's employees solely because the general contractor has 
overall responsibility for overseeing operations on the jobsite. And, 
absent evidence that a firm possesses or exercises control over 
particular employees' essential terms and conditions of employment, 
that firm would not qualify as a joint employer under the standard 
adopted in this final rule.\253\
---------------------------------------------------------------------------

    \251\ Comments of ABC; AGC.
    \252\ Comments of ABC; AGC. Our dissenting colleague similarly 
argues that the final rule risks treating general contractors in the 
construction industry as joint employers on a per se basis.
    \253\ For this reason, as mentioned above, we reject our 
dissenting colleague's suggestion that the final rule will disrupt 
existing relationships and norms on construction sites. As mentioned 
above, we believe our colleague errs in downplaying the requirement 
in the final rule that a party asserting that an entity is a joint 
employer establish that that entity has a common-law employment 
relationship with particular employees. We are confident that this 
threshold requirement will ensure the Board's analysis of whether an 
entity is a joint employer when it applies the rule is appropriately 
focused. Further, to the extent that our colleague relies on 
language in Denver Building indicating that a general contractor's 
``supervision over the subcontractor's work'' precludes a joint-
employer finding, 341 U.S. at 689-690, we respectfully disagree with 
his interpretation. Denver Building was a case involving Sec. 
8(b)(4) of the Act, not the joint-employer standard, and it did not 
address whether the general contractor possessed or exercised 
control over particular employees' essential terms and conditions of 
employment, whether by supervising their work or otherwise. Instead, 
the case focused on the general contractor's supervision of the 
project as a whole.

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[[Page 73971]]

    Others seek recognition of industry-specific business practices 
that warrant special consideration. A number of commenters raise 
concerns about whether the proposed rule pays adequate heed to 
franchisors' need to protect their brands and their trade or service 
marks.\254\ Some of these commenters note that the 2020 rule 
acknowledged franchisors' needs to maintain brand-recognition standards 
by providing that control over brands or trademarks is not probative of 
joint-employer status. The commenters urge the Board to include a 
similar acknowledgment in the final rule.\255\ Relatedly, a number of 
commenters argue that the proposed rule risks a conflict with federal 
trademark law, including the Lanham Act, 15 U.S.C. 1051 et seq., and 
cognate state laws inasmuch as they require franchisors to retain 
control over their franchisees to protect their brand standards.\256\ A 
bipartisan group of six United States Senators expresses similar 
concerns regarding the need to protect franchise brands, noting their 
support for the Trademark Licensing Protection Act of 2022, S.4976.
---------------------------------------------------------------------------

    \254\ Comments of IFA; McDonald's USA, LLC; Restaurant Law 
Center and National Restaurant Association; U.S. Chamber of 
Commerce; Yum! Brands. Our dissenting colleague also expresses 
concern about how the proposed rule will affect franchise 
businesses.
    \255\ Comments of IFA.
    \256\ Comments of IFA; U.S. Chamber of Commerce; Yum! Brands.
---------------------------------------------------------------------------

    We are mindful of franchisors' need to protect their brands and 
their trade or service marks and of the need to accommodate the NLRA 
with the Lanham Act and federal trademark law more generally. That 
said, we view the likelihood of conflict as minimal under the standard 
adopted in this final rule. Many common steps franchisors take to 
protect their brands have no connection to essential terms and 
conditions of employment and therefore are immaterial to the existence 
of a common-law employment relationship. While we are not inclined to 
categorically state that all forms of control aimed at protecting a 
brand are immaterial to the existence of a common-law employment 
relationship, we stress that many forms of control that franchisors 
reserve to protect their brands or trade or service marks (like those 
dealing with logos, store design or d[eacute]cor, or product 
uniformity) will typically not be indicative of a common-law employment 
relationship.\257\ Further, by making the list of ``essential terms and 
conditions of employment'' in the final rule exhaustive, we also aim to 
respond to the substance of these commenters' concerns by offering 
clearer guidance to franchisors about the forms of control that the 
Board will find relevant to a joint-employer inquiry.
---------------------------------------------------------------------------

    \257\ In this regard, we also note that such matters are 
unlikely to constitute mandatory subjects of bargaining. See First 
National Maintenance Corp. v. NLRB, above, 452 U.S. at 676-677 
(``Some management decisions, such as choice of advertising and 
promotion, product type and design, and financing arrangements, have 
only an indirect and attenuated impact on the employment 
relationship.'').
---------------------------------------------------------------------------

    Another commenter urges the Board to state that making a payment as 
part of a contract to provide payroll services is not sufficient to 
demonstrate control over wages sufficient to support a joint-employer 
finding.\258\ One commenter argues that the proposed rule should 
clarify that, for joint-employer purposes, motor carriers are the 
customers, not employees or contractors, of marine terminals.\259\ As 
set forth above, we are not inclined to modify the text of the final 
rule to specifically address these situations. However, we hope that we 
have satisfied these commenters' desires for greater clarity regarding 
their obligations by describing our view of the forms of control that 
will be relevant to the joint-employer inquiry and by cabining the list 
of essential terms and conditions of employment that the Board will 
treat as material to the existence of a common-law employment 
relationship.
---------------------------------------------------------------------------

    \258\ Comments of Subcontracting Concepts, LLC.
    \259\ Comments of American Association of Port Authorities.
---------------------------------------------------------------------------

    Some commenters argue that because decisions to modify or terminate 
joint employment relationships are entrepreneurial decisions between 
businesses, they are not susceptible to decisional bargaining under 
First National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981).\260\ 
Other commenters note that a range of other company-to-company 
contracting practices would not be subject to bargaining under First 
National Maintenance and its progeny and should therefore not be 
considered probative of joint-employer status.\261\
---------------------------------------------------------------------------

    \260\ Comments of RILA; SHRM; Tesla, Inc. These commenters 
acknowledge the possible need for effects bargaining in these 
circumstances but urge the Board to require such bargaining to occur 
on an expedited basis. See id.
     Another commenter also cites Plumbers Local No. 447, 172 NLRB 
128 (1968) (``Malbaff'') for the proposition that an employer should 
not have a bargaining obligation under Sec. 8(a)(5) before 
terminating its relationship with a subcontractor or other business 
entity, which is not a violation of Sec. 8(a)(3). Comments of COLLE.
    \261\ Comments of General Counsel Abruzzo.
---------------------------------------------------------------------------

    As discussed above, the Board has determined to modify the final 
rule to clarify the nature of joint employers' bargaining obligations. 
The final rule explains that, once an entity is found to be a joint 
employer because it shares or codetermines matters governing one or 
more of particular employees' essential terms or conditions of 
employment, it is obligated to bargain over any mandatory subjects of 
bargaining it possesses or exercises the authority to control. As some 
commenters helpfully note, the Supreme Court has held that core 
entrepreneurial decisions ``involving a change in the scope and 
direction of the enterprise'' are not mandatory subjects of 
bargaining.\262\ In applying the final rule, we will adhere to this 
binding precedent when determining the scope of joint employers' 
bargaining obligation.
---------------------------------------------------------------------------

    \262\ First National Maintenance, 452 U.S. at 677.
---------------------------------------------------------------------------

G. Comments About the ``Meaningful Collective Bargaining'' Step of the 
Board's 2015 Browning-Ferris Decision

    Several commenters urge the Board to modify the text of the 
proposed rule to incorporate the ``meaningful collective bargaining'' 
step of the Board's 2015 BFI decision or to otherwise embrace that 
portion of the BFI analysis.\263\ Others, including our dissenting 
colleague, take the position that the Board's proposal should be 
withdrawn or modified in some other manner, as the proposed rule fails 
to cast light on questions the District of Columbia Circuit raised 
regarding ``once control is found, who is exercising that control, 
when, and how.'' \264\ Some commenters specifically suggest that using 
a nonexhaustive list of ``essential terms and conditions of

[[Page 73972]]

employment'' is problematic without a limiting principle akin to the 
``meaningful collective bargaining'' step of BFI or some other 
``guardrails.'' \265\
---------------------------------------------------------------------------

    \263\ Comments of AGC; AHA; American Staffing Association; 
Americans for Tax Reform; Freedom Foundation; IFA; International 
Foodservice Distributors Association; NAM; National Retail 
Federation; National Waste & Recycling Association; Subcontracting 
Concepts, LLC; Thomas Jefferson Institute for Public Policy; U.S. 
Chamber of Commerce.
    \264\ 911 F.3d at 1215. See comments of Americans for Prosperity 
Foundation; Independent Bakers Association; Modern Economy Project; 
National Association of Convenience Stores; National Waste & 
Recycling Association; North American Meat Institute; SHRM; 
Subcontracting Concepts, LLC; The Thomas Jefferson Institute for 
Public Policy; U.S. Chamber of Commerce.
    \265\ Comments of CDW; COLLE; National Association of 
Convenience Stores; National Retail Federation; U.S. Chamber of 
Commerce.
---------------------------------------------------------------------------

    Similarly, a group of commenters urge the Board to include in the 
final rule text a statement that encapsulates or describes a joint 
employer's duty to bargain.\266\ Some of these commenters suggest that 
the Board state that if a putative joint employer does not have at 
least ``co-control'' over the range of potential outcomes regarding an 
essential term or condition of employment, it is not required to 
bargain over that subject.\267\ Some of these commenters encourage the 
Board to modify the rule text to incorporate a principle that appeared 
in the preamble to the proposed rule about the scope of a joint 
employer's bargaining obligation.\268\ A few commenters ask the Board 
to clarify that a joint employer does not have a bargaining obligation 
except as to matters that are divisible and limited to those employees 
represented by the union.\269\
---------------------------------------------------------------------------

    \266\ See, e.g., comments of American Staffing Association; 
SHRM.
    \267\ Comments of RILA; SHRM.
    \268\ Comments of American Staffing Association; SEIU; SHRM; 
U.S. Chamber of Commerce. As mentioned previously, the NPRM provided 
in supplementary information that the proposed rule would only 
require a putative joint employer to bargain over those essential 
terms and conditions of employment it possesses the authority to 
control or over which it exercises the power to control. 87 FR at 
54645 fn. 26.
    \269\ Comments of RILA; SHRM (citing Emporium Capwell Co. v. 
Western Addition Community Organization, 420 U.S. 50, 64 (1975) for 
the proposition that the process and outcome of collective 
bargaining cannot lawfully be imposed on employees who have not 
chosen union representation).
---------------------------------------------------------------------------

    Other commenters contend that, by making a common-law employment 
relationship the prerequisite to a joint-employer finding, the proposed 
rule contains adequate limits, as the Board will not find that entities 
with insufficient control over essential terms and conditions of 
employment are joint employers.\270\ These commenters take the position 
that there is no need to incorporate the ``meaningful collective 
bargaining'' step of BFI in the final rule.\271\
---------------------------------------------------------------------------

    \270\ Comments of AFL-CIO; SEIU.
    \271\ Comments of General Counsel Abruzzo; SEIU.
---------------------------------------------------------------------------

    After carefully considering the comments raising concerns about the 
need for a limiting principle to ensure that the appropriate parties 
are brought within the ambit of the Board's joint-employer standard, we 
have decided to modify the definition of ``essential terms and 
conditions of employment'' in the final rule, as described above. As 
several commenters observe, limiting the list of essential terms and 
conditions of employment is responsive to the District of Columbia 
Circuit's request that the Board incorporate a limiting principle to 
ensure the joint-employer standard remains within common-law 
boundaries.\272\ By clearly identifying and limiting the list of 
essential terms and conditions of employment that an entity may be 
deemed a joint employer if it possesses the authority to control or 
exercises the power to control, the final rule responds to these 
criticisms and helps provide clear guidance and a more predictable 
standard to parties covered by the Act. Moreover, because all of the 
essential terms and conditions of employment as defined by the final 
rule involve matters that lie at the core of workplace issues 
appropriate for collective bargaining, a joint employer's control over 
any of these matters ensures that there is a basis for meaningful 
collective bargaining over at least the essential term or condition 
that is subject to that employer's control.\273\
---------------------------------------------------------------------------

    \272\ Comments of National Retail Federation.
    \273\ We note that the second element of the Board's Browning-
Ferris analysis, the inquiry into ``whether the putative joint 
employer possesses sufficient control over employees' essential 
terms and conditions of employment to permit meaningful collective 
bargaining,'' is self-imposed. BFI, 362 NLRB at 1600; see BFI v. 
NLRB, 911 F.3d at 1205 (noting that in Browning-Ferris, ``the Board 
announced for the first time that it would subdivide the inquiry . . 
. . '') (emphasis added). It is neither a requirement under the 
common law of agency nor under the Act. As our dissenting colleague 
concedes, ``[a]bsent any rule whatsoever, joint-employer status 
would be determined through case-by-case adjudication applying the 
common law of agency.'' Accordingly, although we are not required to 
incorporate the ``meaningful collective bargaining'' step of the 
Board's 2015 BFI decision in our current articulation of the joint-
employer standard, we nevertheless find that Sec.  103.40(c) of the 
final rule, providing for an examination of whether the character 
and objects of a purported employer's control extend to essential 
terms and conditions of employment within the specific context of 
the Act, amply satisfies the District of Columbia Circuit's 
instructions that the Board, on remand, ``explain which terms and 
conditions are `essential' to permit `meaningful collective 
bargaining,' '' and what such bargaining ``entails and how it works 
in this setting.'' Id. at 1221-1222 (quoting BFI, 362 NLRB at 1600).
---------------------------------------------------------------------------

H. Comments About Independent-Contractor Precedent

    The proposed rule cites certain common-law agency decisions that 
apply independent-contractor precedent. Some commenters appear to 
approve of the Board's reliance on these cases and cite independent-
contractor precedent in support of their own arguments.\274\ Other 
commenters and our dissenting colleague criticize the proposed rule's 
reliance on precedent geared toward distinguishing between statutory 
employees and independent contractors.\275\ These commenters, citing 
the District of Columbia Circuit's decision in BFI v. NLRB, 911 F.3d at 
1213-1214, argue that the common-law independent-contractor standard 
and joint-employer standard are different. In particular, these 
commenters and our dissenting colleague urge that the joint-employer 
standard requires an analysis of ``who is exercising . . . control, 
when, and how.'' \276\ Other commenters, also citing the District of 
Columbia Circuit's BFI decision, answer that independent-contractor 
cases ``can still be instructive in the joint-employer inquiry'' to the 
extent that they speak to the common law's view of employment 
relationships.\277\
---------------------------------------------------------------------------

    \274\ See, e.g., comments of RILA.
    \275\ Comments of North American Meat Institute.
    \276\ Id. (quoting BFI v. NLRB, 911 F.3d at 1215 (emphasis in 
original)).
    \277\ Comments of State Attorneys General (quoting BFI v. NLRB, 
911 F.3d at 1215).
---------------------------------------------------------------------------

    As discussed in more detail above, while we do not quarrel with 
commenters' and our dissenting colleague's observation that the common-
law independent-contractor standard and joint-employer standard are 
distinct, we do not agree that the differences between the standards 
preclude us from relying on precedent from the independent-contractor 
context, inasmuch as that precedent illuminates the common law's view 
of control, which is common to both inquiries. As a result, while we 
are mindful of the need to carefully distinguish between independent-
contractor and joint-employer precedent, we believe it is appropriate 
to continue treating independent-contractor cases as relevant where 
they speak about ``the nature and extent of control necessary to 
establish a common-law employment relationship.'' \278\
---------------------------------------------------------------------------

    \278\ BFI, 911 F.3d at 1215.
---------------------------------------------------------------------------

I. Burden of Establishing Joint-Employer Status

    Proposed paragraph (g) provides that the party asserting joint-
employer status has the burden of proving, by a preponderance of the 
evidence, that a putative joint employer satisfies the requirements of 
proposed paragraphs (a) through (f).\279\
---------------------------------------------------------------------------

    \279\ 87 FR 54663.
---------------------------------------------------------------------------

    No commenter argues that the Board should allocate the burden 
differently than suggested in proposed paragraph (g). And no party 
argues that the Board should omit proposed paragraph (g) from the final 
rule. Several commenters state that the proposed rule's articulation of 
the burden of proof does

[[Page 73973]]

not provide sufficient guidance as to how a party can successfully 
carry its burden.\280\ Some of them suggest that the Board clarify what 
kind or amount of evidence a party asserting joint-employer status must 
put forward to meet its burden.\281\
---------------------------------------------------------------------------

    \280\ Comments of SHRM; Tesla, Inc. As discussed below, some of 
these commenters argue that the proposed rule's failure to more 
clearly describe how a party can carry its burden means the rule 
should also fail on the basis of the Administrative Procedure Act 
(APA), 5 U.S.C. 551 et seq. See, e.g., comments of Tesla, Inc. Other 
commenters approve of the proposed rule's discussion of the burden 
of proof, noting that the APA requires the Board to assign the 
burden of proof in the manner proposed. See, e.g., comments of 
Freedom Foundation; UNITE HERE. We discuss these contentions 
separately below.
    \281\ Comments of RILA; SHRM. One commenter makes the related 
suggestion that the Board clarify that a putative joint employer 
exercises the requisite level of control if it is in a position to 
``influence the primary employer's labor policies.'' Comments of 
IBT.
---------------------------------------------------------------------------

    The final rule incorporates the assignment of the burden of proof 
from paragraph (g). While some commenters urge the Board to clarify how 
a party asserting joint-employer status can successfully carry its 
burden in the rule text itself, we find it unnecessary to do so in 
light of the final rule's statement that the burden must be satisfied 
on the basis of a preponderance of the evidence. This familiar 
evidentiary threshold is embodied in the Act itself,\282\ has been 
endorsed by the Supreme Court in similar administrative 
proceedings,\283\ and should satisfy the commenters' desire for 
guidance regarding the amount of evidence necessary to carry the 
burden. While these commenters also express a desire for guidance 
regarding what kinds or types of evidence will be probative of joint-
employer status, because we have addressed this question at length in 
the preceding discussion, we do not find it necessary to modify the 
proposed rule's treatment of the burden of proof or otherwise alter the 
text of the final rule in response to these comments.
---------------------------------------------------------------------------

    \282\ 29 U.S.C. 10(c).
    \283\ Steadman v. SEC, 450 U.S. 91, 101 (1981).
---------------------------------------------------------------------------

J. Severability

    Proposed paragraph (h) set forth the Board's preliminary view that 
the provisions of the joint-employer rule should be treated as 
severable.\284\ Proposed paragraph (h) explains that ``[i]f any 
paragraph of this section is held to be unlawful, the remaining 
paragraphs of this section not deemed unlawful shall remain in effect 
to the fullest extent permitted by law.'' \285\
---------------------------------------------------------------------------

    \284\ 87 FR at 54663.
    \285\ Id.
---------------------------------------------------------------------------

    The Board specifically invited commenters to address severability, 
and several took the opportunity to do so. No commenter suggests that 
the Board should not generally treat the provisions of the proposed 
rule as severable. Several commenters agree with the Board's 
preliminary view of the severability of the provisions of the proposed 
rule.\286\ One commenter takes the view that proposed paragraphs (a) 
through (c) are interconnected and cannot be severed from one another 
but that proposed paragraphs (d), (e), (f), and (g) are fully 
severable.\287\ Another commenter agrees that proposed paragraphs (a), 
(b), and (c) are logically intertwined and so would not be severable 
from one another.\288\ Another group of commenters suggested that the 
Board promulgate a separate rescission of the 2020 rule and new rule 
setting forth a new joint-employer standard.\289\
---------------------------------------------------------------------------

    \286\ Comments of AFL-CIO; General Counsel Abruzzo; CWA; SEIU; 
State Attorneys General; UNITE HERE.
    \287\ Comments of General Counsel Abruzzo.
    \288\ Comments of State Attorneys General. This commenter 
further observes that if paragraphs using the term ``essential terms 
and conditions of employment'' were stricken, proposed subparagraph 
(d) would be unnecessary. Id.
    \289\ Comments of CWA; SEIU. These commenters also suggest that 
if the Board is inclined to issue the rescission and the new 
standard in one document, the Board should make clear that these are 
separate actions and intended to be severable. Id.
---------------------------------------------------------------------------

    The final rule includes a severability provision modeled after 
proposed paragraph (h). Paragraph (i) recites that: the ``provisions of 
this section are intended to be severable'' and that ``[i]f any 
paragraph of this section is held to be unlawful, the remaining 
paragraphs and subparagraphs of this section not deemed unlawful are 
intended to remain in effect to the fullest extent permitted by law.'' 
As explained below, while the Board believes that the final rule in its 
entirety is consistent with the National Labor Relations Act and 
promotes its policies, the Board would adopt the separate portions of 
the final rule independently, were some other portion or portions held 
to be invalid.
    We note that some commenters urge the Board to make clear that the 
rescission of the 2020 rule and the promulgation of the final rule's 
joint-employer standard are intended as separate actions and make a 
specific finding that the Board views these two actions as 
severable.\290\ The Board's intention is that the two actions be 
treated as separate and severable. In the Board's view, the 2020 rule 
is contrary to common-law agency principles and therefore inconsistent 
with the Act. The Board thus believes it is required to rescind the 
2020 rule, as it does today. Even if the 2020 rule were consistent with 
the Act, the Board would still choose to rescind that rule as failing 
to fully promote the policies of the Act.
---------------------------------------------------------------------------

    \290\ See, e.g., comments of AFL-CIO; CWA; SEIU.
---------------------------------------------------------------------------

    The Board's decision to rescind the 2020 rule is intended to be 
independent of its promulgation of a new final rule today. If the final 
rule promulgated here were deemed invalid, the Board would nevertheless 
adhere to its decision to rescind the 2020 rule. In that event, the 
Board's view is that the joint-employer standard would revert to the 
joint-employer standard established in Browning-Ferris Industries of 
California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 
(2015), which immediately preceded the 2020 rule, unless and until that 
standard were revised through adjudication. In NLRB v. Bell Aerospace 
Co., the Supreme Court recognized the Board's authority, in the first 
instance, to determine whether to engage in policymaking through 
rulemaking or adjudication.\291\ Consistent with this authority, the 
Board will proceed to determine joint-employer issues through 
adjudication, rather than rulemaking, should a reviewing court (1) find 
that the draft rule properly rescinds the 2020 rule, but (2) proceeds 
to invalidate the new joint-employer standard.\292\
---------------------------------------------------------------------------

    \291\ 416 U.S. 267, 294 (1974).
    \292\ The Board recognizes that there are certain outstanding 
issues regarding the standard for determining joint employers under 
the Act following the District of Columbia Circuit's remand, as 
discussed above at fn. 5. The Board will resolve these issues 
through adjudication as presented in cases not governed by an 
applicable rule, including cases that arose before the effective 
date of the 2020 rule.
---------------------------------------------------------------------------

K. Other Policy and Procedural Arguments 293
---------------------------------------------------------------------------

    \293\ Two commenters express concerns regarding the 
participation of Member Wilcox and Member Prouty in this rulemaking 
proceeding, suggesting that their submission of comments opposing 
the 2020 Rule while they were in private practice creates, at a 
minimum, the appearance of a conflict of interest. See comments of 
IFA; U.S. Chamber of Commerce. Members Wilcox and Prouty reject this 
challenge. Relevant precedent regarding decisionmakers' 
participation in rulemaking proceedings confirms that ``an 
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 Transportation 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)). Members Wilcox and Prouty 
find that these commenters' general and speculative suggestions fall 
short of the clear and convincing showing that either Member Wilcox 
or Member Prouty ``has an unalterably closed mind'' on matters 
relevant to this rulemaking proceeding, as the law requires. Id. 
Further, although the commenters do not specifically argue that the 
participation of Member Wilcox or Member Prouty in this rulemaking 
proceeding would violate Executive Order 13989 (Jan. 20, 2021) (the 
Biden Ethics Pledge), to the extent their argument about an 
appearance of a conflict of interest is rooted in the Ethics Pledge, 
Members Wilcox and Prouty reject it because this rulemaking is not a 
``particular matter involving specific parties that is directly and 
substantially related to'' Member Wilcox or Member Prouty's former 
employers or former clients within the meaning of the Executive 
Order. They further note that one commenter shares their view, 
stating that the instant rulemaking ``lacks even the appearance of a 
conflict of interest.'' Comments of Congressman Scott, et al.
---------------------------------------------------------------------------

    The proposed rule set forth the Board's preliminary view that

[[Page 73974]]

grounding the joint-employer standard in common-law agency principles 
would serve the policies and purposes of the Act, including the 
statement in Section 1 of the Act that one of the key purposes of the 
Act is to ``encourage the practice and procedure of collective 
bargaining.'' 29 U.S.C. 151. Several commenters specifically note their 
approval of the Board's view that the proposed rule will better serve 
the policies of the Act than did the 2020 rule, with several 
specifically citing Section 1 of the Act as providing support for the 
proposed rule.\294\ Notably, several commenters writing on behalf of 
Senators and Members of Congress agree that the proposed rule would 
further Congressional intent and advance the purposes of the Act.\295\ 
Others argue that the proposed joint-employer standard will advance the 
Act's purpose of eliminating disruptions to interstate commerce by 
increasing the possibility that effective collective bargaining will 
forestall strikes or other labor disputes.\296\
---------------------------------------------------------------------------

    \294\ Comments of AFSCME; CAP; CWA; EPI; General Counsel 
Abruzzo; Lawyers' Committee for Civil Rights Under Law; Los Angeles 
County Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT; 
McGann, Ketterman & Rioux; Michigan Regional Council of Carpenters 
and Millwrights; National Women's Law Center; NELP; State Attorneys 
General; UBC; UE.
    \295\ Comments of Senator Murray et al.; Congressman Scott et 
al. One of these commenters makes the further observation that the 
proposed rule would better comport with the United States' 
obligations under international law. See comments of Congressman 
Scott et al.
    \296\ Comments of General Counsel Abruzzo; SEIU.
---------------------------------------------------------------------------

    A number of commenters contend that the proposed rule is at odds 
with the Act because it exceeds the boundaries of the common law.\297\ 
Others argue that the proposed rule threatens to delay employees' 
remedies because of the need for extensive litigation over joint-
employer issues or to otherwise undermine the effective enforcement of 
other provisions of the Act.\298\ A few commenters argue that adopting 
a broader joint-employer standard increases the risk of enmeshing 
entities as primary employers in what would otherwise be secondary 
labor disputes.\299\ Some of these commenters specifically urge that 
the proposed rule could stand in the way of the effective enforcement 
of portions of the Act that deal specifically with the building and 
construction industry.\300\
---------------------------------------------------------------------------

    \297\ Comments of RILA; Texas Public Policy Foundation.
    \298\ Comments of McDonald's USA, LLC; North American Meat 
Institute; RILA.
    \299\ Comments of Center for Workplace Compliance; COLLE; Home 
Care Association of America; National Waste & Recycling Association; 
RILA. Our dissenting colleague likewise argues that the final rule 
will undermine the enforcement of Sec. 8(b)(4) of the Act.
    \300\ Comments of ABC; AGC.
---------------------------------------------------------------------------

    Some commenters disagree that the Act is intended to encourage the 
practice and procedure of collective bargaining.\301\ Others, including 
our dissenting colleague, agree that encouraging the practice and 
procedure of collective bargaining is a central goal of the Act but 
disagree with the Board's view that the proposed rule is appropriately 
tailored to serve that goal or that the proposed rule is likely to 
``achiev[e] industrial peace by promoting stable collective-bargaining 
relationships.'' \302\ Certain of these commenters observe that the 
proposed joint-employer standard may make it harder for the Board to 
make appropriate bargaining-unit determinations or protect bargaining-
unit boundaries.\303\
---------------------------------------------------------------------------

    \301\ Comments of Competitive Enterprise Institute. This 
commenter argues that the purpose of the Act is narrower: to 
encourage collective bargaining, but only in those instances where 
``certain substantial obstructions'' to interstate commerce ``have 
occurred'' already. Id. (quoting 29 U.S.C. 151).
    We disagree with this commenter's suggestion that a strike or 
other labor dispute must have already occurred for the Act's policy 
favoring collective bargaining to come into play. We find support 
for the broader view of the Act's purposes in Sec. 7, 8, and 9 of 
the Act, which, respectively: set forth employees' rights to ``self-
organization, to form, join, or assist labor organizations, [and] to 
bargain collectively through representatives of their own 
choosing,'' 29 U.S.C. 157; make it an unfair labor practice for an 
employer to refuse to bargain collectively with representatives 
designated or selected by employees, id. 158(a)(5), 158(d), & 
159(a)(5); and direct the Board to conduct representation elections 
upon the filing of a petition supported by a substantial number of 
employees who wish to be represented for the purposes of collective 
bargaining, id. 159. None of these sections states or implies that a 
labor dispute or strike is a precondition to any of these rights or 
duties.
    \302\ Auciello Iron Works, Inc. v. NLRB, 517 U.S. 781, 790 
(1996). See comments of CDW; COLLE; HR Policy Association; IFDA; 
Libertas Institute; National Waste & Recycling Association; RILA; 
Trucking Industry Stakeholders. Because many of these commenters 
advance empirical arguments or discuss their experience with 
bargaining when multiple firms are involved, we discuss these 
comments at greater length below.
    \303\ Comments of Home Care Association of America; SHRM.
---------------------------------------------------------------------------

    Other commenters observe that because the joint-employer standard 
will only be applied to entities that are found to possess or exercise 
control over employees' essential terms and conditions of employment, 
there is no serious risk that the proposed rule would have the effect 
of enmeshing neutral parties in labor disputes.\304\ One commenter adds 
that employees in industries characterized by pervasive contracting are 
sometimes hesitant to engage in collective action or exercise their 
Section 7 rights for fear of inadvertently violating the provisions of 
Section 8(b)(4) of the Act, 29 U.S.C. 158(d)(4).\305\
---------------------------------------------------------------------------

    \304\ Comments of General Counsel Abruzzo.
    \305\ Comments of Los Angeles County Federation of Labor AFL-CIO 
& Locals 396 and 848 of the IBT; UE.
---------------------------------------------------------------------------

    As we preliminarily expressed in our NPRM, we are persuaded that 
rescinding the 2020 Rule is a necessary step toward effectuating the 
policies of the Act. By unduly narrowing the definition of ``joint 
employer,'' the 2020 Rule undermined the Act's protections for 
employees who work in settings where multiple firms possess or exercise 
control over their essential terms or conditions of employment. We 
believe that, consistent with the common-law agency principles that 
must guide the Board in this area, it advances the Act's purposes to 
ensure that, if they choose, all employees have the opportunity to 
bargain with those entities that possess the authority to control or 
exercise the power to control the essential conditions of their working 
lives. In this regard, we view the joint-employer standard adopted in 
this final rule as an important effort to ensure the uniform 
enforcement of the Act in all industries. And, as many commenters 
represent, our revised standard may particularly benefit vulnerable 
employees who are overrepresented in workplaces where multiple firms 
possess or exercise control, including immigrants and migrant 
guestworkers, disabled employees, and Black employees and other 
employees of color.
    We also wish to address comments we received regarding the 
interaction between the joint-employer standard and the Act's 
prohibitions on secondary activity. As one commenter mentioned, the 
2020 rule may have risked chilling employees' willingness to exercise 
their statutory rights for fear of inadvertently running afoul of the 
prohibitions on secondary activity set out in Section 8(b)(4) of the 
Act.\306\ We hope that the standard adopted in the final rule will 
provide the necessary clarity to ensure that employees do not fear 
engaging in protected concerted activity or raising workplace concerns 
with any entities

[[Page 73975]]

that possess or exercise control over their essential terms and 
conditions of employment. Of course, we will continue to vigorously 
enforce the Act's prohibitions on secondary activity in situations 
where multiple firms do not share or codetermine those matters 
governing particular employees' essential terms and conditions of 
employment.\307\
---------------------------------------------------------------------------

    \306\ 29 U.S.C. 158(b)(4).
    \307\ Contrary to our dissenting colleague, we see little risk 
of enmeshing neutral employers in labor disputes. When more than one 
entity jointly employs particular employees, those entities are not 
neutral, and the prohibitions on secondary activity do not apply, 
regardless of what joint-employer standard is applied.
---------------------------------------------------------------------------

    Certain commenters raise arguments regarding whether the proposed 
rule meets the requirements of the Constitution or the Administrative 
Procedure Act (APA), 5 U.S.C. 551 et seq. Some commenters suggest that, 
pursuant to the major-questions doctrine, as summarized in West 
Virginia v. EPA, 597 U.S. __, 2022 U.S. LEXIS 3268 (2022), the Board 
should ``hesitate before concluding that Congress'' conferred authority 
on it to define ``joint employer'' because of the concept's ``economic 
and political significance.'' \308\
---------------------------------------------------------------------------

    \308\ Comments of ABC; CDW; COLLE; IFA; Independent Bakers 
Association; International Warehouse Logistics Association; RILA; 
U.S. Chamber of Commerce.
    Several of these commenters also advance an argument based on 
the nondelegation doctrine. See comments of COLLE; IFA. One such 
commenter specifically argues that Sec. 6 of the Act does not 
delegate sufficiently clear authority to the Board to define ``joint 
employer'' for purposes of the Act. See comments of IFA. As 
discussed in Section III above, we are confident that the Board has 
authority to ``carry out'' the many provisions of the Act that are 
affected by how the Board defines ``joint employer'' through 
rulemaking. The Supreme Court has never cast doubt on the breadth of 
the Board's rulemaking authority. Instead, it has repeatedly 
endorsed the Board's use of rulemaking as a policymaking tool, 
including in contexts involving the scope and nature of bargaining 
obligations. See, e.g., American Hospital Assn. v. NLRB, 499 U.S. 
606 (1991).
---------------------------------------------------------------------------

    Other commenters argue that the major-questions doctrine does not 
present an obstacle to the current rulemaking effort.\309\ One 
commenter notes that, since the earliest days of the Act, the Board 
has, with Supreme Court and other reviewing courts' approval, applied 
the Act to cover joint-employment relationships, eliminating any doubt 
that Congress intended for the ambit of the Act to extend to joint 
employers.\310\
---------------------------------------------------------------------------

    \309\ Comments of CWA; UNITE HERE; reply comments of AFL-CIO.
    \310\ Comments of AFL-CIO (citing Boire v. Greyhound Corp., 376 
U.S. 473, 481 (1964)); Long Lake Lumber Co., 34 NLRB 700, 717 
(1941), enfd. NLRB v. Long Lake Lumber Co., 138 F.2d 363 (9th Cir. 
1943); Franklin Simon & Co., 94 NLRB 576, 579 (1951)).
---------------------------------------------------------------------------

    Based on the Board's long history of analyzing joint-employment 
relationships and regulating entities it finds to be joint employers, 
we find that the major-questions doctrine does not foreclose our 
decision to put forward a new interpretation of the definition of 
``employer'' in Section 2(2) of the Act. Not only has the Board 
historically defined ``joint employer'' through case-by-case 
adjudication, section 6 of the Act provides clear authority to the 
Board to promulgate rules to ``carry out the provisions of [the] Act.'' 
29 U.S.C. 156. We therefore see no constitutional impediment to 
continuing the Board's decades-long effort to clarify and refine its 
joint-employer standard.
    A group of commenters argue that the proposed rule is arbitrary and 
capricious because it does not sufficiently analyze why the standard 
set forth in the 2020 rule was inadequate or because it fails to 
provide adequate guidance.\311\ Some of these commenters, quoting Motor 
Vehicle Manufacturers Association of the United States, Inc. v. State 
Farm Automobile Insurance Co., 463 U.S. 29, 43 (1983), contend that the 
Board has either ``relied on factors which Congress has not intended it 
to consider, entirely failed to consider an important aspect of the 
problem, offered an explanation for its decision that runs counter to 
the evidence before the agency, or is so implausible that it could not 
be ascribed to a difference in view or the product of agency 
expertise.'' \312\ Our dissenting colleague similarly criticizes the 
majority for failing to justify its departure from the 2020 rule and 
for providing insufficient guidance to regulated parties.
---------------------------------------------------------------------------

    \311\ Comments of ABC; CDW; COLLE; IFA; IFDA; International 
Bankshares Corporation; National Association of Convenience Stores; 
North American Meat Institute; Restaurant Law Center and National 
Restaurant Association; U.S. Chamber of Commerce.
    Several commenters make the specific observation that the 
proposed rule is arbitrary because it does not impose an express 
requirement that joint-employer status be proven by ``substantial 
evidence.'' See comments of CDW; RILA; SHRM; Tesla, Inc. As 
discussed above, we reject the view that the proposed rule failed to 
impose a ``substantial evidence'' obligation or was otherwise 
arbitrary. These commenters, effectively reading discrete 
subparagraphs of the proposed rule in isolation, suggest that ``any 
evidence'' of control will be sufficient to establish status as a 
joint employer under the proposed rule. However, as discussed more 
fully above, this view overlooks the proposed rule's allocation of 
the burden of proof and requirement that a party asserting joint-
employer status must demonstrate that an entity is a joint employer 
by a ``preponderance of the evidence.''
    Another commenter urges that the Board's statements in the 
preamble to the proposed rule regarding the importance of workplace 
health and safety during the Covid-19 pandemic are unsupported and 
therefore render the inclusion of health and safety as an essential 
term or condition of employment, and implicitly the rule as a whole, 
arbitrary and capricious. See comments of North American Meat 
Institute. As addressed extensively in our discussion of essential 
terms and conditions of employment above and in our discussion of 
the final rule below, the Board has benefited from the input of 
stakeholders and organizations that confirmed the Board's 
preliminary views that workplace health and safety should be treated 
as an essential term or condition of employment and that the Covid-
19 pandemic exacerbated certain employees' health and safety 
concerns at work. We therefore reject this commenter's view that it 
was arbitrary or capricious for the Board to take these significant 
real-world developments into account when considering how to modify 
its approach to defining ``joint employer.''
    \312\ Comments of COLLE; Independent Bakers Association; U.S. 
Chamber of Commerce.
---------------------------------------------------------------------------

    Some commenters suggest that the proposed rule will lead to 
excessive litigation of joint-employer issues,\313\ potentially 
diminishing the value of proceeding through rulemaking and suggesting 
that case-by-case adjudication might be a better approach. Some 
commenters who are generally supportive of the proposed rule's approach 
to the joint-employer inquiry also express reservations about the 
proposal to promulgate a new standard through rulemaking.\314\
---------------------------------------------------------------------------

    \313\ Comments of American Hospital Association; American 
Staffing Association; Bicameral Congressional Signatories; Center 
for Workplace Compliance; HR Policy Association; IFA; International 
Bancshares Corporation; McDonald's USA, LLC; Modern Economy Project; 
North American Meat Institute; The Mackinac Center for Public 
Policy.
    \314\ Comments of AFL-CIO; IUOE; United Association of 
Journeymen and Apprentices of the Plumbing and Pipe Fitting 
Industry; United Steelworkers.
---------------------------------------------------------------------------

    Some commenters criticize the Board for abandoning the 2020 rule 
prematurely, arguing that because the Board had not yet had occasion to 
apply the rule, the Board cannot find fault with it and should not 
rescind it.\315\ A few commenters suggest that the Board should await 
federal court review of the 2020 rule before rescinding it or consider 
other alternatives before proceeding further.\316\ Certain

[[Page 73976]]

commenters point to reliance interests related to the 2020 rule, with 
some suggesting that the Board delay the effective date of the final 
rule to accommodate these concerns.\317\ For example, one commenter 
states that many staffing agencies entered into contracts using the 
2020 rule as their guide.\318\ Others question whether any material 
legal or factual change has occurred since the 2020 rule was 
promulgated that would justify the proposed changes to the joint-
employer standard or otherwise suggest that the proposed rule failed to 
offer a reasoned explanation for a policy change.\319\ A significant 
number of these commenters propose that the Board withdraw the proposed 
rule entirely and leave the 2020 rule intact.\320\ Some of these 
commenters suggest, in the alternative, that the Board solely rescind 
the 2020 rule.\321\
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    \315\ Comments of COLLE; Elizabeth Boynton; FreedomWorks 
Foundation; Goldwater Institute; Job Creators Network Foundation; 
National Association of Convenience Stores; North American Meat 
Institute; The Thomas Jefferson Institute for Public Policy; U.S. 
Chamber of Commerce; Wyoming Bankers Association. We note that in 
the time since the comment period closed, the Board has applied the 
2020 rule. See Cognizant Technology Solutions U.S. Corp. & Google 
LLC, 372 NLRB No. 108 (2023).
    \316\ Comments of Bicameral Congressional Signatories; 
Bipartisan Senators; CDW; IFA; Independent Bakers Association; U.S. 
Chamber of Commerce.
    Some commenters suggest that there is no need to promulgate a 
new joint-employer standard through rulemaking if the Board's goal 
is to return to the preexisting common-law standard. See, e.g., 
comments of CDW; IFA. As described above, while we believe the final 
rule is firmly grounded in common-law agency principles, we see a 
determinate advantage in replacing the 2020 rule with a new standard 
that, like it, provides a definite and readily available standard. 
We note that by modifying the final rule to provide for an 
exhaustive list of essential terms and conditions of employment, we 
also introduce a new limiting principle that was not a feature of 
the Board's joint-employer doctrine, which is responsive to one of 
these commenter's core concerns regarding the proposed rule. See 
comments of IFA. Announcing this new limiting principle therefore 
provides another justification for promulgating a new rule rather 
than simply rescinding the 2020 rule.
    \317\ Comments of Costa Enterprises; IFA; McDonald's USA, LLC; 
New Civil Liberties Alliance & Institute for the American Worker; 
Restaurant Law Center and National Restaurant Association; Texas 
Public Policy Foundation; U.S. Chamber of Commerce; Yum! Brands. 
Certain of these commenters do not specifically identify reliance 
interests related to the 2020 Rule, but instead more generally 
suggest they structured their businesses in reliance on Board law 
prior to BFI. See, e.g., comments of Costa Enterprises; McDonald's 
USA, LLC. With respect to the request to delay the effective date of 
the final rule, we note that, as some other commenters urge, see, 
e.g., comments of the U.S. Chamber of Commerce, the rule is subject 
to Congressional review and that, as a result, the effective date 
will await the culmination of that process.
    \318\ See comments of Texas Public Policy Foundation.
    \319\ Comments of California Policy Center; COLLE; Empire Center 
for Public Policy; North American Meat Institute; Subcontracting 
Concepts, LLC; U.S. Chamber of Commerce; Wyoming Bankers 
Association.
    \320\ Comments of ABC; AGC; American Hotel & Lodging 
Association; Americans for Fair Treatment; Americans for Prosperity 
Foundation; American Staffing Association; ANB Bank; Bicameral 
Congressional Signatories; CDW; Center for Workplace Compliance; 
COLLE; Competitive Enterprise Institute; HR Policy Association; Home 
Care Association of America; IFA; IFDA; Independent Electrical 
Contractors; Independent Women's Forum; International Bancshares 
Corporation; International Warehouse Logistics Association; 
LeadingAge; McDonald's USA, LLC; Modern Economy Project; NAHB; NAM; 
NATSO & SIGMA; National ACE; National Alliance for Public Charter 
Schools; National Association of Convenience Stores; National Waste 
& Recycling Association; NFIB; Pacific Legal Foundation; Restaurant 
Law Center and National Restaurant Association; RILA; Rio Grande 
Foundation; Senator James M. Inhofe; Taxpayers Protection Alliance; 
Texas Public Policy Foundation; The Mackinac Center for Public 
Policy; U.S. Chamber of Commerce; Yum! Brands.
    \321\ Comments of CDW; HR Policy Association; McDonald's USA, 
LLC; Pacific Legal Foundation.
---------------------------------------------------------------------------

    Other commenters, citing FCC v. Fox Television Stations, Inc., 556 
U.S. 502, 515 (2009), observe that the Board is permitted to advance 
new interpretations of the Act so long as it demonstrates good reasons 
for its new policy.\322\ One commenter argues that any reliance 
interests associated with the 2020 rule must be highly attenuated, 
given that the Rule has not yet been applied and because the NPRM put 
the public on notice that the Board was considering rescinding and/or 
replacing the 2020 rule.\323\
---------------------------------------------------------------------------

    \322\ Comments of State Attorneys General.
    \323\ Comments of General Counsel Abruzzo.
---------------------------------------------------------------------------

    First, we reject the argument that it is premature to rescind the 
2020 rule or to promulgate a new joint-employer standard. As noted 
above, so long as the Board sets forth good reasons for its new policy 
and sets forth a reasoned explanation for the change, Supreme Court 
precedent permits the Board to offer new interpretations of the 
Act.\324\ We have done so throughout our discussion of our 
justifications for rescinding the 2020 rule and promulgating a new 
standard. In addition, as one commenter points out,\325\ the APA does 
not impose any requirement that an agency apply a rule prior to 
replacing it, provided that the agency otherwise identifies problems 
with the rule and explains why it resolves the issue in the manner it 
does. Another commenter notes that the 2020 rule is likewise vulnerable 
on APA grounds, as its definition of ``joint employer'' is ``not in 
accordance with law.'' \326\
---------------------------------------------------------------------------

    \324\ See Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 221 
(2016); FCC v. Fox Television Stations, 556 U.S. at 515.
    \325\ Comments of CWA.
    \326\ Comments of State Attorneys General (citing 5 U.S.C. 
702(2)(A)). Another commenter makes a similar observation, noting 
that leaving the 2020 rule intact is not an option the Board can 
properly consider in light of the District of Columbia Circuit's 
decisions in BFI v. NLRB and Sanitary Truck Drivers. See AFL-CIO 
reply comments.
---------------------------------------------------------------------------

    Next, while some commenters encourage the Board to await judicial 
review of the 2020 rule before taking further action, we remain of the 
view that the 2020 rule introduced control-based restrictions that are 
inconsistent with common-law agency principles, as reflected in the 
District of Columbia Circuit's statements in BFI v. NLRB, 911 F.3d at 
1211-1215, and in Sanitary Truck Drivers, 45 F.4th at 46-47. For this 
reason, we prefer to proactively rescind the 2020 rule and to 
articulate a new standard that better comports with the requirements of 
the common law.
    Further, while we recognize that some parties may have relied on 
the 2020 rule in structuring their business practices, we do not find 
such reliance interests sufficiently substantial to make us reconsider 
rescinding the 2020 rule and promulgating a new standard. We agree with 
the view of one commenter that at least as of the date of the NPRM, any 
such reliance on the 2020 rule cannot be deemed reasonable, as the 
Board indicated its preliminary view that rescinding or replacing that 
standard would be desirable as a policy matter.\327\ Moreover, because 
we think that the final rule accurately aligns employers' statutory 
obligations with their control of essential terms and conditions of 
employment of their own common-law employees, we conclude that to the 
extent that business entities may have structured their contractual 
relationships under prior, overly restrictive versions of the joint-
employer standard, any interest in maintaining such arrangements is not 
sufficiently substantial or proper as a matter of law.
---------------------------------------------------------------------------

    \327\ See comments of General Counsel Abruzzo.
---------------------------------------------------------------------------

    One commenter charges that the Board is not free to promulgate a 
standard defining the terms ``employer'' and ``employee,'' arguing that 
both the 2020 rule and the proposed rule trench on the federal courts' 
authority to interpret these terms.\328\ We respectfully disagree with 
this commenter's view of the Board's role in carrying out the 
provisions of the Act pursuant to Section 6 of the Act. We further note 
that, apart from this procedural disagreement, the final rule is 
consistent with the spirit of this commenter's argument, as the final 
rule seeks to ground the Board's analysis in the common-law agency 
principles that federal courts have instructed the Board to apply in 
construing the statutory definitions contained in section 2 of the Act. 
As explained above, the Board will draw on the Supreme Court's binding, 
authoritative statements regarding the common law of agency and look to 
other judicial common-law precedent as primary sources of authority 
governing the Board's interpretation. Of course, the Board's joint-
employer determinations in individual cases are

[[Page 73977]]

ultimately reviewable by the federal courts.
---------------------------------------------------------------------------

    \328\ Comments of Pacific Legal Foundation. This commenter also 
appears to suggest that it is unconstitutional for the Board to 
interpret the Act through rulemaking, though it does not cite any 
precedent in support of that view. Id.
---------------------------------------------------------------------------

    Other commenters urge that the proposed rule is overly vague, that 
it does not meet its stated goal of providing a ``definite, readily 
available standard,'' \329\ or that it does not meet the requirements 
of fair notice and due process because the proposal is not clear enough 
that parties can reasonably ascertain to whom it applies.\330\ Many of 
these commenters specifically pointed to the open-ended list of 
essential terms and conditions of employment as a feature of the 
proposed rule that renders it impermissibly vague.\331\ Some commenters 
argue that because BFI created a vague definition of joint employer, 
they fear the proposed rule, which codifies key elements of that test 
regarding the significance of forms of indirect and reserved control, 
would likewise create ambiguities and uncertainty.\332\ Others explain 
their view that the absence of practical guidance, illustrative 
examples, hypothetical questions, or other interpretive aids in the 
proposed rule undermines the proposal's effectiveness and will fail to 
provide stakeholders with the guidance they need to meet their 
compliance obligations.\333\
---------------------------------------------------------------------------

    \329\ 87 FR 54645.
    \330\ Comments of CDW; California Policy Center; Colorado 
Bankers Association; Competitive Enterprise Institute; HR Policy 
Association; IFA; International Bancshares Corporation; National 
Small Business Administration; PPAI; Reid's, Inc. d/b/a Crosby's; 
Restaurant Law Center and National Restaurant Association; Tesla, 
Inc.; Yum! Brands.
    \331\ See, e.g., comments of Americans for Prosperity 
Foundation; HR Policy Association; Independent Women's Forum; 
International Bancshares Corporation; LeadingAge; Libertas 
Institute; McDonald's USA, LLC; NAM; National Grocers Association; 
National Roofing Contractors Association; Restaurant Law Center and 
National Restaurant Association; The Thomas Jefferson Institute for 
Public Policy; U.S. Chamber of Commerce. Some of these commenters 
make the further point that the vagueness of the proposed rule will 
require small businesses to retain counsel or bear other compliance, 
legal, and administrative costs. See, e.g., comments of Energy 
Marketers of America; National Lumber & Building Material Dealers 
Association; The Buckeye Institute; Yankee Institute for Public 
Policy.
    \332\ Comments of American Pizza Community; Energy Marketers of 
America; International Warehouse Logistics Association; National 
Alliance for Public Charter Schools; NATSO & SIGMA; National 
Taxpayers Union; PPAI; The Buckeye Institute; Yanxu Yang.
    \333\ Comments of Asian McDonald's Operators Association; NAHB; 
National Black McDonald's Operators Association; U.S. Black 
Chambers, Inc.; U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    Other commenters take the contrary view, arguing that the 
flexibility and adaptability of the proposed rule is one of its 
greatest strengths.\334\ Some of these commenters argue that the Board 
should avoid adopting too rigid a definition of joint employer, noting 
that changing workplace conditions will require refinement of the 
standard as it is applied in new factual situations.\335\
---------------------------------------------------------------------------

    \334\ Comments of McGann, Ketterman & Rioux.
    \335\ Comments of McGann, Ketterman & Rioux.
---------------------------------------------------------------------------

    We have carefully considered the many comments we received seeking 
modifications to the proposed rule geared toward ensuring greater 
clarity and predictability in the Board's joint-employer 
determinations. As mentioned elsewhere, while we acknowledge some 
commenters' position that the 2020 rule fostered greater predictability 
and certainty in the Board's joint-employer determinations, we have 
determined that rule is not in accordance with the common-law agency 
principles we are bound to apply in analyzing whether entities are 
joint employers under the Act. As a result, we cannot maintain that 
standard. However, we believe that the modifications to the text of the 
proposed rule, along with the comprehensive responses we offer in 
response to the helpful input we received during the public-comment 
process, will facilitate parties covered by the Act in understanding 
and meeting their compliance obligations and reduce uncertainty and 
litigation.
    Some commenters argue that the Board's proposed standard will 
create inconsistencies with other regulators' joint-employer 
standards.\336\ As discussed in Section I.D. above, our dissenting 
colleague contends that federal courts have applied different standards 
when determining joint-employer status under other statutes that define 
``employer'' in common-law terms. Other commenters observe that joint-
employer standards similar to the one set forth in the proposed rule 
are commonplace in the context of other labor and employment 
statutes.\337\ One commenter describes the Equal Employment Opportunity 
Commission (EEOC)'s approach to analyzing whether multiple firms 
jointly employ particular employees as taking forms of indirect and 
reserved control into account in much the same manner as does the 
proposed rule.\338\ A number of commenters discuss the Department of 
Labor's approach to defining ``joint employer'' for purposes of the 
Fair Labor Standards Act (FLSA), 29 U.S.C. 203 et seq.,\339\ though 
several commenters observe that the definition of ``employee'' under 
FLSA is broader than the common-law standard used in the NLRA.\340\
---------------------------------------------------------------------------

    \336\ Comments of New Civil Liberties Alliance & Institute for 
the American Worker.
    \337\ Comments of National Partnership for Women & Families; The 
Leadership Conference on Civil and Human Rights.
    \338\ Comments of AFL-CIO (``[A]ll of the circumstances in the 
worker's relationship with each business should be considered to 
determine if either or both should be deemed [their] employer.'') 
(quoting EEOC Notice No. 915.002, Enforcement Guidance: Applications 
of EEO Law to Contingent Workers Placed by Temporary Employment 
Agencies and Other Staffing Firms at Coverage Issues (Dec. 3, 1997), 
available at https://www.eeoc.gov/laws/guidance/enforcement-guidance-application-eeo-laws-contingent-workers-placed-temporary).
    \339\ One commenter cites approvingly to the four-factor joint-
employer test the Department of Labor adopted in 2020 and encourages 
the Board to look to that test for guidance in modifying the 
proposed rule. See comments of National Demolition Association. We 
observe that on July 30, 2021, the Department of Labor issued a 
final rule rescinding the joint-employer standard this commenter 
references. See Rescission of Joint Employer Status Under the Fair 
Labor Standards Act Rule, 86 FR 40939 (July 30, 2021).
    See also comments of National Retail Federation (discussing 
Singh v. 7-Eleven, Inc., 2007 U.S. Dist. LEXIS 16677 (N.D. Cal. Mar. 
7, 2007), and Wright v. Mountain View Lawn Care, LLC, 2016 U.S. 
Dist. LEXIS 31353 (W.D. Va. Mar. 11, 2016), two federal court 
decisions finding that brand-recognition standards at franchise 
businesses did not create a joint employment relationship for 
purposes of the FLSA or Title VII of the Civil Rights Act of 1964, 
respectively).
    \340\ Comments of New Civil Liberties Alliance & Institute for 
the American Worker.
---------------------------------------------------------------------------

    Although we agree with the view of several commenters that certain 
other Federal agencies' joint-employer standards are broadly consistent 
with the Board's proposed rule, we are guided here by the statutory 
requirement that the Board's standard be consistent with common-law 
agency principles and the policies of the National Labor Relations 
Act.\341\ Contrary to our dissenting colleague's suggestion, our 
standard is rooted in common-law agency principles, not the economic-
realities test used to interpret ``employer'' for purposes of the Fair 
Labor Standards Act. Cf. NLRB v. United Insurance Co. of America, 390 
U.S. 254, 256 (1968) (discussing limiting impact of Taft-Hartley 
amendments on the interpretation of the Act).
---------------------------------------------------------------------------

    \341\ In this regard, we confirm that, contrary to a concern one 
commenter raises, the final rule solely relates to the definition of 
``joint employer'' under the NLRA. See comments of American Health 
Care Association & National Center for Assisted Living.
---------------------------------------------------------------------------

    Other commenters raise concerns regarding the possibility that the 
proposed joint-employer standard will stand in tension with state-law 
definitions of ``joint employer.'' One commenter argues that state 
authorities with responsibility for administering state-law equivalents 
of the Act make joint-employer determinations on different grounds than 
those set forth in the proposed rule.\342\
---------------------------------------------------------------------------

    \342\ Comments of Modern Economy Project; National Alliance for 
Public Charter Schools; Subcontracting Concepts, LLC.
---------------------------------------------------------------------------

    State labor and employment law interpretations of ``joint 
employer'' also

[[Page 73978]]

vary. Some commenters find parallels to the proposed rule in certain 
state definitions of ``joint employer.'' \343\ One commenter in 
particular observes that Illinois Department of Labor regulations 
incorporate similar common-law principles to those set out in the 
proposed rule.\344\ By contrast, one commenter notes that New York 
State uses a standard for determining joint-employer status for 
purposes of public-sector labor relations that more closely corresponds 
to the 2020 rule.\345\
---------------------------------------------------------------------------

    \343\ See, e.g., comments of State Attorneys General.
    \344\ Comments of State Attorneys General.
    \345\ Comments of Empire Center for Public Policy.
---------------------------------------------------------------------------

    We are not persuaded that these commenters' concerns about the 
possibility of tension with state-law definitions of ``joint employer'' 
provide a sufficient reason to abandon our rulemaking effort. Certain 
of these commenters appear to suggest the possibility for a state-by-
state patchwork of interpretations of the joint-employer standard if 
state courts apply or interpret the Board's joint-employer standard. We 
respectfully note that, under principles of federal labor law 
preemption, the Board has exclusive jurisdiction to administer the Act. 
See San Diego Building Trades Council v. Garmon, 359 U.S. 236, 245 
(1959) (``When an activity is arguably subject to [section] 7 or 
[section] 8 of the Act, the States as well as the federal courts must 
defer to the exclusive competence of the National Labor Relations Board 
if the danger of state interference with national policy is to be 
averted.''). A group of 18 State Attorneys General argues that it 
relies on the Board's enforcement of private-sector labor law to 
protect employees in their States.\346\
---------------------------------------------------------------------------

    \346\ Comments of State Attorneys General. We note that the 
signatories of this comment included the Attorneys General of 
California, Colorado, Connecticut, Delaware, District of Columbia, 
Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New 
Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode 
Island, and Washington.
---------------------------------------------------------------------------

L. Empirical Arguments

    As stated above, one of the goals of the proposed rule is to reduce 
uncertainty and litigation over questions related to joint-employer 
status. Some commenters challenge the premise of the proposed rule, 
predicting that the proposed rule will fuel time-consuming and costly 
litigation.\347\ One of these commenters points to data that it 
represents shows that after the Board's BFI decision in 2015, petitions 
and unfair labor practice charges raising joint employer issues 
increased dramatically at the Board.\348\ Some respond to this 
contention by noting that findings of joint-employer status remained 
constant during this period.\349\
---------------------------------------------------------------------------

    \347\ Comments of IFA; McDonald's USA, LLC; North American Meat 
Institute. Our dissenting colleague also anticipates that the final 
rule will lead to more extensive litigation of joint-employer 
questions.
    \348\ Comments of IFA.
    \349\ See, e.g., reply comments of AFL-CIO.
---------------------------------------------------------------------------

    While we have carefully considered parties' arguments that the 2020 
rule fostered predictability and reduced litigation, we nevertheless 
conclude that we are foreclosed from maintaining the joint-employer 
standard set forth in that rule because it is not in accordance with 
the common-law agency principles the Board is bound to apply in making 
joint-employer determinations. That said, we note one commenter's view 
that findings of joint-employer status did not markedly increase 
following the Board's decision in BFI. In addition, we hope to have 
minimized the risk of uncertainty or increased litigation of joint-
employer questions by comprehensively addressing the comments we 
received in response to the proposed rule and by modifying the proposed 
rule in several respects to enhance its clarity and predictability.
    Some commenters argue that the 2020 rule encouraged business 
cooperation and led to partnerships that benefit small businesses.\350\ 
These commenters take the view that the proposed rule would diminish 
these beneficial practices or make it harder for companies to 
communicate or cooperate without risking a finding that they are joint 
employers.\351\ Our dissenting colleague also argues that changing the 
joint-employer standard will make it more difficult for businesses to 
cooperate and share resources. In particular, some commenters predict 
that the Board's proposed joint-employer standard will disincentivize 
conduct that tends to improve the workplace, like training, safety and 
health initiatives, and corporate social responsibility programs.\352\ 
Others suggest that the proposed rule will lead to uncertainty about 
obligations, creating a business climate of risk and increasing costs, 
especially in the third-party logistics industry.\353\ Some commenters 
predict that the proposed rule could discourage larger companies from 
entering into contracts with third parties to perform work.\354\ Others 
specifically note that the proposed rule could make it more difficult 
for companies to seek temporary employees to address labor shortages or 
deal with fluctuating seasonal demand for labor.\355\
---------------------------------------------------------------------------

    \350\ Comments of CDW; COLLE; International Warehouse Logistics 
Association; NAHB; National Association of Convenience Stores; NFIB; 
National Retail Federation.
    \351\ Comments of CDW; COLLE; NAHB; NAM; National Retail 
Federation; National Small Business Association; Washington Legal 
Foundation.
    \352\ Comments of American Trucking Associations; HR Policy 
Association; NAM; National Waste & Recycling Association.
    \353\ Comments of International Warehouse Logistics Association.
    \354\ Comments of National Lumber & Building Materials Dealers 
Association; National Small Business Association.
    \355\ Comments of AHA; National Taxpayers Union. Certain 
commenters stress that labor shortages have been acute in hospital 
and healthcare industries since the onset of the Covid-19 pandemic, 
making reliance on contract labor especially important. See, e.g., 
comments of AHA.
---------------------------------------------------------------------------

    We have seriously considered commenters' concerns, especially those 
of individuals and small business owners, regarding how the joint-
employer standard we adopt today might influence their business 
relationships. Insofar as the Act itself requires the Board to conform 
to common-law agency principles in adopting a joint-employer standard, 
these concerns seem misdirected. Nevertheless, we hope that the 
modifications to the proposed rule and clarifications we offer today 
will alleviate some of these concerns. We also note that the Board's 
definition of joint employer, which implements common-law agency 
principles, does not preclude or intend to preclude any particular 
kinds of business arrangements or relationships.
    A number of commenters, including many individuals, argue that the 
proposed rule would negatively affect the franchise industry.\356\ In 
particular, some individuals express the view that a broader joint-
employer standard may inhibit franchisors' abilities to help them 
develop the skills necessary to manage successful businesses.\357\ 
Others suggest that one benefit of the franchise model is the 
independence it affords franchisees. They argue that the proposed rule 
might encourage franchisors to take a more active role in the day-to-
day operation of franchise businesses, undermining franchisees'

[[Page 73979]]

autonomy and creativity.\358\ A number of groups writing on behalf of 
Black franchisees, franchisees of color, veteran franchisees, and women 
and LGBTQ franchisees argue that the franchise model has been 
especially successful in improving their members' lives and economic 
prospects.\359\ They, and other commenters, express concerns about the 
effect of the proposed rule on franchisees and small business owners of 
color.\360\ Groups representing franchisors, a bipartisan group of 
United States Senators and Members of Congress, and the United States 
Small Business Administration Office of Advocacy echo these 
concerns.\361\ A number of commenters cite an economic analysis 
commissioned by the International Franchise Association that sought to 
demonstrate the cost of the Board's 2015 BFI standard on the franchise 
business model.\362\ Others, including some individuals and 
franchisees, make similar arguments, stating that the proposed rule 
could increase costs for franchise business owners if franchisors 
engage in ``distancing behaviors'' and are no longer willing to provide 
franchisees with training and recruitment materials, employee 
handbooks, or educational materials on new regulations.\363\
---------------------------------------------------------------------------

    \356\ See, e.g., comments of Americans for Tax Reform; Mauro 
Alvarez; Kermit Begly; Rachel Greszler; Nichole Holles; Illinois 
Policy Institute; Jean Johns; Job Creators Network Foundation; Neil 
Kellen; McDonald's USA, LLC; Daniel Miller; Russell Moss; NATSO & 
SIGMA; The James Madison Institute; The Mackinac Center for Public 
Policy; Emily Wiechmann; Yankee Institute for Public Policy. One 
commenter argues that the franchise business model has expanded 
access to home care services in the United States and expresses 
concerns about whether the proposed rule could harm access to home 
care services. See comments of Home Care Association of America.
    \357\ See, e.g., comments of Costa Enterprises; Linda Bowin; 
David Denney; Ali Nekumanesh; Shelley Nilsen.
    \358\ Comments of Escalante Organization; National Taxpayers 
Union; The Buckeye Institute; Yanxu Yang. We note in particular that 
some individuals express concerns that instead of being treated as 
independent business owners, the joint-employer rule will cause 
larger firms to treat them as employees or micromanage their work. 
See, e.g., comments of Amber Niblock; Kerry Stone; Tom Webster.
    \359\ Comments of Association of Women's Business Centers; IFA; 
National Black McDonald's Operators Association; U.S. Black 
Chambers, Inc.
    \360\ Comments of COLLE; IFA; U.S. Black Chambers, Inc.
    \361\ Comments of Bicameral Congressional Signatories; 
Bipartisan Senators; IFA; McDonald's USA, LLC; National ACE; 
National Retail Federation; SBA Office of Advocacy; Yum! Brands. As 
some of these commenters note, recent Census data shows that 30.8 
percent of franchise businesses are minority owned, compared to 18.8 
percent of nonfranchised businesses. See, e.g., comments of 
Bicameral Congressional Signatories. The comments of McDonald's USA, 
LLC note that ``31% of [its] U.S. franchisees are minority-owned 
businesses, and that 29% are women-owned businesses.''
    In particular, the SBA Office of Advocacy expresses concern that 
the proposed rule could violate ``a new federal mandate to bolster 
the ranks of underserved small business federal contractors, 
including women-owned, Black-owned, Latino-owned, and other 
minority-owned small businesses.'' Comments of SBA Office of 
Advocacy (citing Press Release, The White House, Statements and 
Releases, FACT SHEET: Biden-Harris Administration Announces Reforms 
to Increase Equity and Level the Playing Field for Underserved Small 
Business Owners, (Dec. 2, 2021)). Other commenters echo the SBA 
Office of Advocacy's concern regarding the possibility of conflicts 
between the proposed rule and federal contracting law and practice. 
Comments of CDW; COLLE; National Retail Federation; Thomas Jefferson 
Institute for Public Policy; U.S. Black Chambers, Inc. One 
individual commenter expresses a concern that the proposed rule 
might make it more difficult for small businesses to bid for and win 
government contracts. See comments of Sherri Smalling.
    \362\ Comments of Bipartisan Senators; Costa Enterprises; 
FreedomWorks Foundations; IFA; Libertas Institute; McDonald's USA, 
LLC; North American Meat Institute; Senator Inhofe; U.S. Black 
Chambers, Inc.; U.S. Chamber of Commerce.
    \363\ Comments of Asian McDonald's Operators Association; 
Escalante Organization; FreedomWorks Foundations; Goldwater 
Institute; IFA; Job Creators Network Foundation; McDonald's USA, 
LLC; NFIB; National Black McDonald's Operators Association; National 
Association of Convenience Stores; National Retail Federation; 
Restaurant Law Center and National Restaurant Association; SBA 
Office of Advocacy; The Mackinac Center for Public Policy. See also, 
e.g., comments of Neil Kellen; Carole Montgomery; Deborah Robart; 
James Weaver; Yanxu Yang.
---------------------------------------------------------------------------

    By contrast, other commenters dispute the contention that the 
proposed rule will negatively affect the franchise business model.\364\ 
Several commenters specifically address the IFA study regarding the 
costs associated with the 2015 BFI standard.\365\ One of these 
commenters disputes the methodology used in preparing the analysis, 
noting that there were ``serious concerns about the survey design and 
statistical analysis.'' \366\ Another argues that, in 2015 and 2016, 
following BFI and the Department of Labor's promulgation of a broader 
joint-employer standard, franchise employment grew by 3 percent and 3.5 
percent, outpacing growth in other private, nonfarm employment, 
undermining the argument that the proposed rule would slow job growth 
in franchise businesses.\367\
---------------------------------------------------------------------------

    \364\ Comments of Center for Law and Social Policy; General 
Counsel Abruzzo.
    \365\ Comments of EPI; reply comments of AFL-CIO. These 
commenters cross-reference a set of reply comments submitted by EPI 
in response to the Board's 2018 joint-employer notice of proposed 
rulemaking, available at https://www.regulations.gov/comment/NLRB-2018-0001-29072.
    \366\ Comments of EPI.
    \367\ Comments of CAP.
---------------------------------------------------------------------------

    We have seriously considered the arguments by commenters advancing 
different views regarding the accuracy and explanatory force of the IFA 
study. We do not believe that the study provides an appropriate or 
sufficient basis to abandon our effort to rescind the 2020 rule and 
promulgate a new joint-employer standard. There is no suggestion in the 
Act's text or legislative history that the Board has the authority to 
depart from common-law agency principles in adopting and applying a 
joint-employer standard because of its predicted effect on a particular 
industry or industries, irrespective of statutory policy or 
Congressional intent.
    Other commenters make qualitative empirical arguments regarding the 
proposed rule's potential positive effect on franchise businesses. 
These commenters argue that the proposed rule might improve operations 
at franchise businesses and make franchise businesses better and safer 
workplaces.\368\ Several commenters are employees who work for 
franchise businesses, and they argue that franchisors exercise 
significant control over the day-to-day details of their working 
lives.\369\ These comments arguably illuminate how forms of reserved 
and indirect control can implicate essential terms and conditions of 
employment, but the final rule is not based on the Board's assessment 
of the new standard's effect--negative or positive--on franchise 
businesses, as that consideration has no clear basis in the Act.
---------------------------------------------------------------------------

    \368\ Comments of Center for Law and Social Policy; Daniel 
Struckhoff.
    \369\ Comments of Richard Eiker.
---------------------------------------------------------------------------

    A group of commenters argue that the proposed rule will increase 
compliance and administrative costs for general contractors, 
subcontractors, and other construction industry employers.\370\ Some of 
these commenters raise concerns that these increased costs will 
diminish opportunities for growth for vendors or smaller 
contractors.\371\ Several commenters also raise concerns about the 
possibility that the Board will find that individuals who provide 
services to other entities as independent contractors are joint 
employers with those entities.\372\ They also argue that the proposed 
rule risks destabilizing longstanding multiemployer bargaining 
practices in the construction industry and could potentially create new 
withdrawal liability in the context of multiemployer defined-benefit 
pension plans.\373\ Certain of these commenters take the view that the 
2020 rule did not adversely affect labor peace and implicitly suggest 
that the proposed rule might lead to an increase in labor

[[Page 73980]]

disputes.\374\ Our dissenting colleague likewise takes the position 
that changing the joint-employer standard may adversely affect certain 
businesses, including by discouraging ``efforts to rescue failing 
businesses'' through successorship.
---------------------------------------------------------------------------

    \370\ Comments of ABC; AGC; National Demolition Association; 
Rachel Greszler. Some of these commenters suggest that the rule will 
require parties to renegotiate or revise contracts, resulting in 
significant transaction costs. See comments of American Trucking 
Associations; Rachel Greszler.
    \371\ Comments of ANB Bank; CDW; Competitive Enterprise 
Institute; Independent Electrical Contractors; International 
Warehouse Logistics Association; Job Creators Network Foundation; 
NFIB; National Taxpayers Union. One commenter suggests that these 
dynamics may cause consolidation in the grocery market, harming 
independent grocers and consumers alike. See comments of National 
Grocers Association.
    \372\ Comments of Andrea Karns; National Association of 
Realtors.
    \373\ Comments of ABC; AGC.
    \374\ Comments of Empire Center for Public Policy.
---------------------------------------------------------------------------

    As expressed elsewhere, we are sensitive to commenters' concerns 
that the joint-employer standard we adopt in this final rule might have 
unwanted effects on their businesses. In particular, we have thoroughly 
reviewed submissions from individuals and small business owners raising 
such concerns. However, we are not persuaded that these concerns 
reflect considerations that, as a statutory matter, may determine the 
Board's choice of a joint-employer standard. As we have explained, the 
Board must adhere to common-law agency principles. These commenters 
have failed to explain how, consistent with the Act's requirements and 
statutory policy, the Board could treat their concerns as 
determinative. In addition, to the extent some of these commenters 
explain that they prefer the 2020 rule to the proposed rule, we 
reiterate our view that we are foreclosed from maintaining the 2020 
rule because it is inconsistent with common-law agency principles and 
does not advance the policies of the Act.
    Other commenters raise practical objections to the proposed joint-
employer standard, urging the Board to consider the potentially harmful 
effect of enmeshing multiple firms in collective bargaining. These 
commenters generally argue that bargaining with more than one firm will 
be cumbersome, unworkable, or otherwise undesirable.\375\ Our 
dissenting colleague similarly argues that bargaining involving 
multiple firms may be stymied by conflicts among the firms and will be 
less likely to culminate in workable collective-bargaining agreements. 
Others, including some individuals, small business owners, and groups 
that represent the interests of women small business owners and small 
business owners of color, express concern that the joint-employer 
standard will limit opportunities for new business or job creation or 
otherwise diminish their economic opportunities or harm consumers.\376\
---------------------------------------------------------------------------

    \375\ Comments of AHA; ABC; CDW; COLLE; Federation of American 
Hospitals; HR Policy Association; IFDA; International Bancshares 
Corporation; National Waste & Recycling Association; New Jersey Food 
Council; Rachel Greszler; Restaurant Law Center and National 
Restaurant Association; U.S. Chamber of Commerce; Wyoming Bankers 
Association. Some of these commenters liken the proposed rule to 
government-mandated multiemployer bargaining. Comments of ABC; 
COLLE; Tesla, Inc. As set forth above, we reject this 
characterization. Under the final rule, businesses remain free to 
structure their business operations however they wish. The rule 
creates no mandate to engage in bargaining on a multifirm basis 
whatsoever.
    \376\ See, e.g., comments of Americans for Tax Reform; IFA; 
Independent Women's Forum; National Grocers Association; North 
American Meat Institute; Rachel Greszler; Stephen Clark; Yankee 
Institute for Public Policy.
    A few of these commenters express concerns that the proposed 
rule will adversely affect particular state economies. See, e.g., 
comments of California Policy Center (California); Goldwater 
Institute (Arizona); Libertas Institute (Utah); Rio Grande 
Foundation (New Mexico); The Buckeye Institute (Ohio); Thomas 
Jefferson Institute for Public Policy (Virginia).
    Some commenters, especially individuals and small business 
owners, argue that the proposed rule is poorly timed in light of 
larger macroeconomic trends, including inflation, and the lingering 
effects of the Covid-19 pandemic on supply chains. See, e.g., 
comments of Daniel Amare; Marlo Andeersen; Hugh Blanchard; Jon 
Clegg; Harold Heller; Justin Hood; Catherine Parker; Larry 
Verlinden.
---------------------------------------------------------------------------

    By contrast, certain commenters suggest that a broad joint-employer 
standard will ensure that the proper parties are present for bargaining 
and may help smaller entities bear only their share of the liability 
for conduct that violates the Act.\377\ Others note that some 
commenters' criticisms of the proposed rule would apply to any joint-
employer standard, since they principally relate to the dynamics of 
bargaining that involves more than one firm.\378\ In this regard, they 
contend, the criticisms are not unique to the proposed rule and should 
not weigh against the Board's rescission of the 2020 rule or 
promulgation of a new joint-employer standard.
---------------------------------------------------------------------------

    \377\ Comments of American Federation of Musicians Local 47; 
Congressman Scott et al.; General Counsel Abruzzo; National Women's 
Law Center.
    \378\ Comments of AFL-CIO; General Counsel Abruzzo.
---------------------------------------------------------------------------

    Other commenters argue that ensuring the appropriate entities are 
recognized as joint employers is essential to deterring practices in 
certain industries, including staffing, temporary warehouse work, and 
food processing, that they represent have led to the underpayment of 
wages, worker misclassification, and unsafe working conditions.\379\ 
Several of these commenters observe that these harmful practices 
disproportionally affect Black employees, Latinx employees, immigrant 
employees and migrant guestworkers, women and LGBTQ employees, and 
employees of color.\380\ A number of organizations also commented on 
the use of ``labor broker'' arrangements in the construction industry 
and how the proposed joint-employer standard might ensure that all 
entities who possess the authority to control or exercise control over 
construction industry employees' essential terms and conditions of 
employment fully comply with their obligations under the Act and other 
labor and employment statutes.\381\
---------------------------------------------------------------------------

    \379\ Comments of ACLU; BCTGM; Center for Law and Social Policy; 
Southern States Millwright Regional Council, UBC and Central South 
Carpenters Regional Council, UBC; District Council of New York City 
& Vicinity of the UBC; NELP; Restaurant Opportunities Centers 
United; Signatory Wall and Ceiling Contractors Alliance; The 
Leadership Conference on Civil and Human Rights; UBC; United for 
Respect.
    \380\ Comments of ACLU; Lawyers' Committee for Civil Rights 
Under Law; NELP; National Black Worker Center; National Partnership 
for Women and Families; NELP; SPLC; TechEquity Collaborative.
    \381\ Comments of District Council of New York City & Vicinity 
of the UBC; McGann, Ketterman & Rioux; Signatory Wall and Ceiling 
Contractors Alliance; Southern States Millwright Regional Council, 
UBC and Central South Carpenters Regional Council, UBC; UBC.
---------------------------------------------------------------------------

    Specifically, some commenters discuss the ``fissuring'' of the 
workplace and note that modern business practices often result in 
multiple firms sharing control over aspects of employees' terms and 
conditions of employment, making it important to define the joint-
employer standard in a manner that brings all necessary parties to the 
bargaining table.\382\ Certain of these commenters note that an unduly 
cramped joint-employer standard might hinder the efficacy of the 
Board's remedial orders by targeting an entity that cannot, by itself, 
make employees whole or engage in the kind of effective collective 
bargaining that the Act contemplates.\383\ Several individual employees 
and commenters with experience representing employees in industries 
characterized by extensive subcontracting represent that a joint-
employer standard that brings the proper parties to the bargaining 
table could help make jobs in those industries safer, especially for 
Black and immigrant workers and women workers.\384\
---------------------------------------------------------------------------

    \382\ Comments of American Federation of Musicians Local 47; 
AFSCME; Asian Pacific American Labor Alliance, AFL-CIO; EPI; Los 
Angeles County Federation of Labor AFL-CIO & Locals 396 and 848 of 
the IBT; National Women's Law Center; SEIU; The Strategic Organizing 
Center; The Washington Center for Equitable Growth; UE; UNITE HERE.
    \383\ Comments of American Federation of Musicians Local 47; 
General Counsel Abruzzo; Hawaii Regional Council of Carpenters; Jobs 
with Justice and Governing for Impact; Los Angeles County Federation 
of Labor AFL-CIO & Locals 396 and 848 of the IBT; National Women's 
Law Center; NELP; SEIU; Texas RioGrande Legal Aid, Inc; UNITE HERE.
    \384\ Comments of NELP; National Women's Law Center; National 
Black Workers Center; Richard Eiker; SPLC; The Strategic Organizing 
Center; William E. Morris Institute for Justice; Women Employed. In 
addition, one commenter notes its long history of successful 
multiemployer and other multifirm bargaining as support for the 
Board's preliminary view that the proposed joint-employer rule would 
facilitate effective bargaining. See comments of IUOE.

---------------------------------------------------------------------------

[[Page 73981]]

    Other commenters argue that the proposed rule would lead to 
positive economic outcomes for employees. For example, one commenter 
notes that by ensuring that the proper parties are brought to the 
bargaining table, unions will be able to bargain effectively, creating 
a positive ``spillover'' effect that will raise the floor for wages, 
benefits, and working conditions.\385\ This commenter estimates that 
the proposed rule ``will result in a boost of pay to workers of $1.06 
billion annually or $20.4 million per week.'' \386\ Several other 
commenters likewise argue that the benefits of the proposed rule will 
have a broad effect on the economy given the high concentration of 
employees in industries marked by extensive contracting practices.\387\
---------------------------------------------------------------------------

    \385\ Comments of EPI.
    \386\ Id. Several other commenters cite approvingly to EPI's 
economic analysis. See, e.g., comments of National Women's Law 
Center. Based on its assessment that the Bureau of Labor Statistics 
Contingent Worker Supplement (CWS) to the Current Population Survey 
likely underestimates how many workers work for contract firms and 
temporary help agencies, this commenter offers revised estimates 
over the total workforce in these settings. See comments of EPI. 
This commenter likewise offers a revised estimate of the number of 
franchise employees and employees of contractors or temporary 
staffing agencies who it represents would benefit from the proposed 
rule. Id.
    \387\ Comments of ACLU; General Counsel Abruzzo.
---------------------------------------------------------------------------

    A number of commenters raise concerns about the specter of 
litigation and eventual liability if their businesses are deemed joint 
employers with other entities.\388\ Others respond that an overbroad 
joint-employer standard risks exposing other entities, like lead firms 
or franchisors, solely because those entities are viewed as having the 
ability to satisfy a judgment.\389\ Some of these commenters suggest 
that principles of joint liability might suffice to ensure that the 
Board's make-whole remedies are effective, rendering a joint-employer 
finding unnecessary in such circumstances.\390\
---------------------------------------------------------------------------

    \388\ Comments of LeadingAge; National ACE; Trucking Industry 
Stakeholders.
    \389\ Comments of James Bitzonis; COLLE.
    \390\ Comments of COLLE. One commenter also expresses concern 
that the proposed rule might interfere with single-employer doctrine 
under the Act. See comments of U.S. Chamber of Commerce. With 
respect, we note that questions of joint-employer and single-
employer status under the Act are distinct. See generally Radio & 
Television Broadcast Technicians Local Union 1264 v. Broadcast 
Service of Mobile, Inc., 380 U.S. 255, 256 (1965) (approving the 
Board's single-employer analysis based on a four-factor test 
considering entities' ``interrelation of operations, common 
management, centralized control of labor relations and common 
ownership'').
---------------------------------------------------------------------------

    Contrary to these commenters, while the final rule establishes a 
joint-employer standard that will apply in unfair-labor-practice cases, 
it does not purport to assign liability or otherwise depart from well-
established principles regarding how to apportion responsibility for 
unlawful conduct among multiple parties. Likewise, we disagree with 
commenters who argue that principles of joint liability might foreclose 
the need for a revised joint-employer standard, as the joint-employer 
standard serves important functions beyond those related to assigning 
liability. Similarly, principles of joint liability sometimes come into 
play in circumstances where there is no dispute that entities are joint 
employers. One commenter, citing Capitol EMI Music, Inc., 311 NLRB 997, 
1000 (1993), notes that the Board imposes certain unfair labor practice 
liability for the actions of one joint employer on another entity only 
if that other entity knew of the action and did nothing to protest 
it.\391\ We agree that this longstanding Board precedent discussing how 
to assign liability to joint employers will continue to guide the Board 
in making these determinations. Additionally, business entities remain 
free under this joint-employer standard, as before, to structure their 
contractual relationships according to their chosen allocation of both 
authority to control and unfair labor practice liability, including by 
the use of indemnification clauses.
---------------------------------------------------------------------------

    \391\ See reply comments of AFL-CIO.
---------------------------------------------------------------------------

V. The Final Rule

    The joint-employer doctrine plays an important role in the 
administration of the Act. The doctrine determines when an entity that 
exercises control over particular employees' essential terms and 
conditions of employment has a duty to bargain with those employees' 
representative. It also determines such an entity's potential liability 
for unfair labor practices. The joint-employer analysis set forth in 
this final rule is based on common-law agency principles as applied in 
the particular context of the Act. In our considered view, the joint-
employer standard that we adopt today removes artificial control-based 
restrictions with no foundation in the common law that the Board has 
previously imposed in cases beginning in the mid-1980s discussed above, 
and in the 2020 rule. By incorporating common-law agency principles, as 
the Act requires, the final rule appropriately aligns employers' 
responsibilities with respect to their employees with their authority 
to control those employees' essential terms and conditions of 
employment and so promotes the policy of the United States, as 
articulated in Section 1 of the Act, to encourage the practice and 
procedure of collective bargaining and to protect the exercise by 
workers of full freedom of association, self-organization, and 
designation of representatives of their own choosing, for the purpose 
of negotiating the terms and conditions of their employment or other 
mutual aid or protection.

A. Definition of an Employer of Particular Employees

    Section 103.40(a) of the final rule provides that an employer, as 
defined by Section 2(2) of the Act, is an employer of particular 
employees, as defined by Section 2(3) of the Act, if the employer has 
an employment relationship with those employees under common-law agency 
principles. This provision expressly recognizes the Supreme Court's 
conclusion that Congress's use of the terms ``employer'' and 
``employee'' in the NLRA was intended to describe the conventional 
employer-employee relationship under the common law.\392\ Because 
``Congress has tasked the courts, and not the Board, with defining the 
common-law scope of `employer,''' the Board--in evaluating whether a 
common-law employment relationship exists--looks for guidance from the 
judiciary, including primary articulations of relevant principles by 
judges applying the common law, as well as secondary compendiums, 
reports, and restatements of these common law decisions, focusing 
``first and foremost [on] the `established' common-law definitions at 
the time Congress enacted the National Labor Relations Act in 1935 and 
the Taft-Hartley Amendments in 1947.'' \393\ By explicitly grounding 
the Board's joint-employer analysis in common-law agency principles, 
this provision recognizes that the existence of a common-law employment 
relationship is a necessary prerequisite to a finding

[[Page 73982]]

that an entity is a joint employer of particular employees.
---------------------------------------------------------------------------

    \392\ See NLRB v. Town & Country Electric, Inc., 516 U.S. 85, 
92-95 (1995) (where Congress has used the term ``employee'' in a 
statute without clearly defining it, the Court assumes that Congress 
``intended to describe the conventional master-servant relationship 
as understood by common-law agency doctrine''). See also Clackamas 
Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440, 448-449 
(2003); Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 
322-324 (1992); Community for Creative Non-Violence v. Reid, 490 
U.S. 730, 740, 752 fn. 31 (1989); Kelley v. Southern Pacific Co., 
419 U.S. 318, 323-324 (1974); NLRB v. United Insurance Co. of 
America, 390 U.S. 254, 256-258 (1968). As noted above, many sources 
refer to the common-law employer-employee relationship using the 
terms ``master'' and ``servant.''
    \393\ BFI v. NLRB, 911 F.3d at 1208-1209.
---------------------------------------------------------------------------

B. Definition of Joint Employers

    Section 103.40(b) provides that, for all purposes under the Act, 
two or more employers of the same particular employees are joint 
employers of those employees if the employers share or codetermine 
those matters governing employees' essential terms and conditions of 
employment. The provision thus first recognizes, as did the 2020 rule, 
that joint-employer issues may arise (and the same test will apply) in 
various contexts under the Act, including both representation and 
unfair labor practice case contexts.\394\ The provision goes on to 
codify the longstanding core of the joint-employer test, consistent 
with the formulation of the standard that several Courts of Appeals 
(notably, the Third Circuit and the District of Columbia Circuit) have 
endorsed.\395\ By providing that a common-law employer of particular 
employees must also share or codetermine those matters governing the 
employees' essential terms and conditions of employment in order to be 
considered a joint employer, the provision recognizes and incorporates 
the principle from BFI that ``the existence of a common-law employment 
relationship is necessary, but not sufficient, to find joint-employer 
status.'' \396\
---------------------------------------------------------------------------

    \394\ Compare BFI, above, 362 NLRB 1599 (considering whether two 
entities were joint employers for purposes of petition for 
representation election), and Browning-Ferris Industries of 
Pennsylvania, Inc., 259 NLRB 148 (1981) (considering whether two 
entities were joint employers for purposes of liability for employee 
discharges in violation of section 8(a)(3) of the Act), enfd. 691 
F.2d 1117 (1982).
    \395\ See BFI v. NLRB, 911 F.3d at 1209 (citing Dunkin' Donuts 
Mid-Atlantic Distribution Center v. NLRB, 363 F.3d 437, 440 (D.C. 
Cir. 2004)); NLRB v. Browning-Ferris Industries of Pennsylvania, 
Inc., 691 F.2d 1117, 1124 (3d Cir. 1982). See also 3750 Orange Place 
Limited Partnership v. NLRB, 333 F.3d 646, 660 (6th Cir. 2003); 
Holyoke Visiting Nurses Assn. v. NLRB, 11 F.3d 302, 306 (1st Cir. 
1993).
    \396\ BFI, above, 362 NLRB at 1610.
---------------------------------------------------------------------------

C. Definition of ``share or codetermine''

    Section 103.40(c) of the final rule provides that to ``share or 
codetermine those matters governing employees' essential terms and 
conditions of employment'' means for an employer to possess the 
authority to control (whether directly, indirectly, or both) or to 
exercise the power to control (whether directly, indirectly, or both) 
one or more of the employees' essential terms and conditions of 
employment. This provision incorporates the view of the Board and the 
District of Columbia Circuit in BFI that evidence of the authority or 
reserved right to control, as well as evidence of the exercise of 
control (whether direct or indirect, including control through an 
intermediary, as discussed further below) is probative evidence of the 
type of control over employees' essential terms and conditions of 
employment that is necessary to establish joint-employer status. After 
careful consideration of comments, as reflected above, the Board has 
concluded that this definition of ``share or codetermine'' is 
consistent with common-law agency principles and best serves the policy 
of the United States, embodied in the Act, to encourage the practice 
and procedure of collective bargaining by ensuring that employees have 
the ability to negotiate the terms and conditions of their employment, 
through representatives of their own choosing, with all of their 
employers that possess the authority to control or exercise the power 
to control those terms and conditions.

D. Definition of ``essential terms and conditions of employment''

    Section 103.40(d) defines ``essential terms and conditions of 
employment'' as (1) wages, benefits, and other compensation; (2) hours 
of work and scheduling; (3) the assignment of duties to be performed; 
(4) the supervision of the performance of duties; (5) work rules and 
directions governing the manner, means, and methods of the performance 
of duties and the grounds for discipline; (6) the tenure of employment, 
including hiring and discharge; and (7) working conditions related to 
the safety and health of employees. The Board has decided, after 
careful consideration of comments as reflected above, to modify the 
proposed rule's definition of ``essential terms and conditions of 
employment'' by setting forth an exclusive, closed list of terms and 
conditions of employment that may serve as the objects of control 
necessary to establish joint-employer status.
    Terms and conditions of employment falling in these seven 
categories are not simply common across employment relationships, they 
represent the core subjects of collective bargaining contemplated by 
the Act, as illuminated by the Board's administrative experience. Thus, 
Section 8(d) of the Act expressly provides that the collective-
bargaining obligation encompasses a duty to confer with respect to 
wages and hours, subjects falling within categories (1) and (2). 
Categories (3), (4), and (5) similarly include terms involving the 
assignment, supervision, and detailed control of employees' performance 
of work duties--and the grounds for discipline of employees who fail to 
perform as required--all common across employment relationships and 
subjects of central concern to employees seeking to improve their terms 
and conditions of employment through collective bargaining. Terms and 
conditions in Category (6), addressing the conditions for the formation 
and dissolution of the employment relationship itself, are clearly 
essential conditions of employment. Finally, as many commenters have 
observed, terms setting working conditions related to the safety and 
health of employees--encompassed in category (7)--are basic to the 
employment relationship and lie at or near the core of issues about 
which employees would reasonably seek to bargain. By providing that a 
common-law employer of particular employees will be considered a joint 
employer of those employees only if it possesses the authority to 
control or exercises the power to control one or more terms and 
conditions of employment falling into one of these seven categories, 
this provision ensures that such an employer will be in a position to 
engage in meaningful bargaining over an issue of core concern to the 
employees involved. This provision thus effectively incorporates the 
second step of the Board's joint-employer test set forth in BFI, above, 
as described by the District of Columbia Circuit in BFI v. NLRB, and 
addresses that court's concern that the Board had failed, in BFI, 
adequately to delineate what terms and conditions are ``essential'' to 
make collective bargaining ``meaningful.'' \397\
---------------------------------------------------------------------------

    \397\ See BFI v. NLRB, above, 911 F.3d at 1221-1222.
---------------------------------------------------------------------------

E. Control Sufficient To Establish Joint-Employer Status

    Section 103.40(e) provides, consistent with Sec.  103.40(a) and 
(c), that whether an employer possesses the authority to control or 
exercises the power to control one or more of the employees' essential 
terms and conditions of employment is determined under common law-
agency principles. Thus, this provision explains that, subject to the 
terms of the preceding provisions, (1) possessing the authority to 
control one or more essential terms and conditions of employment is 
sufficient to establish status as a joint employer regardless of 
whether the control is exercised; and (2) exercising the power to 
control indirectly (including through an intermediary) one or more 
essential terms and conditions of employment is sufficient to establish 
status as a joint

[[Page 73983]]

employer, regardless of whether the control is exercised directly.
    As discussed above, the Board has modified this provision from the 
version set forth in the NPRM by clarifying that, in every case, the 
object of a common-law employer's control that is relevant to the 
question of whether it is also a joint employer under the Act must be 
an essential term and condition of employment as defined in Sec.  
103.40(d). In combination with the Board's limitation of ``essential'' 
terms and conditions of employment to matters that lie near the core of 
the collective-bargaining process, this change is intended to address 
the concerns of commenters (discussed above) that the standard should 
not require the Board to find a joint-employer relationship based on an 
entity's attenuated, insubstantial, or unexercised control over matters 
that--while they may be mandatory subjects of bargaining--are actually 
peripheral to the employment relationship or to employees' terms and 
conditions of employment. The version of Sec.  103.40(e) that appears 
in the final rule is reformatted to include two subsections and has 
been streamlined to avoid surplusage.

F. Control Immaterial to Joint-Employer Status

    Section 103.40(f) provides that evidence of an entity's control 
over matters that are immaterial to the existence of an employment 
relationship under common-law agency principles and that do not bear on 
the employees essential terms and conditions of employment is not 
relevant to the determination of whether the employer is a joint 
employer.\398\ As discussed above, many commenters have expressed a 
concern that the proposed rule could result in the Board finding joint-
employer relationships based on kinds of control that are not 
indicative of a common-law employment relationship or that do not form 
a proper foundation for collective bargaining or unfair-labor practice 
liability. Similarly, the District of Columbia Circuit in BFI v. NLRB 
criticized the Board's BFI decision for failing, in its articulation 
and application of the indirect-control element of the standard, to 
distinguish between indirect control that the common law of agency 
considers intrinsic to ordinary third-party contracting relationships 
and indirect control over essential terms and conditions of 
employment.\399\ This provision addresses these concerns by expressly 
recognizing that some kinds of control, including some of those 
commonly embodied in a contract for the provision of goods or services 
by a true independent contractor, are not relevant to the determination 
of whether the entity possessing such control is a common-law employer 
of the workers producing or delivering the goods or services, and that 
an entity's control over matters that do not bear on workers' essential 
terms and conditions of employment are not relevant to the 
determination of whether that entity is a joint employer.
---------------------------------------------------------------------------

    \398\ As noted above, the Board has modified this provision from 
the version set forth in the NPRM for clarity.
    \399\ 911 F.3d at 1219-1220.
---------------------------------------------------------------------------

G. Burden of Proof

    Section 103.40(g) provides that a party asserting that an employer 
is a joint employer of particular employees has the burden of 
establishing, by a preponderance of the evidence, that the entity meets 
the requirements set forth above. This allocation of the burden of 
proof is consistent with the 2020 Rule, BFI, and pre-BFI precedent. See 
85 FR 11227; BFI, 362 NLRB at 1616.

H. Bargaining Obligations of a Joint Employer

    Section 103.40(h) provides that a joint employer of particular 
employees must bargain collectively with the representative of those 
employees with respect to any term and condition of employment that it 
possesses the authority to control or exercises the power to control, 
regardless of whether that term and condition is deemed to be an 
essential term and condition of employment under the definition above, 
but is not required to bargain with respect to any term and condition 
of employment that it does not possess the authority to control or 
exercise the power to control.
    As discussed above, some commenters have requested that the Board 
provide a concise statement of joint employers' bargaining obligations 
in order to clarify both that a joint employer--like any other 
employer--must bargain over any mandatory subject of bargaining that is 
subject to its control, and that a joint employer--again, like any 
other employer--is not required to bargain about workplace conditions 
that are not subject to its control. Particularly in light of the 
Board's determination, discussed above, to adopt a closed list of 
``essential terms and conditions of employment,'' as objects of control 
relevant to the joint-employer determination, the Board has concluded, 
after careful consideration of the comments, that it is desirable to 
expressly provide that a joint employer's bargaining obligations are 
not limited to those ``essential terms and conditions'' of employment 
that it controls, but extend to any ordinary mandatory subject of 
bargaining that is also subject to its control. Clarifying a joint 
employer's bargaining obligation in this way further ensures that 
collective bargaining involving the joint employer will be meaningful, 
because such bargaining will be able to address not only the core 
workplace issues the control of which establishes the employer's status 
as a joint employer but also any other matters subject to the joint 
employer's control that sufficiently affect the terms and conditions of 
employees' employment to permit or require collective bargaining under 
section 8(d) of the Act.\400\
---------------------------------------------------------------------------

    \400\ See, e.g., Ford Motor Co., Chicago Stamping Plant v. NLRB, 
441 U.S. 488, 501-503 (1979) (affirming Board's conclusion that 
manufacturer was required to bargain over in-plant food service and 
prices because manufacturer contractually reserved right to review 
and control services and prices directly set by a third-party 
contractor).
---------------------------------------------------------------------------

    On the other hand, the Board has also concluded that it serves a 
useful clarifying purpose to expressly provide, consistent with extant 
Board precedent not affected by the final rule, that where two or more 
entities each control terms and conditions of employment of particular 
employees, an employer is not required to bargain over any such terms 
and conditions which are in no way subject to its own control.\401\
---------------------------------------------------------------------------

    \401\ Cf., e.g., Management Training Corp., 317 NLRB 1355, 1358 
& fn. 16, 1359 (1995) (holding that an entity that controls 
sufficient matters relating to the employment relationship to make 
it a statutory employer may be required to bargain over terms and 
conditions of employment within its control, but certification of 
representative does not obligate an employer to bargain concerning 
mandatory subjects of bargaining controlled exclusively by a 
distinct entity that is exempt from the Board's statutory 
jurisdiction).
---------------------------------------------------------------------------

I. Severability

    Section 103.40(i) provides that the provisions and subprovisions of 
the final rule are intended to be severable, and that if any part of 
the rule is held to be unlawful, the remainder of the rule is intended 
to remain in effect to the fullest extent permitted by law. The Board 
believes, on careful consideration, that the final rule in its entirety 
flows from and is consistent with common-law principles as we have 
received them from judicial authority; reflects a permissible exercise 
of the Board's congressionally delegated authority to interpret the 
Act; and best effectuates the Board's statutory responsibility to 
prevent unfair labor practices and to encourage the practice

[[Page 73984]]

and procedure of collective bargaining. However, the Board necessarily 
acknowledges the possibility that a reviewing body might disagree with 
our conclusion in some respect, and, in that event, the Board desires 
to preserve so much of the rule as such a body approves. Separately, as 
noted above, the Board intends the action of rescinding the 2020 Rule 
in itself to be severable from any of the terms of the final rule, so 
that if a reviewing body were to disapprove the final rule in its 
entirety, the Board's action in rescinding the 2020 Rule should still 
be given effect.

VI. Response to Dissent

    Our dissenting colleague advances several reasons for declining to 
join the majority in rescinding and replacing the 2020 Rule. We have 
addressed some of these arguments above. Here, we offer additional 
responses to several of our colleague's contentions.
    First, our dissenting colleague contends that common-law agency 
principles do not compel the Board to rescind the 2020 Rule, and, 
further, actually preclude the Final Rule's elimination of the 2020 
Rule's actual-exercise requirement.\402\ He also criticizes us for 
seeking relevant common-law principles in authority relating to the 
distinction between employees and independent contractors, and for 
failing to pay sufficient attention to judicial articulations of 
relevant common-law principles in decisions involving joint-employer 
questions under other federal statutes, including Title VII of the 
Civil Rights Act of 1964.\403\
---------------------------------------------------------------------------

    \402\ As noted above and discussed more fully below, while we 
have concluded that the 2020 rule's actual-exercise requirement is 
impermissible under the Act as contrary to common law agency 
principles, and apart from recognizing that the Board must follow 
common-law agency principles in determining who is an ``employer'' 
and an ``employee'' under Sec. 2 of the Act, we do not conclude, as 
our colleague suggests, that the common law dictates the specific 
details of the final rule's joint-employer standard. Rather, the 
final rule reflects our policy choices, within the bounds of the 
common law, in furtherance of the policy of the United States, as 
set forth in Sec. 1 of the Act, to encourage the practice and 
procedure of collective bargaining, including by providing a 
mechanism by which an entity's rights and obligations under the Act 
may be accurately aligned with its authority to control employees' 
essential terms and conditions of employment.
    \403\ 42 U.S.C. 2000e et seq.
---------------------------------------------------------------------------

    To the contrary, as set forth more fully above, both the District 
of Columbia Circuit's discussion of independent-contractor authority in 
BFI v. NLRB, and the approach taken by many other courts examining 
joint-employer questions in other contexts, fully support the Board's 
reference to independent-contractor authority to shed light on the 
common-law employer-employee relationship and the joint-employer 
relationship under the Act.\404\ To the extent that the other federal 
cases relied upon by our colleague articulate joint-employer standards 
drawn from common-law principles, those cases at best support the 
proposition that an entity's actual exercise of control over 
appropriate terms and conditions of employment of another employer's 
employees is sufficient to establish that it is a joint-employer--a 
proposition with which we agree--but not our colleague's further claim 
that such exercise of control is necessary to find a joint-employer 
relationship. Rather, numerous federal courts of appeals and state high 
courts have concluded, in non-NLRA contexts, that entities were common-
law employers of other employers' employees based solely on the 
entities' unexercised power or authority to control.\405\ These 
decisions fully support our conclusion that the common law does not 
require an entity's actual exercise of a reserved authority to control 
in order to establish a joint-employer relationship. Judicial decisions 
and secondary authorities addressing the common-law employer-employee 
relationship and the joint-employer relationship further confirm that 
indirect control, including control exercised through an 
intermediary,\406\ can establish the existence of an employment 
relationship, including a joint-employer relationship.\407\
---------------------------------------------------------------------------

    \404\ See Sec. I.D., above, and cases discussed there. See also 
BFI v. NLRB, 911 F.3d at 1195 (``[E]mployee-or-independent-
contractor cases can . . . be instructive in the joint-employer 
inquiry to the extent that they elaborate on the nature and extent 
of control necessary to establish a common-law employment 
relationship.'').
    \405\ See, e.g., EEOC v. Global Horizons, 915 F.3d 631, 640-641 
(9th Cir. 2019) (two entities were joint employers with a direct 
employer based on entities' ``power to control the manner in which 
[benefits] and wages were provided to the . . . workers, even if 
never exercised.''); Mallory v. Brigham Young University, 332 P.3d 
922, 928-929 (Utah 2014) (city was employer of university's employee 
because ``[i]f the principal has the right to control the agent's 
method and manner of performance, the agent is a servant whether or 
not the right is specifically exercised'') (citation omitted); Rouse 
v. Pitt County Memorial Hosp., Inc., 470 SE 2d 44, 52-53 (N.C. 1996) 
(attending physicians could be found employers of resident 
physicians employed by hospital absent evidence of actual exercise 
of control because ``[w]here the parties have made an explicit 
agreement regarding the right of control, this agreement will be 
dispositive;'') (citation omitted); Dunn v. Conemaugh & Black Lick 
RR, 267 F.2d 571, 577 (3d Cir. 1959) (railroad was employer of 
manufacturer's employee based on railroad's right to command 
employee's performance without reference to any instance of exercise 
of that right because ``the person is the servant of him who has the 
right to control the manner of performance of the work, regardless 
of whether or not he actually exercises that right;'') (citation 
omitted); S.A. Gerrard Co. v. Industrial Accident Comm'n, 110 P.2d 
377, 378 (Cal. 1941) (landowner was joint employer of farmer's 
employee based on contract provision that picking should be done 
according to landowner's direction without reference to whether such 
direction was ever given because ``the right to control, rather than 
the amount of control which was exercised, is the determinative 
factor.'') (citation omitted).
    \406\ As noted above, we agree with the District of Columbia 
Circuit's common-sense characterization of control exercised through 
an intermediary as indirect control, rejecting our colleague and the 
2020 Rule's counterintuitive characterization of such control as 
direct and immediate. See BFI v. NLRB, 911 F.3d at 1216-1217.
    \407\ See id. at 1217 (``[T]he common law has never countenanced 
the use of intermediaries or controlled third parties to avoid the 
creation of a master-servant relationship.'') (citing Nicholson v. 
Atchison, T. & S. F. Ry. Co., 147 P. 1123, 1126 (Kan. 1915) (use of 
a ``branch company'' as a ``mere instrumentality'' ``did not break 
the relation of master and servant existing between the plaintiff 
and the [putative master]''); Butler v. Drive Automotive Industries 
of America, 793 F.3d 404, 415 (4th Cir. 2015) (the joint-employer 
test ``specifically aims to pierce the legal formalities of an 
employment relationship to determine the loci of effective control 
over an employee . . . . Otherwise, an employer who exercises actual 
control could avoid Title VII liability by hiding behind another 
entity.''); Al-Saffy v. Vilsack, 827 F.3d 85 (D.C. Cir. 2016) 
(relying in part on evidence that officials working for putative 
joint employer had recommended employee's dismissal as evidence 
supporting reversal of summary judgment on the joint-employer 
issue). See also discussion and sources cited in Sec. I.D., above.
---------------------------------------------------------------------------

    We note, moreover, that the District of Columbia Circuit not only 
upheld the Board's recognition of this point in BFI v. NLRB, but also 
reprimanded the Board that issued the 2020 rule for neglecting it. In 
International Brotherhood of Teamsters v. NLRB, 45 F.4th 38 (D.C. Cir. 
2022), in rejecting the Board's decision not to apply the BFI standard 
retroactively, the court reaffirmed its previous holding, noting that 
it had ``held that `[t]he Board [in Browning-Ferris I] . . . correctly 
determined that the common-law inquiry is not woodenly confined to 
indicia of direct and immediate control;''' [and that] ``[I]n Browning-
Ferris II--a decision issued just five months after the Board announced 
the 2020 Rule--the Board inexplicably overlooked the longstanding role 
of indirect control in the Board's joint-employer inquiry . . . . Our 
court's 2018 decision made clear that `the right-to-control element of 
the Board's joint-employer standard [discussed in Browning-Ferris I] 
has deep roots in the common law [citation omitted],' and that the 
common law rule is that `unexercised control bears on employer status . 
. . . ' Further, we held that `there is no sound reason that the . . . 
joint-employer inquiry would give [indirect control] a cold shoulder.' 
[911 F.3d] at 1218 (`[The] argument that the

[[Page 73985]]

common law of agency closes its mind to evidence of indirect control is 
unsupported by law or logic.'); see id. at 1216 (a `rigid distinction 
between direct and indirect control has no anchor in the common law') . 
. . . [W]e took great pains to inform the Board that the failure to 
consider reserved or indirect control is inconsistent with the common 
law of agency.'' \408\
---------------------------------------------------------------------------

    \408\ 45 F.4th at 42, 44, 46-47.
---------------------------------------------------------------------------

    In sum, the Board's careful examination of relevant common-law 
principles as articulated in a voluminous body of primary judicial 
authority and secondary compendiums, reports, and restatements of these 
common-law decisions has persuaded us that the controlling common-law 
agency principles do not permit the Board to require that an entity 
that possesses authority to control also exercise that control, or 
exercise it in any particular way, in order to be found a joint 
employer under the Act.\409\
---------------------------------------------------------------------------

    \409\ As noted above, we reject any suggestion that the 2020 
rule recognized that an entity's contractually reserved but 
unexercised control is sufficient to establish a common-law 
employer-employee relationship but declined, as a discretionary 
matter, to exercise joint-employer jurisdiction over statutory 
employers who did not actually exercise such control--a rationale 
nowhere presented in the text or preamble of the 2020 rule.
---------------------------------------------------------------------------

    Next, our colleague contends that the final rule unjustifiably 
expands the list of essential terms and conditions of employment. 
Specifically, our colleague takes issue with our inclusion of three 
specific terms and conditions of employment in the exhaustive list set 
forth in Section 103.40(d): ``work rules and directions governing the 
manner, means, and methods of the performance of duties and the grounds 
for discipline''; ``the tenure of employment, including hiring and 
discharge''; and ``working conditions related to the safety and health 
of employees.''
    As discussed more extensively above,\410\ we find our colleague's 
concerns regarding the final rule's treatment of these terms and 
conditions of employment as essentially unfounded. With respect to 
``the tenure of employment, including hiring and discharge,'' our 
colleague seems to take issue with the form rather than the substance. 
Indeed, the 2020 rule treated hiring and discharge as essential, making 
it even more evident that our colleague's quarrel with our formulation 
is principally semantic. As we indicated previously, the phrase we have 
chosen to include in the final rule is meant to encompass the range of 
actions that determine an individual's employment status. We reject the 
suggestion that our framing of this term of employment is overbroad. 
Similarly, our colleague does not seriously contend that an entity's 
reservation or exercise of control over the manner, means, and methods 
of the performance of duties or the grounds of discipline are not 
essential.\411\ Instead, he focuses on our description of ``work rules 
or directions'' that address these aspects of particular employees' 
performance of work, arguing that ambiguous language in an employee 
handbook may be used to justify a joint-employer finding. We find this 
concern misplaced and emphasize that in applying the final rule, we 
will take a functional approach to assessing whether a putative joint 
employer who meets the threshold requirement of having a common-law 
employment relationship with particular employees possesses or 
exercises the requisite control over essential terms and conditions of 
employment.
---------------------------------------------------------------------------

    \410\ See discussion in Sec. IV.D., above.
    \411\ Indeed, the 2020 rule treated both work directions and 
discipline as essential. See 85 FR at 11225 & 11236 (citing Laerco 
Transportation, 269 NLRB at 325). See also, e.g., Cognizant 
Technology Solutions U.S. Corp. & Google LLC, 372 NLRB No. 108, slip 
op. at 1 (2023) (finding joint-employer relationship under 2020 rule 
based in part on entity's maintenance of `` `workflow training 
charts' which govern[ed] the details of employees' performance of 
specific tasks.'').
---------------------------------------------------------------------------

    Lastly, we part company with our colleague when it comes to 
including workplace health and safety as an essential term or condition 
of employment. In our view, it is appropriate to regard an entity that 
possesses or exercises control over workplace health and safety as a 
joint employer. As set forth above, to the extent an entity solely 
memorializes its compliance with legal obligations pertaining to health 
and safety, it will not for that reason alone be regarded as a joint 
employer. However, and contrary to our colleague, we believe that 
entities that exercise discretion over particular employees' workplace 
health and safety are properly treated as joint employers. We believe 
that common-law employers of particular employees that have authority 
to exercise discretion over those employees' workplace health and 
safety are properly treated as joint employers because employees' 
ability to bargain with all of the entities that may exercise such 
control is central to the Act's protection of employees' collective 
rights.
    Our colleague argues that setting forth an exhaustive list of 
essential terms and conditions of employment in the final rule 
nevertheless fails to address the District of Columbia Circuit's 
concerns in BFI about the Board's treatment of forms of indirect 
control when applying the joint-employer standard. Our colleague 
misstates our rationale for closing the list of essential terms and 
conditions of employment. After carefully considering the views of 
commenters, we have included an exhaustive list of essential terms and 
conditions of employment in the final rule to ensure that any required 
bargaining would be meaningful. By contrast, we incorporate the 
District of Columbia Circuit's views regarding the forms of indirect 
control that bear on the joint-employer inquiry in Sec.  103.40(e) and 
(f) of the final rule. In this regard, the final rule is faithful to 
the District of Columbia Circuit's guidance regarding the need for a 
limiting principle to ensure the joint-employer standard remains within 
common-law boundaries.
    The dissent next argues that the majority does not set forth a 
substantial policy justification for rescinding and replacing the 2020 
rule. The dissent argues that because the majority focuses on the 
common-law shortcomings of the 2020 rule, it pays insufficient heed to 
commenters' policy-based objections to the final rule.
    As noted at the outset, while we are persuaded that the 2020 rule 
should be rescinded because it is at odds with common-law agency 
principles, we have stated repeatedly that we would nevertheless 
rescind the 2020 rule and replace it with the final rule for policy 
reasons.\412\ We reiterate that position here. In our view, the joint-
employer standard we adopt today is more consistent with Section 1 of 
the Act and will better facilitate effective collective bargaining than 
the standard set forth in the 2020 rule. Our colleague's contention 
that we have not made a policy-based decision for changing our approach 
to determining joint-employer status under the Act is therefore 
unfounded.
---------------------------------------------------------------------------

    \412\ Accordingly, as noted above, we reject our colleague's 
suggestion that we take common-law agency principles to dictate the 
precise contours of the final rule.
---------------------------------------------------------------------------

    In addition, the dissent contends that the majority does not offer 
a satisfactory response to those commenters who take the view that the 
final rule will adversely affect employers in particular industries or 
sectors, including the building and construction industry, the 
franchise industry, the staffing industry, and the healthcare sector. 
As discussed more extensively in Section IV.D., above, we are of the 
view that the Act--by referring generally to ``employers'' and 
``employees'' and by effectively incorporating the common-law 
definition of those terms--requires the Board to apply a uniform joint-
employer standard to all entities that fall within

[[Page 73986]]

the Board's jurisdiction. For this reason, we have declined several 
commenters' requests for the Board to exempt certain industries from 
the coverage of the final rule. However, we are mindful that applying 
the final rule will require sensitivity to industry-specific norms and 
practices, and we will take any relevant industry-specific context into 
consideration when considering whether an entity is a joint employer.
    Our dissenting colleague also takes the position that the final 
rule will frustrate bargaining and undermine the policies of the Act 
favoring the resolution of labor disputes and the promotion of stable 
bargaining relationships. In this regard, he offers several 
hypotheticals that he suggests illustrate the potential for the final 
rule to be applied in a manner that will frustrate effective collective 
bargaining by extending joint-employer obligations to entities whose 
control over terms and conditions of employment is too attenuated to 
warrant their participation in bargaining.
    We respectfully disagree with our dissenting colleague's view of 
how the final rule will operate. In reciting the standard set forth in 
the final rule, our colleague elides the threshold significance of 
Sec.  103.40(a), which requires a party seeking to demonstrate the 
existence of a joint-employment relationship to make an initial showing 
that the putative joint employer has a common-law employment 
relationship with particular employees. Because the application of the 
final rule will be limited to entities who are common-law employers, 
many of the hypothetical scenarios our colleague suggests will give 
rise to a joint-employer finding cannot arise. For example, as noted 
above, an entity may control a term of employment to which a bargaining 
duty attaches but not possess or exercise the requisite control over 
the performance of the work to be regarded as a common-law employer. 
For example, while the Supreme Court has recognized that an employer 
has a duty to bargain over in-plant food service and prices,\413\ that 
fact alone will not support a finding that the third-party contractor 
who supplies the food, and codetermines pricing, is a joint employer. 
Instead, Sec.  103.40(a) of the final rule establishes a threshold 
requirement that a putative joint employer must be the common-law 
employer of particular employees. Absent evidence that an entity is the 
common-law employer of particular employees, then, there is no basis 
for a joint-employer finding under the final rule. Accordingly, there 
is no risk that the final rule will be applied broadly to encompass 
entities whose relationship to the performance of the work is clearly 
too attenuated to support finding that they are common-law employers, 
as our dissenting colleague fears.
---------------------------------------------------------------------------

    \413\ Ford Motor Co., Chicago Stamping Plant v. NLRB, 441 U.S. 
488, 501-503 (1979).
---------------------------------------------------------------------------

    In addition to these hypotheticals concerning the application of 
the final rule, our colleague makes several predictions about how the 
final rule will affect particular businesses. Our colleague repeats the 
contention raised by several commenters (and addressed more fully 
above) that the possibility of conflict among joint employers will 
complicate bargaining and lead to worse outcomes for employees. As an 
initial matter, we question our colleague's suggestion that the final 
rule will make it more difficult for parties to reach agreements. 
Instead, we are persuaded that a standard that ensures that those 
entities who possess or exercise control over particular employees' 
essential terms and conditions of employment are present for bargaining 
will help avoid fruitless negotiations. In our view, aligning 
employers' responsibilities under the Act with their authority to 
control terms and conditions of employment will lead to better outcomes 
overall. Ensuring that the necessary parties may all have a seat at the 
bargaining table will also empower entities who have chosen to 
contractually retain or exercise control over particular employees' 
essential terms and conditions of employment to formalize their 
responsibilities and protect their interests in collective-bargaining 
agreements they also negotiate and sign.\414\ Further, we observe that, 
even assuming arguendo that our colleague's concern about the potential 
difficulties associated with joint-employer bargaining were valid, such 
difficulties would arise under any joint-employer standard, and 
accordingly do not support specific criticism of the current final 
rule.
---------------------------------------------------------------------------

    \414\ In this respect, the final rule will help avoid the 
scenario our colleague describes where courts bind entities later 
found to be joint employers to collective-bargaining agreements they 
``neither negotiated nor signed.''
---------------------------------------------------------------------------

    Finally, our dissenting colleague contends that the final rule is 
arbitrary and capricious under the Administrative Procedure Act for 
several reasons. First, he argues that the majority has failed to 
respond to significant points urged by commenters. We reject this 
characterization and note our extensive discussion of the points urged 
by commenters in Section IV.D., above. Not only did we respond to 
commenters' significant arguments, we also made adjustments to the text 
of the final rule in response to commenters' valuable input. We are 
confident that the final rule is stronger and will provide better 
guidance to regulated parties because of the helpful public input we 
received and the changes we made in light of commenters' views.
    Next, our colleague argues that the final rule ``offers no greater 
certainty or predictability than adjudication, and it will not reduce 
litigation.'' As discussed in Section IV.D. above, we are of the view 
that the final rule will reduce uncertainty by codifying the general 
principles that will guide the Board in making joint-employer 
determinations. While the final rule does not purport to anticipate the 
myriad arrangements under which entities possess or exercise control 
over particular employees' essential terms and conditions of 
employment, it offers a framework for analyzing such questions that is 
rooted in common-law agency principles and ensures greater 
predictability by offering an exhaustive list of the essential terms 
and conditions of employment that may give rise to a joint-employer 
finding and detailing the forms of control that the Board will treat as 
probative of joint-employer status. In this regard, we respectfully 
disagree with our colleague's suggestion that ``[t]his is precisely how 
the determinations would be made if there were no rule at all.'' 
Finally, to the extent our colleague's criticism amounts to an 
observation that the final rule will need to be applied on a case-by-
case basis moving forward, we observe that the same can be said for the 
2020 rule, which also required the Board to apply the joint-employer 
standard in diverse contexts based on the particular evidence put 
forward by a party seeking to establish joint-employer status. 
Moreover, as the District of Columbia Circuit has observed, it is 
appropriate for the Board to ``flesh out the operation of a legal test 
that Congress has delegated to the Board to administer'' on an ongoing, 
case-by-case basis.\415\
---------------------------------------------------------------------------

    \415\ BFI v. NLRB, 911 F.3d at 1221.
---------------------------------------------------------------------------

    Ultimately, our colleague concludes that the final rule must be 
arbitrary and capricious because, given his view that common-law agency 
principles do not compel the Board to rescind and replace the 2020 
rule, the final rule is ``legally erroneous.'' As we have discussed in 
detail above, the great weight of common-law authority supports our 
conclusion that the 2020 rule is contrary to common-law agency 
principles in requiring that an entity actually exercise control over 
another employer's employees in order to be found to be a joint 
employer. In any case, as we have

[[Page 73987]]

also explained above, we would rescind and replace the 2020 rule for 
policy reasons even if we had not concluded that its actual-exercise 
requirement were precluded by the Act's incorporation of common-law 
agency principles. We accordingly respectfully disagree with our 
colleague's contention that the final rule is arbitrary and capricious 
under the Administrative Procedure Act.

VII. Dissenting View of Member Kaplan

    My colleagues have accomplished something truly remarkable. They 
have come up with a standard for determining joint-employer status that 
is potentially even more catastrophic to the statutory goal of 
facilitating effective collective bargaining, as well as more 
potentially harmful to our economy, than the Board's previous standard 
in Browning-Ferris Industries.\416\ As the dissent noted in Browning-
Ferris, the joint-employer standard the Board adopted in that decision 
not only ``affect[ed] multiple doctrines central to the Act'' but had 
``potentially massive economic implications.'' \417\ The final rule the 
majority issues today, concerningly, goes beyond BFI in several ways. 
BFI went no further than to assert that the ``direct and immediate 
control'' standard of pre-BFI precedent is not compelled by the 
National Labor Relations Act (NLRA or the Act); the majority now claims 
that it is statutorily impermissible.\418\ BFI held that contractually 
reserved but unexercised control and indirect control are probative of 
joint-employer status; \419\ the majority now makes them dispositive of 
that status. BFI recognized that ``of course,'' the ``existence, 
extent, and object of a putative joint employer's control . . . all may 
present material issues'' in a joint-employer determination; \420\ the 
majority removes the term ``extent.'' Under their final rule, joint-
employer status is established if control exists (even if only 
potentially or indirectly) and if the object of control is an essential 
term and condition of employment of another entity's employees, 
regardless of the extent of that control. Put differently, the final 
rule eliminates the second step of the BFI standard, which required the 
Board to determine whether the extent of a putative joint-employer's 
control over the terms and conditions of employment of another 
business's employees was sufficient ``to permit meaningful collective 
bargaining.'' \421\
---------------------------------------------------------------------------

    \416\ Browning-Ferris Industries of California, Inc., d/b/a BFI 
Newby Island Recyclery, 362 NLRB 1599 (2015) (BFI).
    \417\ Id. at 1647 (Members Miscimarra and Johnson, dissenting).
    \418\ Id. at 1609 (stating the BFI majority's view that 
requiring direct and immediate control ``is not mandated by the 
Act'').
    \419\ Id. at 1614 (``The right to control . . . is probative of 
joint-employer status, as is the actual exercise of control, whether 
direct or indirect.'').
    \420\ Id.
    \421\ Id.
---------------------------------------------------------------------------

    As explained below, the majority's final rule effects an 
unprecedented and unwarranted expansion of the Board's joint-employer 
doctrine. The majority misapprehends common-law agency principles in 
holding that those principles compel the Board to rescind its 2020 Rule 
on Joint Employer Status Under the National Labor Relations Act (the 
2020 Rule) \422\ and replace it with a joint-employer standard not seen 
anywhere else in the law. My colleagues dispense with any requirement 
that a company has actually exercised any control whatsoever (much less 
substantial control) over the essential terms and conditions of another 
company's employees. Under the final rule, an entity's mere possession 
of a never-exercised contractual reservation of right to control a 
single essential term and condition of employment of another business's 
employees makes that entity a joint employer of those employees. So 
does its ``indirect'' control of an essential term and condition, a 
term my colleagues fail to define or otherwise cabin. As I will show, 
these standards (in the words of the United States Court of Appeals for 
the District of Columbia Circuit) ``oversho[o]t the common-law mark.'' 
\423\
---------------------------------------------------------------------------

    \422\ 85 FR 11184 (Feb. 26, 2020) (codified at 29 CFR 103.40).
    \423\ Browning-Ferris Industries of California, Inc. v. NLRB, 
911 F.3d 1195, 1216 (D.C. Cir. 2018).
---------------------------------------------------------------------------

    My colleagues claim that their final rule effectuates ``the policy 
of the United States to eliminate the causes of certain substantial 
obstructions to the free flow of commerce . . . by encouraging the 
practice and procedure of collective bargaining,'' \424\ but in reality 
it will frustrate national labor policy by placing at the bargaining 
table a second ``employer'' that has never exercised any control over 
the employment terms of another entity's employees. Indeed, it may 
place many more than just two such ``employers'' at the bargaining 
table. To borrow a hypothetical from the BFI dissent, suppose CleanCo 
is in the business of supplying maintenance employees to clients to 
clean their offices. Suppose further that CleanCo supplies employees to 
one hundred clients, and that each CleanCo-client contract contains a 
provision that gives the client the right to prohibit, on health and 
safety grounds, CleanCo's employees from using particular cleaning 
supplies. Because the clients possess a contractually reserved 
authority to control ``working conditions related to the safety and 
health of employees''--an essential employment term newly invented by 
my colleagues--each of those one hundred clients would be a joint 
employer of CleanCo's employees. Now, suppose a union wins an election 
in an employer-wide unit of CleanCo's maintenance employees. Because 
all one hundred clients jointly employ those employees, all one hundred 
would be compelled to participate in collective bargaining. As the 
dissenters in BFI put it, ``no bargaining table is big enough to seat 
all of the entities that will be potential joint employers under the 
majority's new standards.'' \425\
---------------------------------------------------------------------------

    \424\ NLRA Sec. 1.
    \425\ BFI, 362 NLRB at 1619 (Members Miscimarra and Johnson, 
dissenting). Moreover, because joint-employer status makes an 
otherwise neutral business primary for purposes of Sec. 8(b)(4) of 
the Act, the union that represents CleanCo's maintenance employees 
would not be limited to picketing CleanCo's headquarters but could 
lawfully picket all one hundred clients.
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    My colleagues repeatedly insist that their approach--specifically, 
eliminating the requirement of proof that an entity has actually 
exercised control over another entity's employees before it can be 
deemed their joint employer--is the only permissible one under the 
common law and the Act. In response to commenters who point out the 
significant negative effects that an expanded joint-employer standard 
will have on businesses in wide variety of sectors, they repeatedly say 
that it cannot be helped because their approach is statutorily 
compelled. Accordingly, they provide no substantive response to these 
commenters' weighty objections. Moreover, because my colleagues insist 
that their hands are tied and fail to acknowledge that common-law 
agency principles, and therefore the Act, permit the 2020 Rule, they 
fail to engage in any real policy-based choice between competing 
alternatives. Consequently, the final rule must stand or fall on the 
majority's assertion that their position is compelled by the common law 
and hence the only permissible construction of the Act. It falls. 
Indeed, not only is their position--i.e., that the actual-exercise 
requirement is impermissible--not compelled by the common law, it 
results in a final rule that exceeds the limits of the common law, as I 
will show. In any event, the courts have made clear that the Board may 
adopt a joint-employer standard under the NLRA that does not extend to 
the outermost limits of the common law. Even accepting for argument's 
sake that

[[Page 73988]]

the majority's rule does not exceed the common law's boundaries, 
compelling policy considerations counsel against its promulgation and 
in favor of leaving the 2020 Rule in place. Because I would retain that 
rule, I dissent.
Background
    In determining, under the Act, whether an employment relationship 
exists between an entity and employees directly employed by a second 
entity, common-law agency principles are controlling.\426\ Under those 
principles, the Board will find that two separate entities are joint 
employers of employees directly employed by only one of them if the 
evidence shows that they share or codetermine those matters governing 
the employees' essential terms and conditions of employment.\427\
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    \426\ NLRB v. United Insurance Co. of America, 390 U.S. 254, 256 
(1968).
    \427\ CNN America, Inc., 361 NLRB 439, 441 (2014) (citing TLI, 
Inc., 271 NLRB 798, 798 (1984)), enf. denied in part 865 F.3d 740 
(D.C. Cir. 2017). The ``share or codetermine'' standard was first 
stated by the United States Court of Appeals for the Third Circuit 
in NLRB v. Browning-Ferris Industries of Pennsylvania, Inc., 691 
F.2d 1117, 1123 (3d Cir. 1982). As the D.C. Circuit observed in its 
2018 decision reviewing BFI, after the Third Circuit formulated the 
``share or codetermine'' standard, the Board and the courts began 
coalescing around it. Browning-Ferris Industries of California, Inc. 
v. NLRB, 911 F.3d at 1201.
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    For many years, the Board, with court approval, held that a 
determination that two or more entities share or codetermine such 
matters requires proof that a putative joint employer has actually 
exercised substantial direct and immediate control over one or more 
essential terms and conditions of employment of another entity's 
employees. See Summit Express, Inc., 350 NLRB 592, 592 n.3 (2007) 
(finding that the General Counsel failed to prove direct and immediate 
control and therefore dismissing joint-employer allegation); Airborne 
Express, 338 NLRB 597, 597 n.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 798, 798-799 (1984)); Laerco 
Transportation, 269 NLRB 324, 325-326 (1984) (dismissing joint-employer 
allegation where user employer's supervision of supplied employees was 
limited and routine); see also NLRB v. CNN America, Inc., 865 F.3d at 
748-751 (finding that the Board erred by failing to adhere to its 
``direct and immediate control'' standard); SEIU Local 32BJ v. NLRB, 
647 F.3d 435, 442-443 (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)). Under this precedent, an 
entity's unexercised contractual reservation of a right to control or 
indirect control/influence was insufficient to establish joint-employer 
status.
    In 2015, a divided Board significantly lowered the bar for proving 
a joint-employer relationship in BFI, 362 NLRB at 1599. There, a Board 
majority retained the ``share or codetermine'' standard but eliminated 
the preexisting requirement of proof that a putative joint employer had 
exercised direct and immediate control over essential terms and 
conditions of employment. Id. at 1613-1614. The BFI majority created a 
new two-step standard. At step one, the inquiry was ``whether there is 
a common-law employment relationship with the employees in question.'' 
Id. at 1600. If so, the analysis proceeded to a second step, where the 
Board was to determine ``whether the putative joint employer possesses 
sufficient control over employees' essential terms and conditions of 
employment to permit meaningful collective bargaining.'' Id. In 
addition, the BFI majority held that a joint-employer relationship 
could be based solely on an unexercised contractual reservation of 
right to control and/or indirect control. In other words, the BFI 
majority expanded the joint-employer doctrine to potentially include in 
the collective-bargaining process an employer's independent business 
partner that has an indirect or merely potential impact on the 
employees' essential terms and conditions of employment, even where the 
business partner has not itself actually established any of those 
essential employment terms or collaborated with the undisputed employer 
in setting them.
    The defining feature of the Board's BFI standard was its 
elimination of the preexisting requirement of proof that a putative 
joint employer actually exercised substantial direct and immediate 
control over the essential terms and conditions of another company's 
employees. The Court of Appeals for the District of Columbia Circuit 
(the D.C. Circuit) did not uphold that defining feature. It expressly 
left undecided whether indirect control or contractually-reserved-but-
unexercised authority to control could, standing alone, establish 
joint-employer status. As the court stated, ``because the Board relied 
on evidence that Browning-Ferris both had a `right to control' and had 
`exercised that control,' this case does not present the question 
whether the reserved right to control, divorced from any actual 
exercise of that authority, could alone establish a joint-employer 
relationship.'' Browning-Ferris Industries of California, Inc. v. NLRB, 
911 F.3d at 1213 (internal citation omitted). Similarly, the court said 
that ``whether indirect control can be `dispositive' is not at issue in 
this case because the Board's decision turned on its finding that 
Browning-Ferris exercised control `both directly and indirectly.' '' 
Id. at 1218.
    After canvassing common-law agency principles, the D.C. Circuit 
upheld ``as fully consistent with the common law the [BFI] Board's 
determination that both reserved authority to control and indirect 
control can be relevant factors in the joint-employer analysis.'' Id. 
at 1222 (emphasis added). Although the court held that contractually 
reserved control and indirect control can contribute to a joint-
employer finding, it declined to reach the question of whether either 
one could independently establish joint-employer status.
    The D.C. Circuit made several other important points that 
subsequently informed the 2020 Rule. First, the court made clear that 
the common law sets the outer limit of a permissible joint-employer 
standard under the Act, without suggesting in any way that the Board's 
standard must or should be coextensive with that outer limit. ``The 
policy expertise that the Board brings to bear on applying the National 
Labor Relations Act to joint employers is bounded by the common-law's 
definition of a joint employer. The Board's rulemaking, in other words, 
must color within the common-law lines identified by the judiciary.'' 
Id. at 1208 (emphasis added). Hence, while it is clear that the Board 
is precluded from adopting a more expansive joint-employer doctrine 
than the common law permits, it may adopt a narrower standard that 
promotes the Act's policies. This is a point that was recognized by the 
Board majority in BFI itself. BFI, 362 NLRB at 1613 (``The common-law 
definition of an employment relationship establishes the outer limits 
of a permissible joint-employer standard under the Act.''). Indeed, the 
Board, with court approval, has long made policy choices not to 
exercise the full extent of its jurisdiction, including as to 
particular classes of employment relationships.\428\
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    \428\ See Northwestern University, 362 NLRB 1350, 1352 (2015) 
(declining to assert jurisdiction over Northwestern University 
football players who receive grant-in-aid scholarships, even 
assuming they are statutory employees, due to the nature and 
structure of the NCAA Division I Football Bowl Subdivision); Brevard 
Achievement Center, 342 NLRB 982, 983-985 (2004) (declining to 
exercise jurisdiction over disabled workers whose relationship with 
an employer is ``primarily rehabilitative'' as opposed to 
``typically industrial'' because ``Congress did not intend that the 
Act govern'' the former); Brown University, 342 NLRB 483, 493 (2004) 
(dismissing representation petition based on the ``belief that the 
imposition of collective bargaining on graduate students would 
improperly intrude into the educational process and would be 
inconsistent with the purposes and policies of the Act''), overruled 
on policy grounds by Columbia University, 364 NLRB 1080 (2016); 
Siemons Mailing Service, 122 NLRB 81 (1959) (describing Board's 
discretionary commerce standard).
    In sum, even if the majority's final rule does not exceed the 
bounds of the common law, the Board possesses discretion to adopt, 
for sound policy reasons, a standard that excludes from joint-
employer status entities that have never actually exercised control 
over the terms and conditions of employment of another employer's 
employees. Moreover, although my colleagues and I agree that the 
joint-employer standard is bounded by the common law, they point to 
no authority (nor can they) for the proposition that the Act compels 
the Board to extend joint-employer status to the outermost limits 
permissible under the common law.

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[[Page 73989]]

    Second, the D.C. Circuit made clear that, under the common law, the 
standard for determining independent-contractor status, with its 
emphasis on the right to control the manner and means of performance, 
is different from the joint-employer standard: ``[T]he independent-
contractor and joint-employer tests ask different questions. The 
independent-contractor test considers who, if anyone, controls the 
worker other than the worker herself. The joint-employer test, by 
contrast, asks how many employers control individuals who are 
unquestionably superintendent.'' 911 F.3d at 1214. In this regard, the 
court explained that ``a rigid focus on independent-contractor analysis 
omits the vital second step in joint-employer cases, which asks, once 
control over the workers is found, who is exercising that control, 
when, and how.'' Id. at 1215; see also Redd v. Summers, 232 F.3d 933, 
937-938 (D.C. Cir. 2000) (expressing doubt that independent-contractor 
precedent is well suited to address issues of joint employment). 
Accordingly, ``the vital second step'' of a common-law joint-employer 
analysis does indeed focus on the exercise of control, including its 
form, frequency, and extent.
    Third, the D.C. Circuit held that the BFI decision's treatment of 
the indirect-control factor contravened the common law. Browning-Ferris 
Industries of California, Inc. v. NLRB, 911 F.3d at 1221. Specifically, 
the court concluded that the BFI decision had ``overshot the common-law 
mark'' by failing to distinguish evidence of indirect control that 
bears on workers' essential terms and conditions of employment from 
evidence that simply documents the routine parameters of company-to-
company contracting. Id. at 1216. The court explained that, for 
example, it would be inappropriate to give any weight in a joint-
employer analysis to the fact that Browning-Ferris had controlled the 
basic contours of a contracted-for service, such as by requiring four 
lines' worth of employee sorters plus supporting screen cleaners and 
housekeepers. Id. at 1220-2221.
    Finally, and importantly, the court held that the Board had erred 
by failing to apply the second step of its two-step standard: whether 
the putative joint employer possesses sufficient control over 
employees' essential terms and conditions of employment to permit 
meaningful collective bargaining. The court rebuked the Board for 
``never delineat[ing] what terms and conditions of employment are 
`essential,' '' for adopting an ``inclusive'' and ``non-exhaustive'' 
approach to the meaning of ``essential terms,'' and for failing to 
clarify what ``meaningful collective bargaining'' might require. Id. at 
1221-1222. The court remanded the case to the Board for further 
proceedings consistent with the court's opinion.\429\
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    \429\ On remand, the Board found that retroactive application of 
any refined standard would be manifestly unjust. The Board therefore 
dismissed the complaint and amended the certification of 
representative to remove BFI as a joint employer. Browning-Ferris 
Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 369 
NLRB No. 139, slip op. at 1 (2020). Thereafter, a divided Board 
denied the union's motion for reconsideration. Browning-Ferris 
Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 370 
NLRB No. 86 (2021).
    On further review, the D.C. Circuit found the Board's 
retroactivity analysis erroneous, granted the union's petition for 
review, vacated the Board's order dismissing the complaint and 
amending the certification of representative, and remanded the case 
to the Board for further proceedings consistent with the court's 
opinion. Sanitary Truck Drivers & Helpers Local 350, International 
Brotherhood of Teamsters v. NLRB, 45 F.4th 38 (D.C. Cir. 2022). The 
case is presently pending before the Board.
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The 2020 Joint-Employer Rule
    Against this background, the Board in 2020 promulgated a joint-
employer rule that was clear and consistent with common-law agency 
principles. The 2020 Rule provided much needed guidance to the 
regulated community. It adopted the universally accepted general 
formulation of the joint-employer standard that an entity may be 
considered a joint employer of a separate entity's employees only if 
the two entities share or codetermine the employees' essential terms 
and conditions of employment. The 2020 Rule then further defined that 
standard in a manner that eliminated the unjustified features 
introduced in BFI. The 2020 Rule explained that to show that an entity 
shares or codetermines the essential terms and conditions of another 
employer's employees, ``the entity must possess and exercise 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.' '' 85 FR at 11186 & 11236. The 
Board defined ``substantial direct and immediate control'' to mean 
``direct and immediate control that has a regular or continuous 
consequential effect on an essential term or condition of employment of 
another employer's employees.'' Id. at 11203-11205 & 11236. The 2020 
Rule also specified that control is not ``substantial'' if it is ``only 
exercised on a sporadic, isolated, or de minimis basis.'' Id. at 11236.
    The 2020 Rule recognized that certain other forms of control and 
authority to control play an appropriately limited role in the joint-
employer analysis. It deemed probative of joint-employer status 
evidence of an entity's indirect control over essential terms and 
conditions of employment of another employer's employees, the entity's 
contractually reserved but never exercised authority over the essential 
terms and conditions of employment of another employer's employees, and 
the entity's control over mandatory subjects of bargaining other than 
the essential terms and conditions of employment. Id. But those types 
of control could tend to support a finding of joint-employer status 
``only to the extent [they] supplement[ed] and reinforce[d] evidence of 
the entity's possession or exercise of direct and immediate control 
over a particular essential term and condition of employment.'' Id. 
They could not, standing alone, establish joint-employer status.
    The Board also made clear that the 2020 Rule was not intended to 
immunize an entity from joint-employer status through use of an 
intermediary to exercise control, explaining that ``[d]irect and 
immediate control exercised through an intermediary remains direct and 
immediate.'' Id. at 11209 (citing Browning-Ferris Industries of 
California, Inc. v. NLRB, 911 F.3d at 1217 (``[T]he common law has 
never countenanced the use of intermediaries or controlled third 
parties to avoid the creation of a master-servant relationship.'')).
    In response to the court's criticism of the Board's failure to 
define what constitutes ``essential terms and conditions of 
employment'' in BFI, the 2020 Rule defined a closed set of terms and 
conditions of employment: wages,

[[Page 73990]]

benefits, hours of work, hiring, discharge, discipline, supervision, 
and direction. 29 CFR103.40(b).\430\ The 2020 Rule further specified 
how direct and immediate control would be determined with respect to 
each essential term, providing concrete examples. Id. Sec.  
103.40(c)(1) through (8). For example, with respect to hiring, the 2020 
Rule provided that ``[a]n entity exercises direct and immediate control 
over hiring if it actually determines which particular employees will 
be hired and which employees will not. An entity does not exercise 
direct and immediate control over hiring by requesting changes in 
staffing levels to accomplish tasks or by setting minimal hiring 
standards such as those required by government regulation.'' Id. Sec.  
103.40(c)(4). And with respect to supervision, ``[a]n entity exercises 
direct and immediate control over supervision by actually instructing 
another employer's employees how to perform their work or by actually 
issuing employee performance appraisals,'' but it does not do so by 
providing ``instructions [that] 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.'' Id. 
Sec.  103.40(c)(7).
---------------------------------------------------------------------------

    \430\ Citations in this paragraph to the Code of Federal 
Regulations refer to the regulations in place before the amendments 
made by the majority's final rule.
---------------------------------------------------------------------------

    Taken together, the features of the 2020 Rule were intended to 
ensure that an entity would be found to be a joint employer of another 
employer's employees if (and only if) it had played an active and 
substantial role in hiring, supervising, or directing those employees, 
in setting their work hours, wages or benefits, and/or in disciplining 
or discharging them. Of course, an entity could be found to be a joint 
employer if it had taken only one of these actions (either on its own 
or in collaboration with the employees' undisputed employer), but there 
was a substantiality requirement, a threshold of extent of control that 
had to be crossed. In this way, the Board addressed the court's concern 
that the Board had failed in BFI to ensure that the extent of the 
purported joint employer's control over the terms and conditions of 
employment of the direct employer's employees was sufficient to make 
that entity's participation in collective bargaining necessary for 
meaningful bargaining to take place.
    The Board explained that the 2020 Rule was consistent with common-
law agency principles and promoted the Act's policies by imposing 
bargaining obligations only on entities that actually control essential 
working conditions and by establishing a ``discernible and 
predictable'' standard to guide regulated parties, stating as follows:

    The Board believes a standard that requires an entity to possess 
and exercise substantial direct and immediate control over essential 
terms and conditions of employment is consistent with the purposes 
and policies of the Act . . . . The Act's purpose of promoting 
collective bargaining is best served by a joint-employer standard 
that places at the bargaining table only those entities that control 
terms and conditions that are most material to collective 
bargaining. Moreover, a less demanding standard would unjustly 
subject innocent parties to liability for others' unfair labor 
practices and coercion in others' labor disputes. A fuzzier standard 
with no bright lines would make it difficult for the Board to 
distinguish between arm's-length contracting parties and genuine 
joint employers. Accordingly, preserving the element of direct and 
immediate control over essential terms and conditions draws a 
discernible and predictable line, providing ``certainty beforehand'' 
for the regulated community.

85 FR 11205.
The Majority's Final Rule
    The 2020 Rule was promulgated a mere three-and-a-half years ago, 
and since it took effect, the Board has applied it exactly once. See 
Cognizant Technology Solutions U.S. Corp., 372 NLRB No. 108 (2023) 
(denying Google's request for review of a regional director's 
determination under the 2020 Rule that it is the joint employer of a 
subcontractor's employees based on its exercise of substantial direct 
and immediate control over their supervision, benefits, and hours of 
work). Nevertheless, my colleagues have plowed ahead with this 
rulemaking, even though ``[i]t is common knowledge that the Board's 
limited resources are severely taxed by undertaking a rulemaking 
process.'' \431\ And they have done so despite the fact that one member 
of the current majority sharply criticized a prior Board majority for 
changing the joint-employer standard under strikingly similar 
circumstances.\432\
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    \431\ ``The Standard for Determining Joint Employer Status,'' 83 
FR 46681, 46688 (2018) (then-Member McFerran, dissenting).
    \432\ See Hy-Brand Industrial Contractors, Ltd. & Brandt 
Construction Co., 365 NLRB No. 156, slip op. at 40 (2017) (Member 
Pearce and then-Member McFerran, dissenting) (``What is the 
justification for overruling BFI after just [two] years[?] . . . . 
[A]fter a mere [two] years, any accounting of BFI's effects would be 
premature; indeed, before it was overruled today, BFI has been 
applied by the Board in only one other Board decision. The complete 
absence of relevant experience under BFI underscores the essentially 
reflexive nature of today's exercise.''), vacated 366 NLRB No. 26 
(2018).
---------------------------------------------------------------------------

    The final rule promulgated today makes extreme and troubling 
changes to Board law, including but not limited to the following 
revisions. The rule makes contractually reserved but unexercised 
control and indirect control not merely probative of joint-employer 
status (as did BFI), but independently sufficient to establish that 
status. It scraps what it characterizes as ``artificial control-based 
restrictions'' in the 2020 Rule.\433\ And it jettisons the second step 
of BFI's joint-employer standard, which required proof that a putative 
joint employer ``possesses sufficient control over employees' essential 
terms and conditions of employment to permit meaningful collective 
bargaining.'' 362 NLRB at 1600.
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    \433\ The majority states that ``the joint employer standard 
that [they] adopt today removes artificial control-based 
restrictions with no foundation in the common law that the Board has 
previously imposed in cases beginning in the mid-1980s discussed 
above, and in the 2020 Final Rule.'' In its 2022 Notice of Proposed 
Rulemaking (NPRM), the majority identified those control-based 
restrictions as ``restrictions requiring (1) that a putative joint 
employer `actually' exercise control, (2) that such control be 
`direct and immediate,' and (3) that such control not be `limited 
and routine.' '' 87 FR 54641, 54643.
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    The final rule starts off mundanely enough, declaring in paragraph 
(a) of newly revised Section 103.40 of the Board's Rules & Regulations 
that an entity is an ``employer'' of particular employees ``if the 
employer has an employment relationship with those employees under 
common-law agency principles.'' Paragraph (b) provides that two 
employers of the same employees ``are joint employers'' if ``they share 
or codetermine those matters governing employees' essential terms and 
conditions of employment.''
    Paragraph (c), which defines the ``share or codetermine'' standard, 
is where the trouble really starts. It provides that ``[t]o `share or 
codetermine those matters governing employees' essential terms and 
conditions of employment' means for an employer to possess the 
authority to control (whether directly, indirectly, or both), or to 
exercise the power to control (whether directly, indirectly, or both), 
one or more of the employees' essential terms and conditions of 
employment.'' The effect of this subsection is dramatic. It mandates a 
finding of joint-employer status based on the mere possession of 
authority to control, directly or indirectly, a single essential term 
(e.g., hours of work). The majority has eliminated any need for proof 
of actual exercise, much less substantial exercise, of control over 
employees' essential

[[Page 73991]]

terms. Moreover, paragraph (c) refers broadly to ``authority to 
control,'' without limiting it to contractually reserved authority. A 
``user'' business possesses authority to indirectly control the hours 
of work of employees supplied to it by a ``supplier'' employer merely 
by virtue of the fact that it decides when it is open for business. If 
that is sufficient to make ``user'' businesses joint employers of 
supplied employees, then paragraph (c) of revised Sec.  103.40 makes 
every ``user'' business a joint employer.
    The final rule's treatment of indirect control is similarly 
problematic. Given that possession or exercise of indirect control will 
establish a joint-employer relationship under Sec.  103.40(b) and (c) 
of the final rule, it seems critically important for the majority to 
explain what constitutes ``indirect control.'' They do not do so. The 
final rule identifies control exercised through an intermediary as an 
example of ``indirect control,'' \434\ but this necessarily implies 
that the exercise of ``indirect control'' is not limited to control 
exercised through an intermediary. What else might count as the 
exercise of indirect control? My colleagues do not say, but they take 
note of comments contending that certain circumstances should be 
regarded as demonstrating indirect control,\435\ including that 
franchisors necessarily have indirect control because they ``are the 
parties with meaningful profit margins that could be redistributed to 
the workforce during bargaining'' and because most franchisees' revenue 
and cost variables ``greatly constrain franchisees' practical ability 
to offset concessions to their workers.'' \436\ The same commenter 
suggests that businesses that engage service contractors necessarily 
have indirect control because ``service contractors rarely have room to 
grant wage increases without renegotiating their own contracts with 
clients and thus the clients effectively control the economic terms of 
employment for the contractors' employees.'' \437\ Are these the kinds 
of circumstances that my colleagues have in mind as evidencing 
``indirect control''? We do not know because they do not say.\438\
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    \434\ Under the 2020 Rule, control exercised through an 
intermediary could establish joint-employer status if it was 
otherwise sufficient. ``Direct and immediate control exercised 
through an intermediary remains direct and immediate.'' 85 FR at 
11209 (citing Browning-Ferris Industries of California v. NLRB, 911 
F.3d at 1217 (``[T]he common law has never countenanced the use of 
intermediaries or controlled third parties to avoid the creation of 
a master-servant relationship.'')). My colleagues and I disagree 
about whether to characterize control exercised through an 
intermediary as direct control or indirect control. In my view, an 
intermediary (e.g., a supervisor employed by the undisputed 
employer) who operates as a mere conduit of the putative joint 
employer's commands functions as its agent. The putative joint 
employer there is exercising control even more directly than when it 
engages in collaborative decision-making with the undisputed 
employer, which is direct control. The majority's reclassification 
of control exercised through an intermediary as indirect control 
makes little sense. Moreover, because the majority does not limit 
``indirect control'' to that example, they leave the door open to 
finding other kinds of indirect control. The important question, 
which my colleagues do not answer, is, what else will count as 
``indirect control''?
    \435\ Comments of Center for Law and Social Policy; Los Angeles 
County Federation of Labor AFL-CIO & Locals 396 and 848 of the IBT.
    \436\ Comment of Los Angeles County Federation of Labor AFL-CIO 
& Locals 396 and 848 of the IBT (internal citation and quotations 
omitted).
    \437\ Comment of Los Angeles County Federation of Labor AFL-CIO 
& Locals 396 and 848 of the IBT (internal citation and quotations 
omitted).
    \438\ In response to my criticism, the majority states that they 
``deci[ded] not to include an extensive list of examples of forms of 
indirect control that may be relevant to the joint-employer 
inquiry.'' I am not, however, criticizing my colleagues for failing 
to provide ``an extensive list of examples.'' Rather, I observe that 
the majority does not identify even one example of such indirect 
control other than control exercised through an intermediary. Given 
that the majority makes indirect control sufficient to establish 
joint-employer status, this lack of guidance is a serious 
shortcoming. As with much else in the final rule, the majority 
leaves the fleshing out of ``indirect control'' to be determined 
case by case--and this leaves businesses affected by the new rule, 
and facing the complicated task of planning for its impact, utterly 
at sea.
    Relatedly, my colleagues are wrong in asserting that the role I 
give (and the 2020 Rule gave) to indirect control somehow conflicts 
with the D.C. Circuit's opinion in Browning-Ferris Industries of 
California v. NLRB. In remanding that case to the Board to elucidate 
the distinction between indirect control that bears on essential 
employment terms and the routine parameters of business-to-business 
contracting, the court did not imply that indirect control could 
independently establish a joint-employer relationship. The court 
expressly withheld judgment on that issue. The court simply 
instructed the Board to explain the difference between control that 
is relevant to a joint-employer analysis and that which carries no 
weight at all.
---------------------------------------------------------------------------

    Further, the final rule does not adequately ``distinguish evidence 
of indirect control that bears on workers' essential terms and 
conditions from evidence that simply documents the routine parameters 
of company-to-company contracting.'' Browning-Ferris Industries of 
California v. NLRB, 911 F.3d at 1226. According to the majority, 
``limiting the list of essential terms and conditions of employment is 
responsive to the District of Columbia Circuit's request that the Board 
incorporate a limiting principle to ensure the joint-employer standard 
remains within common-law boundaries.'' \439\ But closing the list of 
essential terms and conditions is not enough because routine components 
of company-to-company contracts may indirectly impact essential terms. 
For example, a widely used standard contract in the construction 
industry \440\ includes a provision that makes the general contractor 
``responsible for initiating, maintaining, and supervising all safety 
precautions and programs in connection with the performance of the 
[c]ontract.'' That clause--a routine component of company-to-company 
contracting in the construction industry--evidences the general 
contractor's indirect control (at least) of ``working conditions 
related to the safety and health of employees'' of each of its 
subcontractors, an essential term and condition of employment under 
Sec.  103.40(d)(7) of the final rule.\441\
---------------------------------------------------------------------------

    \439\ My colleagues say that their decision to close the set of 
``essential'' terms and conditions of employment is not intended to 
address the D.C. Circuit's criticism of BFI's failure to distinguish 
indirect control that bears on joint-employer status from routine 
aspects of company-to-company contracting but rather responds to the 
court's instruction to ``explain which terms and conditions are 
`essential' to permit `meaningful collective bargaining,' '' and to 
``clarify what `meaningful collective bargaining' entails and how it 
works in this setting.'' Browning-Ferris Industries of California, 
Inc. v. NLRB, 911 F.3d at 1221-1222 (quoting BFI, 362 NLRB at 1600). 
But this clarification is at odds with their simultaneous claim that 
a closed set of terms and conditions heeds the D.C. Circuit's 
request for a limiting principle ``to ensure the joint-employer 
standard remains within common-law boundaries.'' The D.C. Circuit's 
directive that the standard remain within common-law boundaries 
flows directly from its finding that BFI ``overshot the common-law 
mark'' by failing to distinguish between indirect control that bears 
on the joint-employer inquiry and the routine components of company-
to-company contracting. Accordingly, I do not mischaracterize their 
position when I point out that closing the set of essential terms 
and conditions fails to provide the ``legal scaffolding'' the D.C. 
Circuit called for.
    \440\ AIA Document A201-2017 (cited in comment of Associated 
General Contractors of America).
    \441\ The majority also says that Sec. 103.40(f) of the final 
rule responds to the D.C. Circuit's instruction that the Board 
separate indirect control that bears on the joint-employer inquiry 
from routine components of company-to-company contracting. I address 
this claim below.
---------------------------------------------------------------------------

    Additionally, my colleagues perform some sleight of hand regarding 
the final rule's treatment of what was BFI's second step: proof that 
``the putative joint employer possesses sufficient control over 
employees' essential terms and conditions of employment to permit 
meaningful collective bargaining.'' 362 NLRB at 1600. In the 2022 NPRM, 
my colleagues straightforwardly acknowledged that their proposed rule 
``d[id] not incorporate'' BFI's second step, dubiously declaring that 
``any required bargaining under the new standard will necessarily be 
meaningful.'' 87 FR at 54645 n. 26. Accordingly, they repudiated the 
BFI majority's recognition that in some cases, a putative joint 
employer's extent of control over the terms and conditions of 
employment of the employees of an undisputed employer will be

[[Page 73992]]

insufficient to warrant placing that entity at the bargaining table, 
and that in those circumstances, it would be contrary to the policies 
of the Act to find joint-employer status. 362 NLRB at 1610-1611; id. at 
1614 (``The existence, extent, and object of a putative joint 
employer's control, of course, all may present material issues.'') 
(emphasis added). In the final rule, the majority takes a different 
route than they took in the NPRM, but they arrive at the same 
destination. The majority says that the final rule ``effectively 
incorporates the second step of the Board's joint-employer test set 
forth in BFI'' because the final rule (unlike the proposed rule) makes 
the list of ``essential'' terms and conditions of employment 
exhaustive. But BFI's second step addresses the extent of a putative 
joint employer's control over essential terms and conditions. What 
constitutes essential terms and conditions pertains to what is 
controlled, i.e., the object of control--and as BFI makes clear, extent 
of control and object of control present distinct issues in the joint-
employer analysis. Plainly, the final rule does not ``incorporate[ ] 
the second step'' of the BFI standard, and this is made all the more 
apparent by newly revised Sec.  103.40(e), which provides that merely 
``[p]ossessing the authority to control is sufficient to establish 
status as a joint employer,'' and so is ``[e]xercising the power to 
control,'' without any requirement that there be a sufficient amount of 
control to permit meaningful collective bargaining.
    My colleagues dismiss this concern by saying that Sec.  103.40(a) 
of the final rule will prevent the rule from being applied overbroadly 
``to encompass entities whose relationship to the performance of the 
work is clearly too attenuated.'' They say that my criticism of their 
rule ``elides the threshold significance of Sec.  103.40(a), which 
requires a party seeking to demonstrate the existence of a joint-
employment relationship to make an initial showing that the putative 
joint employer has a common-law employment relationship with particular 
employees.'' But it is my colleagues who have failed to explain how 
Sec.  103.40(a) functions in the joint-employer analysis. They do not 
explain what, if any, limitations it imposes on joint-employer 
determinations. They do not convey that it establishes some minimum 
level of control (in terms of extent of control over a particular term 
or condition of employment or breadth of control across multiple terms 
or conditions) that must be reached before joint-employer status is 
found. But even accepting that some unstated minimum quantum of 
authority to control is implicit in the threshold requirement of Sec.  
103.40(a), nothing in their rule enlightens the regulated community 
what that minimum quantum might be. Like ``indirect control,'' that is 
left to be determined case by case, with the majority here saying, in 
effect, ``trust us, we'll be reasonable,'' even though nothing in the 
text of the rule constrains the Board from drawing the line 
unreasonably. And my colleagues certainly do not suggest that Sec.  
103.40(a) implicitly sneaks an actual-exercise requirement in through 
the back door. Any hope in that regard is laid to rest by their 
insistence, in discussing Sec.  103.40(c), that exercise of control is 
unnecessary under the common law. In short, my colleagues have not 
blunted my criticism of their abandonment of the actual-exercise 
requirement by pointing to Sec.  103.40(a) and its nebulous threshold 
requirement.\442\
---------------------------------------------------------------------------

    \442\ As noted above, the majority also denies that their rule 
fails adequately to distinguish evidence of indirect control that 
bears on the joint-employer inquiry from evidence that simply 
documents the routine parameters of company-to-company contracting, 
as mandated by the D.C. Circuit, by pointing to Sec.  103.40(f) of 
the final rule. Sec. 103.40(f) provides that evidence of an entity's 
control over matters that are immaterial to the existence of an 
employment relationship under common-law agency principles and that 
do not bear on the employees' essential terms and conditions of 
employment is not relevant to the determination of whether the 
entity is a joint employer. In other words, Sec.  103.40(f) is 
mostly just the inverse of Sec. 103.40(a) and, as such, furnishes no 
more guidance than does Sec.  103.40(a). And to the extent that it 
is not the inverse of Sec.  103.40(a), it is the inverse of Sec.  
103.40(b), which confirms that my colleagues do indeed take the 
position that by defining a closed set of essential terms and 
conditions, they have responded to the D.C. Circuit's mandate.
---------------------------------------------------------------------------

    In short, the combined effect of all these features of the final 
rule results in a dramatic expansion of the Board's joint-employer 
doctrine compared with the 2020 Rule and even compared with the Board's 
holding in BFI. At least it will do so if the final rule survives one 
or more of the inevitable court challenges it is destined to face. A 
betting person might hesitate to put money on its chances because, as 
demonstrated below, the final rule is wrong as a matter of law and 
unadvisable as a matter of policy.
Common-Law Agency Principles Do Not Compel or Even Support the Final 
Rule
    My colleagues repeatedly and emphatically declare that common-law 
agency principles, and therefore the Act itself, preclude the 2020 Rule 
and compel their final rule. Among the statements they make are the 
following:
     ``After carefully considering nearly 13,000 comments, the 
Board believes that it is necessary and appropriate to rescind the 2020 
rule, which was contrary to the Act insofar as it was inconsistent with 
the common law of agency.''
     ``[W]e believe that the Board is required to rescind the 
2020 rule . . . .''
     ``[W]e rescind the 2020 rule because it is inconsistent 
with common-law agency principles and therefore inconsistent with the 
National Labor Relations Act.''
     ``[B]ecause we are bound to apply common-law agency 
principles, we are not free to maintain a definition of `joint 
employer' that incorporates the restriction that any relevant control 
an entity possesses or exercises be `direct and immediate.' ''
     ``[T]he 2020 rule introduced control-based restrictions 
that are inconsistent with common-law agency principles.''
     ``[W]e are foreclosed from maintaining the joint-employer 
standard set forth in [the 2020 rule] because it is not in accordance 
with the common-law agency principles the Board is bound to apply in 
making joint-employer determinations.''
     ``[T]he Board has concluded that the actual-exercise 
requirement reflected in the 2020 rule is . . . contrary to the common-
law agency principles that must govern the joint-employer standard 
under the Act and that the Board has no statutory authority to adopt 
such a requirement.''
    A reader might reasonably expect the majority to follow up those 
assertions with citations to judicial decisions, involving the NLRA and 
other materially similar statutes, in which the courts have found 
joint-employer status based exclusively on a never-exercised 
contractual right to control and/or indirect control of an essential 
term and condition of employment. Such readers will be sorely 
disappointed. The majority fails to cite a single judicial decision, 
much less a body of court precedent rising to the level of establishing 
the common law, that bases a joint-employer finding solely on a never-
exercised contractual reservation of right to control or on indirect 
control of employees' essential terms and conditions. As I will show, 
judicial precedent addressing joint-employer status under both the NLRA 
and materially similar statutes requires that control be actually 
exercised. And as the following discussion will demonstrate, so does 
Board precedent, with narrow exceptions. Accordingly, the majority is 
mistaken when they claim that requiring the exercise of substantial 
direct and immediate control to establish joint-employer status is 
inconsistent with ``prior Board and judicial decisions.''

[[Page 73993]]

    The 2020 Rule was not inconsistent with the majority of Board 
precedent addressing joint-employer status under the Act.
    A survey of Board decisions addressing the issue of joint-employer 
status reveals that, with narrow exceptions, the Board has relied, at 
least in part, on the putative joint-employer's actual exercise of 
direct control over terms and conditions of employment. Accordingly, 
the majority's decision to make never-exercised authority to control or 
indirect control independently sufficient to establish joint-employer 
status represents a sharp break from Board precedent.
    Contrary to my colleagues' suggestion, Greyhound Corp., 153 NLRB 
1488 (1965), does not support finding joint-employer status based 
exclusively on a never-exercised right to control or indirect control. 
There, the Board found that Greyhound was a joint employer of its 
cleaning contractor's employees based in part on Greyhound's actual 
exercise of substantial direct and immediate control over the 
employees' essential terms and conditions of employment. Specifically, 
the Board relied on the fact that Greyhound had actually engaged in 
``detailed supervision'' of the contractor's employees on a day-to-day 
basis regarding the manner and means of their performance. Id. at 1496. 
The Board also relied on evidence that Greyhound had actually prompted 
the discharge of one of the contractor's employees whom Greyhound 
deemed unsatisfactory. Id. at 1491 n. 8. To be sure, the Board also 
gave some weight to provisions in the contract between Greyhound and 
the contractor, which granted Greyhound the right to specify the 
``exact manner and means'' through which the employees' work would be 
accomplished, to control their wages, to set their schedules, and to 
assign employees to perform the work. Id. at 1495-1496. But the Board 
specifically stated that ``[t]he joint employer finding herein is 
premised on the common control exercised by Greyhound and [the cleaning 
contractor] over the employees.'' Id. at 1492 (emphasis added). And the 
Board explained that Greyhound had ``reserved to itself, both as a 
matter of express contractual agreement and in actual practice, rights 
over these employees which are consistent with its status as their 
employer along with [the cleaning contractor].'' Id. at 1495 (emphasis 
added). In short, Greyhound is consistent with both subsequent Board 
joint-employer precedent and the 2020 Rule. It does not support the 
majority's final rule.\443\
---------------------------------------------------------------------------

    \443\ In an earlier case related to Greyhound, the Supreme Court 
held that a federal district court lacked subject-matter 
jurisdiction to enjoin the Board from conducting a representation 
election based on the plaintiff's challenge to the Board's joint-
employer determination in the representation proceeding. Boire v. 
Greyhound Corp., 376 U.S. 473 (1964). Although the Court did not 
rule on the joint-employer issue, it did not criticize the Board's 
finding that Greyhound and the cleaning contractor constituted a 
joint employer ``because they had exercised common control over the 
employees.'' Id. at 475 (emphasis added).
---------------------------------------------------------------------------

    The majority mischaracterizes Board precedent during the two 
decades following Greyhound, implying that it reflects a 
``traditional'' approach under which proof that an entity exercised 
control over the terms and conditions of employment of another 
employer's employees was unnecessary to establish joint-employer 
status.\444\ The majority asserts that ``Board precedent from this time 
period generally did not require a showing that both putative joint 
employers actually or directly exercised control.'' But they fail to 
acknowledge that the Board has never based a joint-employer finding 
solely on ``indirect control,'' and most of the Board cases my 
colleagues cite as demonstrating a ``traditional'' reliance on a 
contractual reservation of right to control are limited to a single 
category of cases involving department stores with licensed 
departments.\445\ These cases do not bear the weight the majority gives 
them.\446\
---------------------------------------------------------------------------

    \444\ The issue here is not whether an unexercised contractual 
right of control and/or indirect control is or are relevant 
considerations in a joint-employer analysis. They are, as the 2020 
Rule recognized. The issue is whether either one can independently 
establish joint-employer status.
    \445\ As these department-store cases demonstrate, licensed 
departments were seamlessly integrated with the department store as 
a whole, and employees of the licensee were indistinguishable from 
the department store's employees. See, e.g., Spartan Department 
Stores, 140 NLRB 608, 610 (1963) (observing that the agreement 
between the department store and the licensee was ``in furtherance 
of Spartan's intention of creating the appearance of a single, 
integrated department store''). Indeed, in one such case, the 
parties' contract expressly provided that employees in the licensed 
department ``shall be the employees of'' the department store. 
Taylor's Oak Ridge Corp., 74 NLRB 930, 932 (1947).
    \446\ In the department-store cases, the Board did not purport 
to apply common-law agency principles, much less cite common-law 
cases finding joint-employer status based on reserved authority to 
control alone. When the Board stated any standard at all, it relied 
on whether the department store was in a position to influence the 
licensee's labor relations policies. See, e.g., United Mercantile, 
Inc. d/b/a Globe Discount City, 171 NLRB 830 (1968); Buckeye Mart, 
165 NLRB 87 (1967), enfd. mem. 405 F.2d 1211 (6th Cir. 1969); Value 
Village, 161 NLRB 603 (1966). These cases do not support the 
majority's view that the common law compels a conclusion that 
contractually reserved authority to control is sufficient to make an 
entity a joint employer of another entity's employees. Indeed, in 
Buckeye Mart, it was found that the department store (Buckeye) was 
not the joint employer of the employees of the licensee (Manley) 
despite possessing contractually reserved authority to require 
Manley to discharge employees that Buckeye deemed objectionable. 165 
NLRB at 88 (``Although Buckeye may compel the discharge of any 
Manley employee . . . . Buckeye is not in a position to `influence' 
Manley's labor policies and . . . is not a joint employer with 
Manley . . . .''). Accordingly, the majority's reliance on Board 
cases involving licensing relationships in the department-store 
industry is misplaced. The majority also cites two cases--General 
Motors Corp. (Baltimore, MD), 60 NLRB 81 (1945), and Anderson 
Boarding & Supply Co., 56 NLRB 1204 (1944)--where the issue was 
whether an industrial facility was the joint employer of employees 
working in its cafeteria. In neither case did the Board mention the 
common law of agency, and even if the common law was implicit in its 
analysis, two cases do not amount to a ``traditional'' practice. 
Moreover, as the D.C. Circuit forcefully reminded the Board in 
Browning-Ferris Industries of California, Inc. v. NLRB, ``Congress 
has tasked the courts, and not the Board, with defining the common-
law scope of `employer.' '' 911 F.3d at 1208. The Board, as an 
administrative agency, has no power to do so.
---------------------------------------------------------------------------

    In fact, during the two decades following Greyhound, the Board 
regularly found no joint-employer status where the putative joint 
employer possessed some reserved contractual authority to control 
essential terms, and even where it actually exercised control but to 
too limited an extent to warrant a joint-employer finding. For example, 
in Hychem Constructors, Inc., 169 NLRB 274, 276 (1968), the Board found 
no joint-employer status despite a putative employer's reserved right 
to approve wage increases and overtime, its policy of consulting on 
proposed layoffs, and its ``as yet unexercised prerogative to remove an 
undesirable . . . employee.'' Similarly, in S. G., Tilden, Inc., 172 
NLRB 752, 753 (1968), the Board found a franchisor was not a joint 
employer of its franchisees' employees despite its specification of the 
franchisees' hours of operation and its requirement that they adhere to 
certain pricing and housekeeping standards. Echoing the standard 
applied in the department-store cases, the Board in S. G. Tilden found 
``no clear indication . . . that Respondent Tilden intended to, or in 
fact did, exercise direct control over the labor relations of [the 
franchisees].'' Id. (emphasis added); see also Furniture Distribution 
Center, Inc., 234 NLRB 751, 751-752 (1978) (evidence that ``user'' 
business and ``supplier'' business conferred and jointly decided on the 
number of supplied employees and the number of hours those employees 
would work each week deemed insufficient to create a joint-employer 
relationship); Cabot Corp., 223 NLRB 1388, 1389, 1390 n.10, 1392 (1976) 
(no joint-employer status despite putative joint employer reserving the 
right to inform direct employer of the specific

[[Page 73994]]

work to be performed and the equipment and personnel used, maintaining 
the right to ``inspect, test, approve, and disapprove of work and 
services,'' requiring all employees to follow its safety regulations, 
and retaining the right to remove employees it deemed incompetent), 
affd. sub nom. International Chemical Workers Local 483 v. NLRB, 561 
F.2d 253 (D.C. Cir. 1977); Westinghouse Electric Corp., 163 NLRB 914, 
914-915 (1967) (no joint-employer status despite putative joint 
employer's occasional direct supervision of supplier employer's 
employees, review of supplied employees' timesheets for auditing 
purposes, and reservation of the right to request removal of 
``disorderly, incompetent, or objectionable persons from working at the 
site . . . . [S]uch conduct is clearly consistent with that of a 
contractor seeking to police its subcontract.''); Space Services 
International Corp., 156 NLRB 1227, 1232-1233 (1966) (no joint-employer 
status where putative joint employer ``[reserved] the right to require 
removal from the work of any employee it deems incompetent, careless, 
or insubordinate'' and exercised this right on at least one occasion 
with respect to a management official). Accordingly, contrary to the 
majority's assertion, Board precedent prior to the 1984 joint-employer 
decisions in TLI and Laerco Transportation did not make indirect 
control independently sufficient to establish joint-employer status, 
and cases relying solely on contractually reserved authority to control 
do not apply a common-law test and therefore do not support the 
majority's claim that TLI and Laerco abandoned a ``traditional, common-
law based standard'' for determining joint-employer status.\447\
---------------------------------------------------------------------------

    \447\ For example, in Floyd Epperson, cited by the majority, the 
Board noted anecdotal evidence of the putative joint employer's 
indirect control over wages and discipline, but its joint-employer 
finding was largely based on evidence of direct and immediate 
supervision of the employees involved. 202 NLRB 23, 23 (1973), enfd. 
491 F.2d 1390 (6th Cir. 1974). In Lowery Trucking Co., also cited by 
the majority, the Board noted the putative joint employer's 
unexercised right to reject a supplier employer's driver, but it 
highlighted the putative joint employer's actual exercise of 
detailed supervision, participation in the hiring process, discharge 
of two drivers, and discipline of a third. 177 NLRB 13, 15 (1969), 
enfd. sub nom. Ace-Alkire Freight Lines v. NLRB, 431 F.2d 280 (8th 
Cir. 1970). Similarly, in Carrier Corp. v. NLRB, 768 F.2d 778 (6th 
Cir. 1985), the court of appeals relied in part on the putative 
joint employer's reserved authority to reject drivers that did not 
meet its standards and to direct the primary employer to remove 
drivers for improper conduct, but in finding that substantial 
evidence supported the Board's joint-employer finding, the court 
primarily relied on evidence that Carrier ``exercised substantial 
day-to-day control over the drivers' working conditions'' and 
consulted with the undisputed employer over wages and benefits. Id. 
at 781; see also International Chemical Workers Local 483 v. NLRB, 
561 F.2d 253, 257 (D.C. Cir. 1977) (affirming Board's finding of no 
joint-employer status in part because the putative joint employer 
``did not have authority to, and did not actually, direct [the 
primary employer's] employees in the details of their work'') 
(emphasis added). Moreover, most of the cases my colleagues rely on 
to support their claim that the Board adhered to a ``traditional, 
common-law based'' joint-employer standard prior to TLI and Laerco 
involved department stores with licensed departments, where, as 
explained above, the Board stated and applied a test that asked 
whether the store was in a position to influence the licensee's 
labor policies--and Buckeye Mart reveals the difference between that 
standard and a common-law based standard as my colleagues construe 
it.
---------------------------------------------------------------------------

    Nor do the last forty years of relevant Board precedent support the 
majority's characterization of that period as marked by a radical 
departure from a prior ``traditional'' joint-employer standard. To 
begin, TLI and Laerco Transportation merely clarified the appropriate 
legal standard by echoing the United States Court of Appeals for the 
Third Circuit's articulation in NLRB v. Browning-Ferris Industries of 
Pennsylvania, Inc., 691 F.2d at 1123: ``The basis of the [joint-
employer] finding is simply that one employer while contracting in good 
faith with an otherwise independent company, has retained for itself 
sufficient control of the terms and conditions of employment of the 
employees who are employed by the other employer. Thus, the `joint 
employer' concept recognizes that the business entities involved are in 
fact separate but that they share or co-determine those matters 
governing the essential terms and conditions of employment'' (internal 
citations omitted) (emphasis in original). Importantly, the Third 
Circuit equated this ``share or codetermine'' standard with the 
exertion--i.e., exercise--of significant control: ``[W]here two or more 
employers exert significant control over the same employees--where from 
the evidence it can be shown that they share or co-determine those 
matters governing essential terms and conditions of employment--they 
constitute `joint employers' within the meaning of the NLRA.'' Id. at 
1124. The Third Circuit's ``share or codetermine'' standard is 
consistent (with narrow exceptions) with the Board's pre-TLI and pre-
Laerco joint-employer decisions. As shown below, it is also consistent 
with TLI, Laerco, and the Board's subsequent joint-employer decisions--
until, of course, BFI took joint-employer doctrine in an entirely 
unprecedented direction. But it flatly contradicts the definition of 
that standard that my colleagues adopt today.\448\
---------------------------------------------------------------------------

    \448\ As noted above, the final rule incorporates the ``share or 
codetermine'' standard in newly revised Sec. 103.40(b). However, in 
Sec. 103.40(c), the final rule defines the ``share or codetermine'' 
standard to include indirect control of, and possession of a never-
exercised authority to control, any essential term or condition of 
employment. This is not how the standard has been understood or 
applied historically, and it is contrary to the understanding of the 
very court that announced it, which defined the ``share or 
codetermine'' standard as a shared ``exert[ion]'' of ``significant 
control'' over a group of employees. NLRB v. Browning-Ferris 
Industries of Pennsylvania, 691 F.2d at 1124.
---------------------------------------------------------------------------

    In TLI, Inc., 271 NLRB at 798-799, the Board reversed a judge's 
finding of joint-employer status, noting that the putative joint 
employer did not sufficiently affect the terms and conditions of 
employment of the supplier employer's drivers: the ``supervision and 
direction exercised by [the putative joint employer] on a day-to-day 
basis [was] both limited and routine.'' Id. at 799.\449\ Similarly, in 
Laerco Transportation, 269 NLRB at 325, the Board found that the 
putative joint employer did not possess ``sufficient indicia of 
control'' over a supplier employer's drivers to create a joint-employer 
relationship. The Board found evidence that the putative joint employer 
gave drivers directions on which routes to follow and attempted to 
resolve personality conflicts to constitute merely ``minimal and 
routine'' supervision, and that most other terms and conditions of 
employment of the drivers were effectively controlled by their direct 
employer. Id. at 326. Thus, in TLI and Laerco, the Board faithfully 
applied the Third Circuit's standard--requiring ``two or more employers 
[to] exert significant control over the same employees'' in order to 
satisfy the ``share or codetermine'' standard and create a joint-
employer relationship under the Act--to the facts of those cases, 
contrary to the majority's assertion that these decisions lacked ``a 
clear basis in established common-law agency principles or prior . . . 
judicial decisions.''
---------------------------------------------------------------------------

    \449\ The Board in TLI reached this conclusion notwithstanding 
the language of the applicable contract, which provided that the 
putative joint employer ``will solely and exclusively be responsible 
for maintaining operational control, direction and supervision'' 
over the supplier's drivers. Id. at 798. As explained above, this is 
consistent with the historical treatment of reserved authority to 
control as generally being insufficient to support joint-employer 
status absent evidence of substantial direct control. The Board also 
noted that the presence of the putative joint employer's 
representative at two bargaining sessions did not alter the outcome, 
as ``there [was] no evidence that he demanded specific reductions or 
that he made particular proposals.'' Id. at 799.
---------------------------------------------------------------------------

    Subsequent joint-employer decisions were similarly consistent with 
both the

[[Page 73995]]

Third Circuit's definition of the ``share or codetermine'' standard 
and, in general, the Board's pre-1984 joint-employer decisions. In AM 
Property Holding Corp., 350 NLRB 998, 1001 (2007), the Board explained 
that it has ``generally found supervision to be limited and routine 
where a supervisor's instructions consist primarily of telling 
employees what work to perform, or where and when to perform the work, 
but not how to perform the work.'' It further explained that ``[i]n 
assessing whether a joint employer relationship exists, the Board does 
not rely merely on the existence of . . . contractual provisions 
[governing the right to approve hiring], but rather looks to the actual 
practice of the parties.'' Id. at 1000.
    In Airborne Express, 338 NLRB 597 (2002), the Board adopted the 
judge's finding that there was no joint-employer relationship, based in 
part on evidence that the putative joint employer entered into 
contracts that explicitly afforded the independent contractors full and 
complete control over hiring, firing, discipline, work assignment, and 
other terms and conditions of employment. Id. at 605. The Board noted 
that ``the essential element in this analysis is whether a putative 
joint employer's control over employment matters is direct and 
immediate.'' Id. at 597 n.1; \450\ see also Flagstaff Medical Center, 
357 NLRB 659, 667 (2011) (``[T]he evidence regarding Sodexho's role in 
hiring, discharging, disciplining, supervising, and evaluating 
housekeepers does not establish that Sodexho shared or codetermined 
essential terms and conditions of employment.'').
---------------------------------------------------------------------------

    \450\ In Airborne, the Board said that about twenty years 
earlier, it had ``abandoned its previous test in this area, which 
had focused on a putative joint employer's indirect control over 
matters relating to the employment relationship.'' Id. (emphasis in 
original). Frankly, I believe this statement mischaracterized the 
Board's earlier joint-employer precedent. As shown above, that 
precedent did not focus on indirect control. Those cases ascribed 
some significance to indirect control, but they did not find 
indirect control to be outcome-determinative absent evidence of 
direct control.
---------------------------------------------------------------------------

    During this time period, no appellate court criticized the Board's 
formulation of the joint-employer standard. As the BFI dissenters 
observed, if it were true that TLI, Laerco, and subsequent decisions 
departed without explanation from the Board's prior joint-employer 
precedent, some court of appeals would have taken issue: ``It is simply 
impossible that all the courts of appeals would have missed this train 
wreck.'' BFI, 362 NLRB at 1633 (Members Miscimarra and Johnson, 
dissenting).
    The final rule's reliance on independent-contractor precedent to 
support their standard for determining joint-employer status is 
misplaced.
    The majority's legal justification for abandoning the requirement 
that a putative joint employer actually exercise some control over at 
least one term or condition of employment of another employer's 
employees boils down to a misplaced reliance on broad statements in 
cases where the issue presented is whether certain individuals are 
employees or independent contractors. Based on a review of judicial 
decisions and compendiums of law addressing common-law principles 
pertinent to deciding that issue, my colleagues say that they are ``not 
aware of any common-law judicial decision or other common-law authority 
directly supporting the proposition that, given the existence of a 
putative employer's contractually reserved authority to control, 
further evidence of direct and immediate exercise of that control is 
necessary to establish a common-law employer-employee relationship.'' 
They miss my point, however, by conflating separate and distinct 
points. The issue here is not whether actual exercise of control by a 
putative employer is required to make a worker an employee of that 
employer and not an independent contractor. The issue is whether a 
worker who is undisputedly an employee of one entity is jointly 
employed by a second entity. My colleagues acknowledge that these are 
distinct issues. They must do so, as the D.C. Circuit has emphatically 
rejected any attempt to equate them. See Browning-Ferris Industries of 
California, Inc. v. NLRB, 911 F.3d at 1213 (``Browning-Ferris cites no 
case in which we have applied an employee-or-independent-contractor 
test to resolve a question of joint employment, and we have found 
none.'') Yet, immediately following the statement quoted above--which, 
again, is based on precedent that addresses the employee-or-
independent-contractor issue--my colleagues leap to the conclusion that 
they are statutorily precluded from requiring actual exercise of 
control to establish that an entity is a joint employer. In other 
words, the majority acknowledges the distinction between the employee-
or-independent-contractor issue and the joint-employer issue and erases 
the distinction practically in the same breath. To stay within the 
boundaries of the common law as regards joint-employer status, they 
should not--indeed, must not--promulgate a rule that permits that 
status to be predicated solely on a never-exercised contractual 
reservation of right to control and/or indirect control where judicial 
decisions in joint-employer cases do not go that far--and as I explain 
below in the section after this one, they do not.
    Moreover, my colleagues' reliance on independent-contractor 
precedent to set the standard for determining joint-employer status 
depends on equating ``right to control'' for purposes of deciding 
employee-or-independent-contractor issues with contractually reserved 
authority to control the terms and conditions of employment of another 
business's employees--but the equation does not hold. As the majority 
emphasizes, courts have explained that workers are employees rather 
than independent contractors if the putative employer possesses a right 
to control their manner and means of performance, regardless of whether 
that right is exercised. However, the independent-contractor cases make 
clear that in that context, a finding of ``right to control'' is a 
legal conclusion based on a totality-of-the-circumstances analysis 
applying twelve factors culled from the federal common law of agency to 
the facts of the case. See, e.g., Community for Creative Non-Violence 
v. Reid, 490 U.S. 730, 751-752 (1989) (listing the relevant 
factors).\451\ And, as the Supreme Court recognized, ``no one of these 
factors is determinative.'' Id. at 752. If, on balance, an analysis of 
the facts of a case in light of these multiple factors supports a 
finding that the hiring party has the right to control the manner and 
means of the worker's performance, then the hiring party is the 
worker's employer regardless of whether it exercises its right to 
control her manner and means of performance by directing the details of 
her work. In short, the ``right to control manner and means of 
performance'' under independent-contractor precedent is one thing, and 
a never-exercised contractual reservation of right to affect one or 
more essential terms and conditions of employment of another employer's 
employees is quite another. The majority simply errs in treating these 
two distinct legal doctrines as equivalent.\452\
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    \451\ Those factors are (1) the skill required; (2) the source 
of the instrumentalities and tools; (3) the location of the work; 
(4) the duration of the relationship between the parties; (5) 
whether the hiring party has the right to assign additional projects 
to the hired party; (6) the extent of the hired party's discretion 
over when and how long to work; (7) the method of payment; (8) the 
hired party's role in hiring and paying assistants; (9) whether the 
work is part of the regular business of the hiring party; (10) 
whether the hiring party is in business; (11) the provision of 
employee benefits; and (12) the tax treatment of the hired party. 
Id.
    \452\ One reason that judicial precedent distinguishing between 
independent contractors and employees is ill-suited to fully resolve 
joint-employer issues is that independent-contractor cases 
necessarily involve exercise of control by the sole putative 
employer over the putative employee. That entity has engaged the 
worker (i.e., hired her to perform work), has decided upon the 
compensation to be paid (i.e., determined her wages), and has 
actually paid her that compensation. This is seen in Singer Mfg. Co. 
v. Rahn, 132 U.S. 518, 523 (1889), a case my colleagues rely on 
heavily to support their proposition that exercise of control is 
unnecessary under the common law, not only in the independent-
contractor context but in the joint-employer context as well. In 
Singer Mfg. Co. v. Rahn, the Court held that a worker was an 
employee, not an independent contractor, based on the written terms 
of a contract between the worker and the company. There, the company 
engaged (i.e., hired) an individual to sell its sewing machines and 
decided upon his compensation, which, along with other terms, was 
set forth in a contract between the two parties. To be sure, the 
Court's analysis focused on the terms of the contract, but to 
conclude that this compels the conclusion that joint-employer status 
likewise may be based solely on a never-exercised contractual right 
to control ignores that in the independent-contractor context, where 
there is only one alleged employer, that entity necessarily 
exercises direct control of at least two things that my colleagues 
and I agree constitute essential terms and conditions. Even if it 
exercises control of nothing else, it engages--i.e., hires--the 
worker, and it compensates--i.e., pays--the worker. Notably, it may 
do so and the individual thus hired and paid may still be an 
independent contractor, yet my colleagues would make a joint 
employer of businesses that never exercise direct control over any 
essential term or condition. Precedent like Singer does not support 
the proposition that a court (or the Board) must or should find that 
one entity is a joint employer of another entity's employees based 
exclusively on a never-exercised contractual reservation of right to 
control.

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[[Page 73996]]

    This was made clear by the D.C. Circuit's opinion in Browning-
Ferris Industries of California v. NLRB. As noted above, the court of 
appeals made clear that ``a rigid focus on independent-contractor 
analysis omits the vital second step in joint-employer cases, which 
asks, once control over the workers is found, who is exercising that 
control, when, and how.'' 911 F.3d at 1215 (emphasis in original). As 
the court explained, ``using the independent-contractor test 
exclusively to answer the joint-employer question would be rather like 
using a hammer to drive in a screw: it only roughly assists the task 
because the hammer is designed for a different purpose.'' Id. Today's 
final rule simply disregards the second step of the common-law joint-
employer standard identified by the D.C. Circuit. It eliminates any 
requirement of actual exercise of control and thus renders immaterial 
``how'' control is exercised (directly or indirectly) or ``when'' 
(never, rarely, occasionally, or frequently). Further, the D.C. 
Circuit's pointed decision to avoid answering whether a joint-employer 
finding could ever be based solely on an unexercised contractual 
reservation of authority to control, 911 F.3d at 1213, or on indirect 
control, id. at 1218, undermines my colleagues' assertion that the 
common-law of agency compels affirmative answers to those two 
questions.\453\
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    \453\ My colleagues cite a plethora of decisions (including 
state law cases more than a hundred years old), the overwhelming 
majority of which focus on independent contractor, workers' 
compensation, and tort liability matters. Although these cases are 
informative regarding the contours of the master-servant doctrine 
with respect to individuals alleged to have an employment 
relationship with a single entity, they have limited utility where 
workers are unquestionably employees of one entity, and the issue is 
whether a second entity jointly employs them. My view here is fully 
consistent with that of the D.C. Circuit in Browning-Ferris 
Industries of California, Inc. v. NLRB. As the court there stated, 
``Browning-Ferris's contention that the joint-employer and 
independent-contractor tests are virtually identical lacks any 
precedential grounding. Browning-Ferris cites no case in which we 
have applied an employee-or-independent-contractor test to resolve a 
question of joint employment, and we have found none.'' 911 F.3d at 
1213.
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    The final rule is inconsistent with the common-law joint-employer 
standard applied by the courts under other federal statutes.
    The majority minimizes federal court precedent specifically 
analyzing joint-employer issues under materially similar federal 
statutes, i.e., statutes that, like the NLRA, contain a definition of 
``employee'' that may not be interpreted to exceed the boundaries 
established by common-law agency principles.\454\ These statutes 
include Title VII of the Civil Rights Act of 1964,\455\ the Age 
Discrimination in Employment Act,\456\ and Section 504 of the 
Rehabilitation Act of 1973.\457\ Applying common-law agency principles 
in these joint-employer cases, federal appellate courts have considered 
the extent to which a putative joint employer has exercised control 
over the essential terms and conditions of employment of another 
company's employees. Courts have considered a host of factors (e.g., 
control exercised over hiring, firing, and day-to-day supervision), 
drawing guidance from Supreme Court precedent distinguishing between 
independent contractors and employees, but tailoring the analysis to 
account for the joint-employer context, i.e., workers who are 
undisputedly an employee of one employer but who may have a second, 
joint employer. Courts consider the totality of the circumstances, with 
no one factor being determinative, in ascertaining whether the putative 
joint employer has exerted a sufficient amount of control over the 
workers at issue to be deemed their joint employer. Generally speaking, 
they have emphasized the extent of the putative joint employer's active 
role in hiring and firing the workers at issue and in supervising their 
manner and means of performance.
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    \454\ See, e.g., Hurst v. McDonough, 2022 U.S. App. LEXIS 9725 
(10th Cir. Apr. 12, 2022); Felder v. U.S. Tennis Assn., 27 F.4th 834 
(2d Cir. 2022); Perry v. VHS San Antonio, LLC, 990 F.3d 918 (5th 
Cir. 2021); Nethery v. Quality Care Investors, L.P., 814 Fed. Appx. 
97 (6th Cir. 2020); EEOC v. Global Horizons, Inc., 915 F.3d 631 (9th 
Cir. 2019); Frey v. Hotel Coleman, 903 F.3d 671 (7th Cir. 2018); 
Garcia-Celestino v. Ruiz Harvesting, Inc., 843 F.3d 1276 (11th Cir. 
2016); Al-Saffy v. Vilsack, 827 F.3d 85 (D.C. Cir. 2016); Faush v. 
Tuesday Morning, Inc., 808 F.3d 208 (3d Cir. 2015); Casey v. Dep't 
of Health & Human Services, 807 F.3d 395 (1st Cir. 2015); Butler v. 
Drive Automotive Industries of Am., 793 F.3d 404 (4th Cir. 2015).
    \455\ 42 U.S.C. 2000e et seq.
    \456\ 29 U.S.C. 621 et seq.
    \457\ 29 U.S.C. 794. In contrast, under the Fair Labor Standards 
Act, 29 U.S.C. 621 et seq., the joint-employer doctrine is not 
limited by common-law agency principles. See, e.g., Salinas v. 
Commercial Interiors, Inc., 848 F.3d 125, 137 (4th Cir. 2017) 
(``[T]he FLSA's definition of `employee' encompass[es] a broader 
swath of workers than would constitute employees at common law.'') 
(citing Nationwide Mutual Ins. Co. of America v. Darden, 503 U.S. 
318, 326 (1992)).
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    Applying common-law principles, every circuit court that has 
decided joint-employer issues under statutes materially similar to the 
NLRA applies a significantly more demanding joint-employer standard 
than the one promulgated by my colleagues today.\458\

[[Page 73997]]

Not a single circuit has held or even suggested that an entity can be 
found to be the joint employer of another entity's employees based 
solely on a never-exercised contractual reservation of right to affect 
essential terms or on ``indirect control,'' i.e., conduct other than 
actually determining (alone or in collaboration with the undisputed 
employer) employees' essential terms and conditions of employment.\459\
---------------------------------------------------------------------------

    \458\ The First Circuit examines fifteen factors, which ``are to 
be weighed in their totality,'' with a stated emphasis on the extent 
to which the putative joint employer controls the manner and means 
by which the worker completes her tasks. Casey, 807 F.3d at 405 
(finding no joint-employer relationship where the putative joint 
employer ``did not exert such control over [the employee's] 
performance of her job duties as to establish an employment 
relationship''). The Second Circuit asks whether two or more 
entities ``share significant control'' over the same employees, 
examining thirteen non-exhaustive factors, with no single factor 
being decisive, and focusing on the extent to which control was 
exercised. Felder, 27 F.4th 843-844 (finding no joint-employer 
relationship despite fact that putative joint employer exercised 
control by preventing its subcontractor from referring a particular 
worker for assignment). The Third Circuit focuses on which entity 
paid workers' salaries, hired and fired them, and had control over 
their daily employment activities. Faush, 808 F.3d at 216 (holding 
that district court erred in granting summary judgment in favor of 
putative joint employer that had given employee assignments, 
directly supervised him, provided site-specific training, furnished 
necessary equipment and materials, and verified the number of hours 
he had worked on a daily basis). The Fifth Circuit applies a 
``hybrid'' test that focuses on the right to hire, fire, supervise, 
and set work schedules, and on which entity paid the employee's 
salary, withheld taxes, provided benefits, and set the terms and 
conditions of employment. Perry, 990 F.3d at 928-929 (finding that 
hospital was not joint employer of physician supplied to it by 
professional association despite fact that hospital had exercised 
its ``limited contractual right to `fire' [him] by requesting that 
[the professional association] terminate his professional services 
agreement''). The Sixth Circuit asks whether two entities share or 
codetermine those matters governing essential terms and conditions 
of employment, examining a putative joint employer's exercise of its 
ability to hire, fire or discipline employees, affect their 
compensation and benefits, and direct and supervise their 
performance. EEOC v. Skanska USA Building, Inc., 550 Fed. Appx. 253, 
256 (6th Cir. 2013) (finding that general contractor was joint 
employer of subcontractor's elevator-operator employees because it 
had ``supervised and controlled the operators' day-to-day activities 
without any oversight from [the subcontractor],'' ``routinely 
exercised its ability to direct and supervise the operators' 
performance,'' and ``set the operators' hours and daily 
assignments''). The Seventh Circuit applies five factors: (1) the 
extent of the putative joint employer's control and supervision of 
the worker, including scheduling and manner and means of performance 
of work; (2) the kind of occupation and nature of skill required, 
including whether skills are obtained in the workplace; (3) 
responsibility for the costs of operation, such as equipment, 
supplies, fees, licenses, workplace, and maintenance of operations; 
(4) method and form of payment and benefits; and (5) length of job 
commitment and/or expectations. Frey, 903 F.3d at 676. The Seventh 
Circuit explained that in applying its five-factor test, it ``looks 
to see whether the putative employer exercised sufficient control.'' 
Id. at 678. The Ninth Circuit focuses on ``the extent of control 
that one may exercise over the details of the work of the other,'' 
``with no one factor being decisive.'' Global Horizons, Inc., 915 
F.3d at 638. The Tenth Circuit applies the ``share or codetermine'' 
standard and looks to whether both entities ``exercise[d] 
significant control.'' Adams v. C3 Pipeline Constr. Inc., 30 F.4th 
943, 961 (10th Cir. 2021).
    \459\ The majority disputes this statement, citing EEOC v. 
Global Horizons, Inc., 915 F.3d at 631. That case does not support 
my colleagues' position, for reasons explained below.
---------------------------------------------------------------------------

    Illustrative is Felder v. U.S. Tennis Assn., 27 F.4th at 842-844. 
In that case, the Second Circuit articulated for the first time its 
standard for analyzing joint-employer status under Title VII. After 
surveying the legal landscape, the court explained that it will find a 
joint-employer relationship ``when two or more entities, according to 
common law principles, share significant control of the same 
employee.'' Importantly, the court quoted with approval cases from 
other circuits requiring proof that the putative joint employer 
``exercise[d] significant control.'' \460\ The court explained that, 
``[b]ecause the exercise of control is the guiding indicator, . . . any 
relevant factor may be considered so long as [it is] drawn from the 
common law of agency'' synthesized in Community for Creative Non-
Violence v. Reid, 490 U.S. at 730. Id. at 844 (emphasis added). 
Broadly, those factors include whether the putative joint employer `` 
`paid [the employees'] salaries, hired and fired them, and had control 
over their daily activities.' '' Id. at 843 (quoting Faush v. Tuesday 
Morning, Inc., 808 F.3d at 214 (3d Cir. 2015) (alteration in Felder)). 
Applying this standard, the Felder court held that a lower court had 
properly granted the putative joint employer's motion to dismiss the 
complaint because the plaintiff had failed to allege that the putative 
joint employer ``would have exerted significant control'' over his 
terms and conditions of employment had it not rejected a 
subcontractor's attempt to refer him to it. Id. at 845.
---------------------------------------------------------------------------

    \460\ The court in Felder, id. at 843-844, cited Knitter v. 
Corvias Mil. Living, LLC, 758 F.3d 1214, 1226 (10th Cir. 2014) 
(quoting Bristol v. Bd. of Cnty. Comm'rs of Cnty. of Clear Creek, 
312 F.3d 1213, 1218 (10th Cir. 2002) (``Under the joint employer 
test, two entities are considered joint employer . . . if they both 
`exercise significant control over the same employees.' '')), and 
Plaso v. IJKG, LLC, 553 Fed. Appx. 199, 204 (3d Cir. 2015) (quoting 
Graves v. Lowery, 117 F.3d 723, 727 (3d Cir. 1997) (``[A] joint 
employment relationship exists when `two entities exercise 
significant control over the same employees.' '')).
---------------------------------------------------------------------------

    Similarly, in Butler v. Drive Automotive Industries of America, the 
Fourth Circuit explained that ``the [joint-employer] doctrine's 
emphasis on determining which entities actually exercise control over 
an employee is consistent with Supreme Court precedent interpreting 
Title VII's definitions.'' 793 F.3d at 409 (emphasis added). See also 
Adams v. C3 Pipeline Constr. Inc., 30 F.4th at 961 (10th Cir. 2021) 
(``Both entities are [joint] employers if they both exercise 
significant control over the same employees.'') (internal quotation 
marks and citations omitted); Whitaker v. Milwaukee County, 772 F.3d 
802, 810 (7th Cir. 2014) (``An entity other than the actual employer 
may be considered a `joint employer' `only if it exerted significant 
control over' the employee.'') (quoting G. Heileman Brewing Co. v. 
NLRB, 879 F.2d 1526, 1530 (7th Cir. 1989) (emphasis added)); \461\ 
Gulino v. N.Y. State Educ. Dept., 460 F.3d 361, 379 (2d Cir. 2006) 
(``The Reid factors countenance a[n employment] relationship where the 
level of control is direct, obvious, and concrete, not merely indirect 
or abstract.'').\462\
---------------------------------------------------------------------------

    \461\ The majority dismisses the Seventh Circuit's decision in 
Whitaker because, they say, the court ``drew its articulation of the 
[joint-employer] standard from a Board decision'' applying Laerco. 
What my colleagues fail to acknowledge, however, is that the court 
adopted that standard as circuit law. Moreover, the Seventh Circuit 
in Whitaker did not rely on Board precedent for its holding that 
joint-employer status requires that an entity must exercise control 
to be deemed a joint employer. See Whitaker, 772 F.3d at 810-811 
(``We . . . have held, however, `that for a joint-employer 
relationship to exist, each alleged employer must exercise control 
over the working conditions of the employee, although the ultimate 
determination will vary depending on the specific facts of each 
case.' Moldenhauer v. Tazewell-Pekin Consol. Commc'ns Ctr., 536 F.3d 
640, 644 (7th Cir. 2008) (emphasis added). . . .'').
    \462\ My colleagues' overly selective reading of the Title VII 
cases is unpersuasive. Despite their best efforts, my colleagues' 
parsing of isolated words or phrases does not detract from the 
primary theme in the Title VII cases that exercise of control is the 
``guiding indicator.'' Felder, 27 F.4th at 844; id. at 847 (``Absent 
further allegations that the USTA would have significantly 
controlled the manner and means of Felder's work as a security 
guard, the complaint does not cross the line from speculative to 
plausible on the essential Title VII requirement of an employment 
relationship.'') (emphasis added).
    Additionally, my colleagues say that in some of the Title VII 
cases I cite above, the courts applied a standard that incorporates 
an ``economic realities'' test, and those cases cannot inform the 
Board's formulation of a joint-employer standard under the NLRA 
because Congress, in the Taft-Hartley Act, repudiated the ``economic 
realities'' test the Supreme Court applied in NLRB v. Hearst 
Publications, 322 U.S. 111 (1944). Once again, the majority is 
crossing its wires between independent-contractor law and joint-
employer law. In Hearst, the Court applied an ``economic realities'' 
standard to determine employee-or-independent-contractor status 
under the NLRA. In Title VII cases, circuit courts apply an 
``economic realities'' test to discern whether a putative joint 
employer actually exercised control over essential terms and 
conditions of employment of another employer's employees. See, e.g., 
Perry v. VHS San Antonio, LLC, 990 F.3d at 929 (``The economic-
realities component of the `hybrid economic realities/common law 
control test' focuses on who paid the employee's salary, withheld 
taxes, provided benefits, and set the terms and conditions of 
employment.''). Here again, my colleagues' insistence on basing a 
joint-employer standard on independent-contractor precedent leads 
them astray.
---------------------------------------------------------------------------

    The standard promulgated today, which does not require proof of any 
exercise of control, is strikingly inconsistent with the standards 
applied by the federal courts of appeals when applying common-law 
agency principles to determine joint-employer status. As summarized 
above, federal appellate courts have repeatedly focused on the extent 
to which a putative joint employer has exercised control. In contrast, 
the standard my colleagues promulgate resembles the substantially 
easier-to-satisfy standard applicable under the Fair Labor Standards 
Act, where ``economic reality . . . is to be the test of employment.'' 
Goldberg v. Whitaker House Co-op., Inc., 366 U.S. 28, 33 (1961) 
(internal quotation marks omitted). ``Because of the uniqueness of the 
FLSA, a determination of joint employment [under that statute] `must be 
based on a consideration of the total employment situation and the 
economic realities of the work relationship.' '' In re Enterprise Rent-
A-Car Wage & Employment Practices Litigation, 683 F.3d 462, 469 (3d 
Cir. 2012) (quoting Bonnette v. California Health & Welfare Agency, 704 
F.2d 1465, 1470 (9th Cir. 1983)). Application of a control-based test 
``would only find joint employment where an employer had direct control 
over the employee, but the FLSA designates those entities with 
sufficient indirect control as well.'' Id. at 469.

[[Page 73998]]

Notably, in contrasting the breadth of the FLSA's economic-realities 
standard with the common-law test, the Third Circuit quoted its 
earlier--and leading--decision on the joint-employer standard under the 
NLRA, writing that under the Act, ``the alleged [joint] employer must 
exercise `significant control.' '' Id. at 468 (quoting Browning-Ferris 
Industries of Pennsylvania, 691 F.2d at 1124).\463\
---------------------------------------------------------------------------

    \463\ Even under the economic-realities standard applicable 
under the FLSA, the Third Circuit in Enterprise Rent-A-Car held that 
Enterprise Holdings, Inc. was not a joint employer of the employees 
of its wholly owned subsidiaries (rental-car facilities), despite 
its potential impact on their essential terms and conditions of 
employment. Among other significant actions, the parent corporation 
recommended salary ranges for the subsidiaries' branch employees and 
provided a standard performance-review form, job descriptions, and 
best practices. Id. at 466. Each subsidiary had discretion to adopt 
or disregard the parent's recommended employment practices. In 
finding that such indirect influence did not render the parent a 
joint employer under the FLSA, the court emphasized that the record 
failed to show ``that [the parent's] actions at any time amounted to 
mandatory directions rather than mere recommendations.'' Id. at 470.
---------------------------------------------------------------------------

    As the preceding discussion demonstrates, in eliminating the 
requirement that a putative joint employer must be shown to have 
exercised substantial direct and immediate control over the essential 
terms and conditions of employment of another entity's employees, my 
colleagues have gone beyond the boundaries of the common law.\464\ They 
fail to support their repeated declarations that common-law agency 
principles compel the Board to adopt a standard that does not require 
proof that an entity actually exercised control over the employment 
terms and conditions of another employer's employees before it will be 
found to be their joint employer. This is fatal to the majority's final 
rule. In enacting the Taft-Hartley Act, Congress made clear that under 
the NLRA, the common law of agency is the controlling standard,\465\ 
and `` `an agency regulation must be declared invalid, even though the 
agency might be able to adopt the regulation in the exercise of its 
discretion, if it was not based on the [agency's] own judgment but 
rather on the unjustified assumption that it was Congress' judgment 
that such [a regulation is] desirable' or required.'' Transitional 
Hospitals Corp. of La. v. Shalala, 222 F.3d 1019, 1029 (D.C. Cir. 2000) 
(quoting Prill v. NLRB, 755 F.2d 941, 948 (D.C. Cir. 1985)). Today's 
final rule is based on such an unjustified assumption.
---------------------------------------------------------------------------

    \464\ Contrary to my colleagues' assertion, the final rule's 
elimination of the actual-exercise requirement finds no support in 
EEOC v. Global Horizons. In that case, it was undisputed that two 
companies operating orchards (the ``Growers'') were joint employers 
of workers from Thailand supplied by Global Horizons under the 
federal H-2A guest worker program. 915 F.3d at 634 (``All parties 
agree that the Growers and Global Horizons were joint employers of 
the Thai workers with respect to orchard-related matters.''). The 
only issue presented in EEOC v. Global Horizons was ``whether the 
EEOC plausibly alleged that the Growers were also joint employers 
with respect to non-orchard related matters.'' Id. The court's 
analysis of that issue was shaped, as it had to have been, by 
federal regulations governing the H-2A guest worker program. First, 
under those regulations, an ``employer'' is required to provide H-2A 
guest workers certain benefits, including housing, meals, and 
transportation. ``The H-2A program thus expands the employment 
relationship between an H-2A `employer' and its workers to encompass 
housing, meals, and transportation, even though those matters would 
ordinarily fall outside the realm of the employer's 
responsibility.'' Id. at 640. Second, H-2A regulations define the 
term ``employer'' as an entity that, among other things, ``has an 
employer relationship with respect to employees . . . as indicated 
by the fact that it may hire, pay, fire, supervise or otherwise 
control the work of any such employee.'' Id. (quoting 20 CFR 
655.100(b)) (emphasis added). In other words, H-2A regulations 
define employer status with reference to authority to control 
essential terms and conditions of employment. It was in this unique 
context that the court stated that ``[t]he power to control the 
manner in which housing, meals, transportation, and wages were 
provided to the Thai workers, even if never exercised, is sufficient 
to render the Growers joint employers as to non-orchard-related 
matters.'' Id. at 641. Importantly, the court did not rely on a 
contractual reservation of right to control as the basis for its 
joint-employer finding. Rather, the court held that the Growers were 
joint employers by virtue of their regulatory obligations, and their 
``contractual delegation [of those duties to Global Horizons] did 
not absolve the Growers of their legal obligations as `employers' 
under H-2A regulations.'' Id. at 640.
    \465\ See NLRB v. United Insurance Co. of America, 390 U.S. at 
256.
---------------------------------------------------------------------------

The Final Rule Is Unsound as a Matter of Policy
    In a couple of paragraphs, my colleagues do very briefly pay lip 
service to a backup position that, even assuming the 2020 Rule is 
permissible under the Act, they would rescind it and promulgate their 
final rule for policy reasons. In this regard, my colleagues assert 
that the final rule ``advances the Act's purposes to ensure that, if 
they choose, all employees have the opportunity to bargain with those 
entities that possess the authority to control or exercise the power to 
control the essential conditions of their working lives,'' and that the 
final rule ``may particularly benefit vulnerable employees who are 
overrepresented in workplaces where multiple firms possess or exercise 
control, including immigrants and migrant guestworkers, disabled 
employees, and Black employees and other employees of color.'' But 
these are mere conclusory remarks. My colleagues do not support their 
assertions; they dismiss commenters' weighty policy-based criticisms of 
the rule as ``misdirected''; and they fail to grapple with the reality 
that their joint-employer standard is likely to frustrate collective 
bargaining and erect barriers to reaching collective-bargaining 
agreements. It is not clear to me how the vulnerable employees cited by 
my colleagues are benefited by a rule that makes it more difficult for 
their representatives to obtain a collective-bargaining agreement and, 
in turn, for them to gain the statutory protections afforded by such an 
agreement.
    Even assuming for argument's sake that the final rule does not 
exceed the limits established by common-law agency principles and 
therefore is not impermissible under the Act, I would still dissent 
from my colleagues' decision to promulgate the final rule because the 
2020 Rule better promotes the Act's policy of encouraging collective 
bargaining as a means to reduce obstacles to the free flow of commerce. 
It bears repeating that the common law sets the outer limit of a 
permissible joint-employer standard under the Act and that the Board 
may adopt a more demanding standard for policy reasons.\466\ In my 
view, joint-employer status under the Act should be imposed only on 
entities that play a significant, active role in hiring, supervising, 
or directing another employer's employees, in setting their wages, 
benefits, or hours of work, and/or in disciplining or discharging them. 
Only upon such a showing should the Board find joint-employer status 
and, accordingly, impose on the joint employer a duty to bargain in 
good faith with a union representing the jointly employed employees. 
That approach, requiring proof of exercise of control, is reflected in 
the 2020 Rule.
---------------------------------------------------------------------------

    \466\ See Browning-Ferris Industries of California v. NLRB, 911 
F.3d at 1208 (``The policy expertise that the Board brings to bear 
on applying the National Labor Relations Act to joint employers is 
bounded by the common-law's definition of a joint employer. The 
Board's rulemaking, in other words, must color within the common-law 
lines identified by the judiciary.''). Additionally, the Board has 
authority to define the duty to bargain in good faith under Sec. 
8(a)(5) and 8(d). See Ford Motor Co. v. NLRB, 441 U.S. 488, 496 
(1979) (``It is thus evident that Congress made a conscious decision 
to continue its delegation to the Board of the primary 
responsibility of marking out the scope of the statutory language 
[of Sec. 8(a)(5) and 8(d)] and of the statutory duty to bargain.''). 
This authority includes the authority to define that duty in the 
joint-employer context--provided, of course, that the Board stays 
within common-law limits--in such a way as to trigger a joint 
employer's bargaining obligation only upon its actual exercise of 
substantial direct and immediate control over the essential terms 
and conditions of employment of another entity's employees.
---------------------------------------------------------------------------

    In contrast, I believe that today's final rule, rather than making 
bargaining more ``meaningful,'' will prove detrimental to productive 
collective

[[Page 73999]]

bargaining.\467\ Imagine a scenario in which an undisputed employer has 
exercised complete control over every aspect of its employees' 
essential terms and conditions and that a second entity possesses, but 
has never exercised, a contractual reservation of right to codetermine 
the employees' wages. Under the majority's final rule, that second 
entity will be deemed a joint employer, but given that it has never 
exercised its contractually reserved authority, it makes little if any 
sense to seat it at the bargaining table. Doing so will have little if 
any benefit, while creating a substantial risk of frustrating agreement 
between the undisputed employer and the union because the interests of 
the undisputed employer and the second entity might well be in 
conflict.\468\ What if the two employer-side entities were each to 
insist, in good faith, on different wage rates? What if an agreement 
were held up by the second entity's refusal to agree to wage proposals 
that were agreeable to the union and the undisputed employer? Would 
that prevent the formation of a collective-bargaining agreement? If 
not, is the second entity bound by the agreement's wage terms despite 
its refusal to agree to them? How will the rules of impasse and 
implementation upon impasse apply in this scenario? My colleagues fail 
to consider the implications of their final rule for collective 
bargaining.\469\
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    \467\ I do not agree that making it more difficult for parties 
to reach agreement through collective bargaining advances the 
concept of ``meaningful'' bargaining.
    \468\ See, e.g., Comments of the National Waste and Recycling 
Association and the American Hospital Association.
    \469\ Federal courts have indicated that a non-signatory joint 
employer may be bound by a collective-bargaining agreement signed by 
the direct employer and a labor union representing the jointly-
employed workers. See Armogida v. Jobs with Justice, Inc., 2022 U.S. 
Dist. LEXIS 174658 at *13 (S.D. Ind. Sept. 26, 2022) (``[A] party 
may be bound by a labor contract by virtue of its status as a `joint 
employer' with a signatory of the contract.''); Mason Tenders Dist. 
Council v. CAC of N.Y., Inc., 46 F. Supp. 3d 432, 438 n.11 (S.D.N.Y. 
2014) (``Since joint employer status functions, in cases like the 
one at bar, to bind a non-signatory to the terms of an otherwise-
operative collective bargaining agreement, the typical scenario 
would focus on whether that non-signatory . . . could properly be 
treated as a joint employer.'') (emphasis in original); Newmark & 
Lewis, Inc. v. Local 814, Teamsters, 776 F. Supp. 102, 106 (E.D.N.Y. 
1991) (federal court jurisdiction under LMRA Sec. 301 includes 
determining whether a non-signatory to a collective-bargaining 
agreement is contractually obligated to arbitrate under joint-
employer theory); Central States, Southeast & Southwest Areas 
Pension Fund v. International Comfort Products, LLC, 787 F. Supp. 2d 
696, 702 (M.D. Tenn. 2011) (``J.E. Hoetger makes it clear that Sec.  
301 of the LMRA binds a joint employer to the terms of a collective 
bargaining agreement signed by a co-joint employer. Phrased another 
way, Sec.  301 creates an ongoing duty for a joint employer to abide 
by the terms of its employees' collective bargaining agreement, 
regardless of whether that employer signed the agreement.'') (citing 
Metropolitan Detroit Bricklayers District Council v. J.E. Hoetger & 
Co., 672 F.2d 580, 583 (6th Cir. 1982) (``We recognize that courts 
have generally held that [Sec. 301] creates federal jurisdiction 
only over parties to the contract being sued upon. However, since 
the primary issue in this case was whether Hoetger was a `joint 
employer' such that it could be bound by the collective bargaining 
agreement, we conclude that the district court had jurisdiction 
under Sec.  301(a) to decide this claim.'')).
    The possibility that a joint employer could be bound to a 
collective-bargaining agreement that it neither negotiated nor 
signed strongly counsels against the majority's decision to permit a 
joint-employer finding to be made absent any exercise of control 
whatsoever over the covered employees. Indeed, given that the final 
rule is to be applied retroactively, it is all but certain that 
countless employers--that have never been identified as a joint 
employer nor exercised any control over another employer's 
employees--will now be required to adhere to the terms of other 
parties' collective-bargaining agreements.
---------------------------------------------------------------------------

    It is difficult to imagine a better recipe than today's final rule 
for injecting chaos into the practice and procedure of collective 
bargaining that the majority claims to promote. Accordingly, the final 
rule is contrary to the national labor policy Congress established, 
which is to ``achiev[e] industrial peace by promoting stable 
collective-bargaining relationships.'' Auciello Iron Works, Inc. v. 
NLRB, 517 U.S. 781, 790 (1996) (emphasis added).\470\ Moreover, 
collective bargaining was intended by Congress to be a process that 
could conceivably produce agreements. See, e.g., NLRB v. Insurance 
Agents' International Union, 361 U.S. at 485 (Congress intended 
collective bargaining to be ``a process that look[s] to the ordering of 
the parties' industrial relationship through the formation of a 
contract.''); H.J. Heinz Co. v. NLRB, 311 U.S. 514, 523 (1941) (The 
object of collective bargaining under the Act is ``an agreement between 
employer and employees as to wages, hours and working conditions.''). 
There is nothing stable about the collective-bargaining relationships 
the final rule will predictably create, and the final rule will 
frustrate rather than facilitate reaching agreements.\471\
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    \470\ See also Colgate-Palmolive-Peet Co. v. NLRB, 338 U.S. 355, 
362 (1949) (``To achieve stability of labor relations was the 
primary objective of Congress in enacting the National Labor 
Relations Act.'').
    \471\ It is evident that the final rule is likely to create 
significant delay for parties as they endeavor to reach final 
collective-bargaining agreements. For example, should a labor union 
insist on the participation of a putative joint employer that has 
never directly exercised any control over any essential term and 
condition of employment of another employer's employees, and that 
entity refuses to bargain based on its conviction that it is not a 
joint employer, bargaining between the undisputed employer and the 
union will be delayed while the union files an unfair labor practice 
charge and the issue is litigated to a final determination, possibly 
including litigation in the courts. It is self-evident that such 
delay to the collective-bargaining process could be substantial.
---------------------------------------------------------------------------

    Its predictable adverse effect on the practice and procedure of 
collective bargaining is far from the only policy-based objection to 
the final rule. I am also concerned about its impact on small 
businesses that, on their own, fall below the Board's discretionary 
jurisdiction thresholds. Under extant law, the Board combines the gross 
revenues of joint employers when applying its discretionary 
jurisdictional standards.\472\ That historic practice was acceptable 
under the more rigorous joint-employer standard the Board applied both 
before and after TLI and Laerco and codified in the 2020 Rule. But now 
that my colleagues have lowered the bar, significantly greater numbers 
of small businesses never before subject to the Board's jurisdiction 
will be swept within it. As a result, they will be saddled with costs 
they can ill afford, particularly the expense of hiring an attorney to 
represent them in collective bargaining. I'm concerned that the final 
rule will impose significant economic hardships on these small 
entities, without any countervailing benefit to collective bargaining 
that would outweigh this burden.
---------------------------------------------------------------------------

    \472\ See, e.g., Central Taxi Service, 173 NLRB 826, 827 (1968); 
Checker Cab Co., 141 NLRB 583, 586-587 (1963), enfd. 367 F.2d 692 
(6th Cir. 1966); see also CID--SAM Management Corp., 315 NLRB 1256, 
1256 (1995).
---------------------------------------------------------------------------

    Additionally, the final rule undermines Section 8(b)(4)'s 
protection of neutral employers against picketing and boycotts. That 
provision was designed to ``shield[ ] unoffending employers and others 
from pressures in controversies not their own.'' NLRB v. Denver 
Building Trades Council, 341 U.S. 675, 692 (1951). By expanding the 
universe of joint employers to include entities that exercise an 
undefined indirect control or that merely possess but have never 
exercised authority to control, the final rule will convert heretofore 
neutral employers into primary employers, subjecting them to lawful 
picketing. This result will be particularly unjust where the labor 
dispute involves an essential term or condition of employment over 
which the joint employer has no control.\473\
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    \473\ My colleagues say that they ``see little risk of enmeshing 
neutral employers in labor disputes'' because ``[w]hen more than one 
entity jointly employs particular employees, those entities are not 
neutral, and the prohibitions on secondary activity do not apply, 
regardless of what joint-employer standard is applied.'' Obviously, 
however, the point I am making and that my colleagues do not dispute 
is that, by eliminating the actual-exercise requirement, the 
majority's relaxed standard will render many more businesses joint 
employers despite them never having played any role in actually 
exercising control over any term or condition of employment of 
another employer's employees. By drawing such businesses into labor 
disputes not their own, the final rule diminishes Sec. 8(b)(4)'s 
protection against picketing and boycotts.

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[[Page 74000]]

    The majority's final rule will also discourage efforts to rescue 
failing businesses. Suppose a unionized company that supplies employees 
to ``user'' businesses is going under and seeks a buyer to acquire its 
assets. If that supplier is independent of the user businesses it 
supplies, the usual rules of successorship would apply. A prospective 
buyer would understand that if a majority of its post-acquisition 
workforce consists of former employees of the seller, it would have to 
recognize and bargain with the incumbent union (and it would also 
understand that it cannot discriminate in hiring to avoid that duty), 
but it would not have to assume the seller's collective-bargaining 
agreement, and it would be free to set its own initial terms and 
conditions of employment unilaterally. See NLRB v. Burns International 
Security Services, Inc., 406 U.S. 272 (1972); Fall River Dyeing & 
Finishing Corp. v. NLRB, 482 U.S. 27 (1987). The Supreme Court created 
this framework based in part on the public policy of facilitating the 
rescue of ``moribund'' businesses. Burns, 406 U.S. at 287-288 (``A 
potential employer may be willing to take over a moribund business only 
if he can make changes . . . . Saddling such an employer with the terms 
and conditions of employment contained in the old collective-bargaining 
contract may make these changes impossible and may discourage and 
inhibit the transfer of capital.'').
    All this changes, however, if user businesses are deemed joint 
employers of the supplier's employees, a scenario the final rule will 
make far more common. For the sake of simplicity, assume that only one 
such joint-employer user business exists. (In the real world, there 
would likely be multiple joint employers, upping the complications.) If 
a user business is a joint employer of the supplier's employees, it 
will likely be a joint employer of the supplier's successor's 
employees, and its ongoing duty to bargain bridging the two supplier 
employers would prevent the successor from setting initial terms and 
conditions of employment different from those of the predecessor. See 
Whitewood Maintenance Co., 292 NLRB 1159, 1168-1169 (1989) (holding 
that contractor that substituted one subcontractor for another jointly 
employed both the old and new subcontractors' employees, so the new 
subcontractor could not set its own initial terms), enfd. 928 F.2d 1426 
(5th Cir. 1991). Moreover, it is no answer to say that the user 
business could prevent this ``bridging'' by subcontracting the work 
performed by the supplier's employees to the employees of a different 
supplier because, as the joint employer of the employees of its 
existing supplier, it would have a duty to bargain with their union 
representative over that subcontracting decision and its effects. See 
Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203 (1964). 
Accordingly, by making scenarios like this far more likely than under 
the 2020 Rule, the majority's final rule will discourage attempts to 
rescue failing businesses.
    In short, policy considerations militate against the majority's 
radical expansion of the joint-employer doctrine. Any purported benefit 
of eliminating the requirement that control actually be directly 
exercised is nominal at best and is outweighed by the detrimental 
consequences outlined above. In my view, retaining the 2020 Rule would 
better promote the policies of the Act and public policy generally. But 
in this section of my dissent, I have barely scratched the surface of 
the adverse consequences that predictably will flow from the final 
rule, consequences that commenters have brought to the Board's 
attention, to no avail. To these, I turn next.
The Majority Fails Adequately To Respond to Public Comments
    My colleagues briefly describe, but proceed to disregard as 
irrelevant, a variety of public comments regarding the new rule's 
likely impact on businesses generally and on those in specific sectors 
of the economy where the joint-employer issue frequently arises. For 
example, some commenters predict that the Board's new joint-employer 
standard will disincentivize conduct that tends to improve the 
workplace, like providing training sessions; undertaking safety and 
health initiatives; and developing corporate social responsibility 
programs, including diversity, equity, and inclusion initiatives. 
Others predict that the new rule will discourage larger companies from 
entering into contracts with smaller third parties to perform work, 
which would tend to harm business owners from underrepresented 
communities. Still others say that the new rule will make it more 
difficult for companies to seek temporary employees to address labor 
shortages or deal with fluctuating seasonal demand for labor.
    What is the majority's response to these and other legitimate 
objections to their rule? My colleagues brush them aside, stating that 
``insofar as the Act itself requires the Board to conform to common-law 
agency principles in adopting a joint-employer standard, these concerns 
seem misdirected.''
    The majority similarly disregards the effects of the new rule on 
businesses in specific sectors of the economy. Although my colleagues 
express an awareness of ``commenters' concerns that the joint-employer 
standard we adopt in this final rule might have unwanted effects on 
their businesses,'' they conclude that there is ``no clear basis in the 
text or structure of the Act for exempting particular groups or types 
of employers from the final rule.'' More decisively, they believe 
``that these concerns reflect considerations that, as a statutory 
matter, may [not] determine the Board's choice of a joint-employer 
standard.''
    When the majority dismisses commenters' objections as ``misplaced'' 
or says that they may not determine the choice of a joint-employer 
standard ``as a statutory matter,'' they mean, of course, that the 
common law of agency, and therefore the Act itself, precludes the 
standard the Board implemented in the 2020 Rule and compels the 
standard they promulgate today. But as I have shown, they are mistaken: 
the final rule is not compelled by the common law of agency and the 
Act. Accordingly, the majority has no valid basis for refusing to 
respond to the substance of the comments and therefore has failed to 
fulfill its statutory duty under the Administrative Procedure Act to 
provide a reasoned response to these comments.\474\
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    \474\ ``[I]n reviewing rules promulgated under the notice and 
comment rulemaking requirements of the Administrative Procedure Act, 
5 U.S.C. 553 (`APA'), courts must assure that the agency has 
provided a reasoned explanation for its rule. In particular, a 
reasoned explanation for agency action must be based on a 
consideration of relevant factors . . . . [A]n agency decision may 
not be reasoned if the agency ignores vital comments regarding 
relevant factors, rather than providing an adequate rebuttal.'' 
Western Coal Traffic League v. U.S., 677 F.2d 915, 927 (D.C. Cir. 
1982) (citations omitted); see also Alternate Fuels, Inc. v. Lujan, 
1992 U.S. Dist. LEXIS 15785 (D. Kan. Sept. 22, 1992) (``An agency 
should rebut vital relevant comments. The opportunity to comment is 
meaningless unless the agency responds to significant points raised 
by the public.'') (citations omitted).
---------------------------------------------------------------------------

    Moreover, the question here is not whether the Board should craft 
industry-specific joint-employer standards or exceptions.\475\ Rather, 
the point is that, in crafting a single, generally applicable joint-
employer

[[Page 74001]]

standard within the boundaries of the common law, the Board should--
indeed, must--consider the substance of vital comments opposing as well 
as supporting the proposed rule. Having dismissed those comments on the 
erroneous ground that their hands are tied by the common law, my 
colleagues have conspicuously failed to do that here. And the 
legitimate objections to the proposed rule articulated in numerous 
major comments further persuade me that the final rule, in addition to 
being statutorily precluded, is unsound as a matter of policy.
---------------------------------------------------------------------------

    \475\ Indeed, the 2020 Rule does not include industry-specific 
carveouts.
---------------------------------------------------------------------------

    One illustrative example is the negative impact of the rule on the 
construction industry. As several commenters note, due to the 
particular nature of this industry, multiple employers typically 
operate on a given project.\476\ Multi-employer worksites are common in 
the construction industry, where a general contractor coordinates the 
work of multiple subcontractors, sometimes in multiple tiers. Each of 
these parties typically remains the sole employer of its own employees. 
But a general contractor must exert a degree of control over 
subcontractors and their employees to ensure that work on a given 
project meets efficiency, quality, and safety benchmarks. In fact, 
project owners routinely require general contractors to sign standard-
form agreements, which obligate the general to reserve and exercise 
some level of control over their subcontractors' employees, arguably 
impacting essential terms and conditions of employment. Illustrative 
are several provisions in two standard contracts \477\ widely used in 
the construction industry:
---------------------------------------------------------------------------

    \476\ See, e.g., Comments of U.S. Chamber of Commerce; 
Associated Builders and Contractors; Associated General Contractors 
of America; U.S. Small Business Administration Office of Advocacy.
    \477\ AIA Document A201-2017 (cited in comment of Associated 
General Contractors of America).
---------------------------------------------------------------------------

     ``The Contractor shall enforce strict discipline and good 
order among the Contractor's employees and other persons carrying out 
the [w]ork. The Contractor shall not permit employment of unfit persons 
or persons not properly skilled in tasks assigned to them.''
     ``The Contractor shall be responsible for initiating, 
maintaining, and supervising all safety precautions and programs in 
connection with the performance of the [c]ontract.''
     ``Unless the Contract Documents instruct otherwise, [the 
general contractor] shall be responsible for the supervision and 
coordination of the [w]ork, including the construction means, methods, 
techniques, sequences, and procedures utilized.'' \478\
---------------------------------------------------------------------------

    \478\ For additional examples of frequently used standard-form 
provisions, see Comment of Associated General Contractors of 
America.
---------------------------------------------------------------------------

    Under the final rule, there is a significant risk that these and 
similar standard contract provisions will be found to vest in the 
general contractor reserved authority to control hiring, supervision, 
discipline, and discharge of its subcontractors' employees--not to 
mention authority to control ``working conditions related to the safety 
and health of employees''--making the general contractor a joint 
employer of every single employee who performs work on the project.
    This puts the final rule at odds with the Supreme Court's decision 
in NLRB v. Denver Building & Construction Trades Council, 341 U.S. at 
689-690. There, the Court stated that ``the fact that the contractor 
and subcontractor were engaged on the same construction project, and 
that the contractor had some supervision over the subcontractor's work, 
did not eliminate the status of each as an independent contractor or 
make the employees of one the employees of the other. The business 
relationship between independent contractors is too well established in 
the law to be overridden without clear language doing so'' (emphasis 
added). My colleagues address Denver Building Trades by construing it 
narrowly, but this will not do. The Court held that the general 
contractor was not the joint employer of its subcontractor's employees 
simply because it exercised ``some supervision over the subcontractor's 
work,'' but under the final rule, a general contractor will be the 
joint employer of its subcontractors' employees where it exercises no 
supervision over subcontractors' work but merely possesses a 
contractually reserved authority to affect subcontractors' employees' 
terms and conditions of employment. If Denver Building Trades precludes 
finding a general contractor a joint employer where it exercises some 
supervision over work performed by employees of the subcontractors, it 
must also preclude finding a general contractor a joint employer where 
it exercises no supervision over work performed by employees of the 
subcontractors. The final rule cannot be reconciled with Denver 
Building Trades.
    The majority has similarly afforded insufficient attention to the 
impact of the final rule on the franchise industry. As numerous 
commenters note, the majority's rule compromises the viability of 
franchises nationwide in key respects.\479\ Unsurprisingly, commenters 
warn the Board that the rule's vast reach creates a significant risk 
that many franchisors will be held liable as joint employers of their 
franchisees' employees. For example, McDonald's LLC informs us that all 
its franchisees have unfettered discretion to hire, assign work, set 
wages, benefits, and schedules, and carry out day-to-day supervision. 
Yet McDonald's franchise system--typical of countless others--requires 
franchisees to adhere to strict brand standards. The majority says that 
``many forms of control that franchisors reserve to protect their 
brands or trade or service marks . . . will typically not be indicative 
of a common-law employment relationship,'' but they decline to 
``categorically state that all forms of control aimed at protecting a 
brand are immaterial to the existence of a common-law employment 
relationship.'' And it is entirely foreseeable that franchisors' 
monitoring of franchisees' cleanliness and hygiene protocols to protect 
brand standards would make franchisors joint employers of their 
franchisees' employees under either or both of two newly adopted 
essential employment terms: ``work rules and directions governing the 
manner, means, or methods of work performance'' and/or ``working 
conditions related to the safety and health of employees.'' Commenters 
predict that franchisors will respond in one of two ways. Some will 
exert much greater control over their franchisees, effectively turning 
previously independent owners of franchisees into glorified managers; 
others will distance their franchisees by denying them guidance--
particularly with respect to human resources--previously furnished, 
forcing franchisees to incur the expense of obtaining that guidance 
from other sources, i.e., labor and employment attorneys. Both outcomes 
are bad. Many commenters also highlight the disproportionate impact 
that the final rule will have on members of minority groups.\480\
---------------------------------------------------------------------------

    \479\ See, e.g., Comments of International Franchise 
Association; Bicameral Congressional Signatories; Bipartisan 
Senators; U.S. Chamber of Commerce; U.S. Small Business 
Administration Office of Advocacy; McDonald's USA, LLC; McDonald's 
USA LLC Reply.
    \480\ See, e.g., Comment of Bicameral Congressional Signatories 
(citing census data showing that 30.8 percent of franchise 
businesses are minority owned, compared to 18.8 percent of non-
franchise businesses); Comment of International Franchise 
Association (predicting that the proposed rule, if enacted, would be 
especially harmful to minority, female, and LGBTQ franchise 
operators).
---------------------------------------------------------------------------

    Several commenters warn the Board that the staffing industry will 
be

[[Page 74002]]

severely impaired by the final rule.\481\ Staffing firms play a 
significant role in the economy by recruiting and hiring employees and 
placing them in temporary assignments with a wide range of clients on 
an as-needed basis.\482\ Under the final rule, virtually every client 
of a staffing firm predictably will be the joint employer of that 
firm's supplied employees. The client will at least reserve authority 
to control and/or indirectly control at least one essential employment 
term, and probably more than one (e.g., hours of work and scheduling; 
tenure of employment; possibly ``work rules and directions governing . 
. . the grounds for discipline''). I have already described the 
deleterious consequences the final rule predictably will have in the 
user employer/supplier employer setting, and staffing firms are a 
subset of the broader ``supplier employer'' category. Those 
consequences, particularly the prospect of getting trapped in a 
contractual relationship from which it cannot readily extricate itself, 
will incentivize user businesses to avoid contracting with staffing 
firms altogether, whether or not those firms are unionized. Contracting 
with a firm whose employees are unrepresented is no guarantee of 
protection, since there's always the risk that those employees will 
choose representation. Rather than run the risk of incurring joint-
employer status of a staffing firm's employees--a risk that the final 
rule increases dramatically--user businesses might well decide to bring 
their contracted-out work in-house, to the detriment of staffing firms 
generally and the broader economy. Moreover, where the costs to the 
(former) user business of bringing work in-house exceed the costs of 
contracting out that work, the impact may be felt by the (former) user 
businesses' own employees. As one commenter cautions, ``[a]s in any 
case where a business is forced to incur unexpected costs, it will be 
forced to look for other ways to remain profitable. Often this leads to 
reduced headcount or other cost-saving measures that could impact 
workers.'' \483\
---------------------------------------------------------------------------

    \481\ See, e.g., Comments of American Staffing Association; U.S. 
Chamber of Commerce; American Hospital Association; FMI--Food 
Industry Association; National Association of Manufacturers; Clark 
Hill PLC.
    \482\ The importance of staffing firms to the health of the 
economy is difficult to overstate. As one commenter explains, they 
are crucial to ensuring that food is delivered to consumers in a 
timely fashion despite the persistence of significant supply chain 
disruptions. See Comment of FMI--Food Industry Association.
    \483\ See Comment of Clark Hill PLC.
---------------------------------------------------------------------------

    In addition, the final rule will negatively impact the healthcare 
sector. As several commenters point out, the rule's unprecedented 
elevation of indirect control and reserved authority to control to 
dispositive status in the joint-employer analysis risks encroaching on 
a host of business relationships that hospitals rely on to provide 
lifesaving patient care.\484\ For instance, since the onset of the 
Covid-19 pandemic, many hospitals have utilized contracted labor in the 
form of travel nurses to fill critical staffing gaps.\485\ Travel 
nurses typically sign a contract with a staffing agency to occupy a 
temporary position at a hospital that can range in duration from 
several days to a few months.\486\ Under the final rule, a hospital 
that maintains (or merely has the authority to maintain) work rules and 
schedules for travel nurses on its premises will be their joint 
employer and duty-bound to bargain with the union that represents 
nurses directly employed by the staffing agency. Moreover, travel 
nurses are required to comply with the health and safety policies of 
the hospital where they work, which may impose more stringent 
requirements than those mandated by law. Again, under the final rule, 
the maintenance of these policies will make the hospital the joint 
employer of those nurses. The problematic consequences are not 
difficult to imagine. Among other things, all the adverse consequences 
discussed above with respect to businesses in the user employer/
supplier employer context apply here as well, and coming to grips with 
those takes time and costs money. As one commenter accurately observes, 
hospitals will be forced ``to spend time and resources that could be 
devoted to patient care on administrative and management issues as it 
works to understand the scope of its joint employer liability [and] 
revises policies, practices, and contracts to address that liability . 
. . .'' \487\
---------------------------------------------------------------------------

    \484\ See, e.g., Comments of U.S. Chamber of Commerce; American 
Hospital Association.
    \485\ See Bertha Coombs, With travel nurses making $150 an hour, 
hospital systems are forced to innovate, CNBC (Mar. 28, 2023), 
https://www.cnbc.com/2023/03/28/with-travel-nurses-making-150-an-hour-hospital-systems-innovate.html.
    \486\ What Is a Travel Nurse? Job Description and Salary, St. 
Catherine University, https://www.stkate.edu/academics/women-in-
leadership-degrees/what-is-a-travel-
nurse#:~:text=Travel%20nurses%20sign%20a%20contract,a%20new%20destina
tion%20and%20opportunity (last visited Oct. 19, 2023).
    \487\ See Comment of American Hospital Association.
---------------------------------------------------------------------------

    Furthermore, although my colleagues assert that the final rule is 
``unrelated to'' the Board's 1989 health care rule, I respectfully 
disagree. It is true that the text of the final rule does not directly 
impact bargaining units in any particular hospital. But a foreseeable 
consequence of the final rule will be a proliferation of bargaining 
units in hospitals, contrary to policy concerns embedded in the 1974 
Health Care amendments.\488\
---------------------------------------------------------------------------

    \488\ See the Board's Second Notice of Proposed Rulemaking on 
Collective-Bargaining Units in the Health Care Industry, 53 FR 
33900, 33909 (1988): ``In view of Congressional concern in the 
health care amendments with the ability of health care institutions 
to deliver uninterrupted health services, it is relevant to consider 
whether multiple units increase costs to health care institutions so 
as to disrupt the stability of the institutions.''
---------------------------------------------------------------------------

    The net benefit of the final rule to unions in the healthcare 
sector is also questionable. As I explain above, the impact of the rule 
on collective bargaining is murky at best and disastrous at worst. With 
increasing regularity, representatives of businesses that have never 
exercised control over any essential term or condition of employment of 
other businesses' employees will crowd around the bargaining table with 
one another and the direct employer's representatives, and they will 
have competing interests and motives, complicating the prospects of 
securing an agreement. As one commenter observes, ``[c]ollective 
bargaining is difficult enough when just one employer sits across the 
table and approaches issues and proposals with a unitary perspective. 
When a union must simultaneously bargain with two, three, or four 
employers whose interests and priorities do not align, finalizing an 
agreement will be orders of magnitude more difficult.'' \489\ This 
observation applies to any industry but is particularly troubling in 
the healthcare space. The potential adverse consequences of the final 
rule on critical patient care warrant the most serious 
consideration,\490\ and my colleagues do not give them that attention 
because, they say, it cannot be helped because the common law and the 
Act leave them no other choice. For reasons already explained, they are 
wrong.
---------------------------------------------------------------------------

    \489\ Comment of American Hospital Association.
    \490\ The role of increased work stoppages, which will likely 
occur as a result of the rule, is easy to glean from recent events. 
See, e.g., Nurses end nearly 10-month strike at Tenet Healthcare-
owned hospital, Dallas Morning News (Jan. 5, 2022), https://www.dallasnews.com/business/local-companies/2022/01/05/nurses-end-nearly-10-month-strike-at-tenet-healthcare-owned-hospital/ (noting 
that a dozen inpatient behavioral health beds were closed due to 
staffing challenges presented by the strike).

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[[Page 74003]]

The Majority Erroneously, and Unreasonably, Expands and Modifies the 
List of ``Essential'' Terms and Conditions of Employment
    The Board should not make ``working conditions related to the 
safety and health of employees'' an essential term and condition of 
employment.
    I disagree with several of the changes my colleagues make to the 
list of essential terms and conditions of employment, but the most 
problematic of the bunch is their decision to make ``working conditions 
related to the safety and health of employees'' a newly essential term 
and condition. Doing so is not compelled or supported by common-law 
agency principles, and it is unwise as a matter of policy. The majority 
fails to cite a single court case identifying working conditions 
related to employees' health and safety as an essential term and 
condition of employment.\491\ Further, in light of the significant 
federal regulatory obligations in the area of workplace safety, cited 
by many commenters, the majority fails to explain why, in their view, 
an entity's exercise of control over or reservation of authority to 
control the workplace health and safety of another entity's employees 
should create joint-employer status.
---------------------------------------------------------------------------

    \491\ In support of its position, the majority merely cites the 
general statement in the Restatement (Second) of Agency, section 2, 
that a servant is an agent employed by a master to perform service 
in his affairs whose ``physical conduct in the performance of the 
service'' is controlled by the master. That citation is insufficient 
to justify the majority's decision. And as numerous commenters point 
out, a variety of courts have rejected the notion that an entity's 
control over workplace safety tends to prove a joint-employer 
relationship. See, e.g., Comment of New Civil Liberties Alliance and 
the Institute for the American Worker (citing cases).
---------------------------------------------------------------------------

    The Occupational Safety and Health Act, 29 U.S.C. 654, obligates 
employers to protect the safety and health of not only their own 
employees but also the employees of other entities in the workplace. 
Under section 654:

    (a) Each employer--
    (1) shall furnish to each of his employees employment and a 
place of employment which are free from recognized hazards that are 
causing or are likely to cause death or serious physical harm to his 
employees;
    (2) shall comply with occupational safety and health standards 
promulgated under this chapter.

    To be sure, an employer's duty under subsection (a)(1)--known as 
the general duty clause--is owed only to its own employees. However, 
subsection (a)(2) ``does not limit its compliance directive to the 
employer's own employees, but requires employers to implement the Act's 
safety standards for the benefit of all employees in a given workplace, 
even the employees of another employer.'' Universal Construction Co. v. 
OSHRC, 182 F.3d 726, 728 (10th Cir. 1999). In short, federal law 
requires employers to exert control over the workplace health and 
safety of workers employed by other employers--and in complying with 
its statutory and regulatory obligations, an employer might need to 
exercise discretion.\492\
---------------------------------------------------------------------------

    \492\ For example, a number of OSHA standards establish 
alternative methods by which an employer can satisfy its duties, 
which, as explained above, are owed to other entities' employees on 
a multi-employer worksite. See, e.g., 29 CFR 1926.55 (``Gases, 
vapors, fumes, dusts, and mists. To achieve compliance with 
paragraph (a) of this section, administrative or engineering 
controls must first be implemented whenever feasible. When such 
controls are not feasible to achieve full compliance, protective 
equipment or other protective measures shall be used to keep the 
exposure of employees to air contaminants within the limits 
prescribed in this section.''); 29 CFR 1926.652(c) (``Design of 
support systems, shield systems, and other protective systems. 
Designs of support systems, shield systems, and other protective 
systems shall be selected and constructed by the employer or his 
designee and shall be in accordance with the requirements of 
paragraph (c)(1); or, in the alternative, paragraph (c)(2); or, in 
the alternative, paragraph (c)(3); or, in the alternative, paragraph 
(c)(4) as follows: . . . .''). The fact that an employer has 
discretion in this regard arguably makes the majority's carveout for 
measures that are legally required inapplicable.
---------------------------------------------------------------------------

    Additionally, an employer/property owner who adopts certain safety 
rules to satisfy its general-duty obligation to its own employees under 
section 654(a)(1) is also likely to require others on its premises to 
abide by these safety rules, and doing so has been found not to create 
joint-employer status. Knitter v. Corvias Military Living, LLC, 758 
F.3d at 1230 (finding no joint-employer status despite company's 
exercise of control over workplace safety because company ``naturally 
would be concerned about [vendor's employees'] safety, even if only for 
liability purposes, just as they would for any employee or non-employee 
on premises.''). Businesses are required by law to protect the safety 
of their own employees, and my colleagues say that measures required by 
law will not evidence joint-employer status--but the court's reasoning 
in Knitter exposes the inadequacy of that carveout. As the court points 
out, a business will apply its workplace safety measures to everyone on 
its property, for liability purposes if for no other reason, regardless 
of whether it is compelled to do so by statute or regulation. And by 
doing so it will become, under the final rule, the joint employer of 
everyone on its property that is employed by another entity.\493\
---------------------------------------------------------------------------

    \493\ Curiously enough, because the property owner (or lessee) 
would become an employer of everyone on its property directly 
employed by other employers, it would arguably incur the same duties 
to them that it owes to its own directly employed employees under 
the Occupational Safety and Health Act and its implementing 
regulations! However, I doubt that the property owner would be heard 
to contend that its joint-employer status is negated the very 
instant it is created by virtue of the final rule's carveout for 
workplace safety measures compelled by law. Whether or not such an 
argument, strictly speaking, would be circular, it would certainly 
be given to rotation.
---------------------------------------------------------------------------

    The majority's decision to make ``working conditions related to the 
safety and health of employees'' an essential term and condition of 
employment is also at odds with the Occupational Safety and Health 
Administration's guidance on the duties owed by employers on multi-
employer worksites.\494\ That guidance does not contemplate that one 
company is or becomes the joint employer of another company's employees 
by virtue of the control it possesses or exercises over workplace 
safety measures.
---------------------------------------------------------------------------

    \494\ See Occupational Safety and Health Administration, U.S. 
Department of Labor, CPL 02-00-124, OSHA Instruction: Multiemployer 
Citation Policy (Dec. 10, 1999), https://www.osha.gov/enforcement/directives/cpl-02-00-124 (last visited Oct. 19, 2023).
---------------------------------------------------------------------------

    OSHA's guidance identifies four types of employers on a multi-
employer worksite: the creating employer, the exposing employer, the 
correcting employer, and the controlling employer. Id. The creating 
employer is an employer that caused a hazardous condition that violates 
an OSHA standard. The exposing employer is an employer whose own 
employees have been exposed to the hazard. The correcting employer is 
an employer who is engaged in a common undertaking, on the same 
worksite, as the exposing employer and is responsible for correcting 
the hazard. And the controlling employer is an employer who has general 
supervisory authority over the worksite, including the power to correct 
safety and health violations itself or require others to correct them. 
Each type of employer owes duties to employees. The extent of an 
employer's duties depends on its proper categorization, and an employer 
may have multiple roles. Id.
    In Universal Construction Co. v. OSHRC, 182 F.3d at 726, the court 
held that a general contractor in the construction industry (Universal) 
was citable for hazardous conditions created by a subcontractor where 
only the subcontractor's employees had been exposed to the danger. The 
court explained that under 29 U.S.C. 654(a)(2), a general contractor--
the controlling employer in the foregoing schema--is responsible for 
safety violations that it could reasonably have been expected to 
prevent or abate by reason of its supervisory capacity,

[[Page 74004]]

regardless of whether it created the hazard or whether its own 
employees had been exposed to the hazard. Id. at 732. Under the final 
rule my colleagues promulgate today, which renders ``working conditions 
related to the safety and health of employees'' an essential term and 
condition of employment, a general contractor in Universal's shoes 
would become the joint employer of the employees directly employed by 
the ``exposing employer'' subcontractor--and possibly employees 
directly employed by every subcontractor on the project--if it 
exercised discretion in responding to the hazardous condition or went 
beyond the minimum required by law. This is not consistent with Supreme 
Court precedent. See NLRB v. Denver Building & Construction Trades 
Council, 341 U.S. at 689-690 (``[T]he fact that the contractor and 
subcontractor were engaged on the same construction project, and that 
the contractor had some supervision over the subcontractor's work, did 
not eliminate the status of each as an independent contractor or make 
the employees of one the employees of the other'').\495\
---------------------------------------------------------------------------

    \495\ See Comment of Associated Builders and Contractors.
---------------------------------------------------------------------------

    Additionally, a number of commenters point out that treating 
``working conditions related to the safety and health of employees'' as 
an essential term and condition of employment creates a perverse 
incentive for companies to avoid protecting the employees of other 
employers or to avoid maintaining safety standards or applying safety 
measures that are any more protective than legally-mandated 
minimums.\496\ As stated by one commenter, ``[p]lacing the regulated 
community in a position where they must choose between robust workplace 
health and safety standards contractually mandated and monitored on the 
one hand and, on the other hand, a potential joint employer 
classification over individuals whom all involved considered to be 
employees of only one employer, is bad public policy.'' \497\ These 
comments, which resonate with me, are not satisfactorily addressed by 
the majority.
---------------------------------------------------------------------------

    \496\ See, e.g., Comments of American Trucking Association and 
National Association of Manufacturers.
    \497\ See Comment of the American Trucking Associations. Indeed, 
in the 2015 BFI decision, the Board majority found the presence of a 
joint-employer relationship in part because the user employer 
noticed the supplier's employees committing several safety 
violations. The BFI official ``witnessed two Leadpoint employees 
passing a pint of whiskey at the jobsite'' and reported it. 362 NLRB 
at 1602. The facility in question used conveyor belts, a type of 
powered haulage, to move materials to be sorted for recycling. Id. 
at 1600. It is obvious that consuming alcohol near powered haulage 
is inherently hazardous. With all due respect to my colleagues, I 
genuinely wonder whether a potential joint employer will flag 
blatant safety violations like this with as much urgency after their 
final rule takes effect.
---------------------------------------------------------------------------

    Other changes to the list of essential terms and conditions invite 
mischief.
    I also disagree with the majority's decision to add ``work rules 
and directions governing the manner, means, or methods of the 
performance of duties and the grounds for discipline'' to the list of 
essential terms and conditions of employment. My concern is with the 
phrase ``work rules . . . governing . . . the grounds for discipline,'' 
which brings to mind the Board's history of policy oscillation 
regarding the proper analysis of workplace rules that allegedly 
interfere with protected activity. See Stericycle, Inc., 372 NLRB No. 
113 (2023) (Member Kaplan, dissenting). The final rule's incorporation 
of this phrase invites unions to comb through a putative joint 
employer's manuals in search of ambiguous language, argue that workers 
employed by another entity (i.e., supplied employees performing work 
for a putative-joint-employer user business) ``could'' reasonably 
interpret the language to interfere with protected activity, and rely 
on it to support a joint-employer finding. Such an argument would have 
legs regardless of whether the user employer actually applied its 
workplace rules to employees of a supplier employer because even if it 
did not (which seems unlikely), it would possess the authority to do 
so.
    Finally, I believe that my colleagues' substitution of ``hiring'' 
and ``discharge'' as essential terms and conditions of employment under 
the 2020 Rule with ``the tenure of employment, including hiring and 
discharge'' (emphasis added) will be used to make general contractors 
in the construction industry joint employers per se. As is well known 
to those in the regulated community, a wide variety of unionized 
businesses in the construction industry employ a comparatively small 
complement of permanent employees, and then, when they are awarded a 
subcontract on a construction site, ``staff up'' from the union hiring 
hall with employees whose employment lasts only for the duration of the 
project for which they are hired. It could easily be argued that the 
general contractor, which ultimately determines the duration of each 
part of the construction project--every stage from excavation through 
interior finishing work--indirectly controls ``the tenure of 
employment'' of every employee hired only for the duration of his or 
her employer's subcontracted part of the project, and is therefore the 
joint employer of every single one of those employees.\498\
---------------------------------------------------------------------------

    \498\ Contrary to my colleagues' assertion, my disagreement here 
is not ``principally semantic.'' As I explained, the majority's 
inclusion of ``the tenure of employment, including hiring and 
discharge'' significantly broadens the potential scope of essential 
terms and conditions of employment compared to the 2020 Rule's more 
clearly defined set. The majority's statement that it refers to 
``the range of actions that determine or alter an individual's 
employment status'' provides no further definition, and does not 
foreclose the possibility that this essential term could be used to 
make general contractors in the construction industry the joint 
employer of every single one of its subcontractors' employees. I 
leave it to those more deeply conversant with the workings of the 
construction industry to flesh out the implications of such a 
scenario. I will note, however, that under John Deklewa & Sons, 282 
NLRB 1375, 1377-1378 (1987), enfd. sub nom. Iron Workers, Local 3 v. 
NLRB, 843 F.2d 770 (3d Cir. 1988), employers that are party to a 
Sec. 8(f) collective-bargaining agreement can withdraw recognition 
from the union and change their employees' terms and conditions of 
employment upon the expiration of the 8(f) agreement. But a general 
contractor that, by virtue of its indirect control over ``tenure of 
employment,'' becomes a joint employer of employees of 
subcontractors that are party to Sec. 8(f) agreements is not itself 
party to a Sec. 8(f) agreement. Would it stand in the shoes of its 
subcontractors? Or would the fact that it is not itself signatory to 
its subcontractors' 8(f) agreements disrupt the applicability of 
Deklewa's rules? Would it be permitted to withdraw recognition when 
the subcontractor's 8(f) agreement expires? Could it do so if the 
subcontractor does not withdraw recognition when the 8(f) agreement 
expires? I do not envy employers who will need to navigate such 
uncharted--and complicated--legal waters in light of my colleagues' 
final rule.
---------------------------------------------------------------------------

    For these reasons, I disagree with the majority's decision to 
rescind and revise the 2020 Rule's appropriate determination of the 
terms and condition of employment that should be considered 
``essential'' for purposes of determining joint-employer status.
The Final Rule Is Arbitrary and Capricious Under the Administrative 
Procedure Act
    The Administrative Procedure Act (APA), 5 U.S.C. 551 et seq., 
establishes standards that federal agencies must follow when engaged in 
notice-and-comment rulemaking. Specifically, the APA prohibits 
administrative agencies from acting arbitrarily and capriciously. In 
this regard, the Supreme Court has explained that the APA requires the 
agency to ``provide reasoned explanation for its action . . . . And of 
course the agency must show that there are good reasons for the new 
policy.'' FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 
(2009) (internal citation omitted). More recently, the Supreme Court 
succinctly held that ``[t]he APA's arbitrary-and-capricious standard 
requires that agency action be

[[Page 74005]]

reasonable and reasonably explained.'' FCC v. Prometheus Radio Project, 
__U.S. __, 141 S. Ct. 1150, 1158 (2021). The final rule fails this 
test.
    I have already pointed out one respect in which the final rule 
contravenes the APA--namely, that the final rule fails to respond to 
significant points urged in vital comments. But the reason it fails to 
do so portends a more fundamental problem for my colleagues' final 
rule. The majority has taken the position that common-law agency 
principles, and therefore the NLRA itself, compel the Board both to 
rescind the 2020 Rule and to promulgate a final rule that does not 
require proof that an entity has exercised any control whatsoever 
before it may be found to be a joint employer of another entity's 
employees. For reasons explained at length above, that position is 
legally erroneous, and since it is the very foundation of the final 
rule--again, the rule barely mentions policy grounds--it renders the 
final rule arbitrary and capricious in its entirety. The majority 
misconstrues common-law agency principles applied in the joint-employer 
context, ignores judicial precedent addressing joint-employer status 
under statutes materially similar to the NLRA--i.e., statutes that, 
like the NLRA, define ``employee'' in such a manner as to make the 
common law of agency govern the interpretation--and refuse to 
acknowledge that the Board, for policy reasons unique to the NLRA, may 
adopt a joint-employer standard that does not extend to the outermost 
limits of the common law. Because the majority erroneously deems the 
2020 Rule statutorily precluded and their final rule statutorily 
compelled, they dismiss as ``misdirected'' the many public comments 
that point out the ways in which the proposed rule--implemented with 
minor changes in the final rule--would harm businesses and destabilize 
labor relations. For these reasons, the majority's final rule is 
neither reasonable nor reasonably explained.
    Further, my colleagues fail adequately to justify their decision to 
engage in this rulemaking by claiming that the final rule, among other 
things, establishes ``a definite and readily available standard'' that 
will assist employers and labor organizations in complying with the Act 
and ``reduce uncertainty and litigation over the basic parameters of 
joint-employer status'' compared to determining that status through 
case-by-case adjudication. These claims are simply untrue. The final 
rule fails to achieve these things. It offers no greater certainty or 
predictability than adjudication, and it will not reduce litigation, 
because it expressly contemplates that joint-employer status will be 
determined through adjudication under the common law, not under the 
provisions of the final rule, in most if not all cases. In this 
respect, it will also provide markedly less guidance to parties than 
did the 2020 Rule.
    Absent any rule whatsoever, joint-employer status would be 
determined through case-by-case adjudication applying the common law of 
agency.\499\ Rather than specify how common-law principles will be 
applied in determining joint-employer status, however, the final rule 
simply incorporates the common law of agency by reference in no fewer 
than three places. Section 103.40(a) of the final rule provides that 
``an employer, as defined by Section 2(2) of the National Labor 
Relations Act (the Act), is an employer of particular employees, as 
defined by Section 2(3) of the Act, if the employer has an employment 
relationship with those employees under common-law agency principles.'' 
Section 103.40(e) of the final rule provides that ``[w]hether an 
employer possesses the authority to control or exercises the power to 
control one or more of the employees' terms and conditions of 
employment is determined under common-law agency principles.'' And 
Section 103.40(f) of the final rule provides that ``[e]vidence of an 
employer's control over matters that are immaterial to the existence of 
an employment relationship under common-law agency principles or 
control over matters that do not bear on the employees' essential terms 
and conditions of employment is not relevant to the determination of 
whether the employer is a joint employer.'' Determinations of joint-
employer status under each of these provisions will require 
adjudication under the common law (which the majority has 
mischaracterized), since the final rule by its terms provides no other 
guidance. This is precisely how the determinations would be made if 
there were no rule at all.
---------------------------------------------------------------------------

    \499\ See NLRB v. United Insurance Co. of America, 390 U.S. at 
256 (holding that the Board must ``apply general agency principles 
in distinguishing between employees and independent contractors 
under the Act''); Browning-Ferris Industries of California v. NLRB, 
911 F.3d at 1214-1215 (``[E]mployee-or-independent-contractor cases 
can still be instructive in the joint-employer inquiry to the extent 
that they elaborate on the nature and extent of control necessary to 
establish a common-law employment relationship. Beyond that, a rigid 
focus on independent-contractor analysis omits the vital second step 
in joint-employer cases, which asks, once control over the workers 
is found, who is exercising that control, when, and how.'') 
(emphasis in original).
---------------------------------------------------------------------------

    The final rule is a step backward from the 2020 Rule in all these 
respects. As noted above, the 2020 Rule specified the factors to be 
considered in making a joint-employer determination and explained how 
they relate to each other. This permitted parties to determine whether 
a joint-employer relationship would be found based on the text of the 
rule itself, without any need to resort to Restatements of Agency, 
precedent applying the common law, or any other source to make that 
determination because the 2020 Rule itself reflected (and remained 
within) the boundaries established by the common law. For all these 
reasons, the 2020 Rule indisputably provided parties with greater 
certainty and predictability than they would have if joint-employer 
status were decided by adjudication. The final rule, on the other hand, 
does not.
    Although administrative agencies have the authority to revise or 
amend previously promulgated rules, the APA requires the agency to 
``provide reasoned explanation for its action . . . . [and] show that 
there are good reasons for the new policy.'' FCC v. Fox Television 
Stations, Inc., 556 U.S. at 515 (internal citation omitted). Here, the 
majority fails to acknowledge that today's final rule provides less 
guidance for the regulated community than did the 2020 Rule. Nor have 
they shown that there are ``good reasons'' for replacing a clear, well-
defined, and comprehensive rule with one that simply sets employers, 
employees, and unions adrift in a sea of common-law cases, just as if 
there were no joint-employer rule at all. Most of all, they fail to 
show that there are good reasons for the final rule because their 
primary supporting rationale--that the final rule is compelled as a 
matter of law--is wrong, and their alternative supporting rationale--
that the final rule is superior to the 2020 Rule as a matter of 
policy--is cursory at best and fails to reckon with the substance of 
vital comments that attack the rule on policy grounds. For all these 
reasons, the final rule is arbitrary and capricious.
The Majority's Final Regulatory Flexibility Analysis Is Arbitrary and 
Capricious
    My colleagues err in asserting that their final joint-employer rule 
will not have a significant economic impact on a substantial number of 
small entities. In their view, ``[t]he only direct compliance cost for 
any of the 6.1 million American business firms (both large and small) 
with employees is reading and becoming familiar with the text of the 
new rule.'' They peg that familiarization cost at $227.98, representing 
their estimate of the cost of an hour-long review of the rule by a

[[Page 74006]]

human resources specialist or labor relations specialist and an hour-
long consultation between that specialist and an attorney. As the 
public comments make clear, the majority grossly underestimates the 
actual costs that small businesses will incur to familiarize themselves 
with the final rule. It is not clear how a human resources specialist 
will be able to read the rule, which nearly 63,000 words in length, in 
an hour, let alone comprehend the full ramifications of its changed 
legal standard in this complicated area of the law.
    More importantly, my colleagues erroneously deem irrelevant (for 
purposes of a regulatory flexibility analysis) certain direct costs of 
compliance that the rule imposes on small businesses. The final rule 
will transform many small businesses that were not joint employers 
under the 2020 Rule into joint employers, with an entirely new duty to 
engage in collective bargaining. This will impose direct compliance 
costs in two ways. First, to determine whether they would be subject to 
that duty, small businesses will have to review their existing business 
contracts and practices to determine whether they possess any reserved 
authority to control or exercise any indirect control over any 
essential term and condition of employment of another business's 
employees, neither of which could alone establish joint-employer status 
under the 2020 Rule but either of which will make an entity a joint 
employer of another business's employees under the majority's final 
rule. Second, small businesses whose joint-employer status has been 
changed by the final rule and that contract with an employer whose 
employees are unionized will be required to participate in collective 
bargaining, as mandated by new Section 103.40(h).
    The Regulatory Flexibility Act, as amended by the Small Business 
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 601-612, 
``obliges federal agencies to assess the impact of their regulations on 
small businesses.'' United States Cellular Corp. v. FCC, 254 F.3d 78, 
88 (D.C. Cir. 2001). Among other things, the Regulatory Flexibility Act 
requires that a federal agency issuing a rule under the Administrative 
Procedure Act publish an initial regulatory flexibility analysis, 
consider the comments received in response, and publish a final 
regulatory flexibility analysis (FRFA) when promulgating its final 
rule. See 5 U.S.C. 603, 604. An agency's FRFA must meet certain 
statutory requirements. It must state the purpose of the final rule 
and, if possible, the estimated number of small businesses that it will 
affect. Additionally, each FRFA must summarize comments filed in 
response to the agency's initial regulatory flexibility analysis, along 
with the agency's assessment of those comments. Finally, each FRFA must 
include ``a description of the steps the agency has taken to minimize 
the significant economic impact'' that its rule will have on small 
businesses, ``including a statement of the factual, policy, and legal 
reasons for selecting the alternative adopted in the final rule and why 
each one of the other significant alternatives to the rule considered 
by the agency which affect the impact on small entities was rejected.'' 
5 U.S.C. 604(a)(6). An agency is excused from conducting a FRFA only if 
``the head of the agency certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' 5 U.S.C. 605(b).
    Although the requirements of the Regulatory Flexibility Act are 
``purely procedural,'' National Telephone Cooperative Assn. v. FCC, 563 
F.3d 536, 540 (D.C. Cir. 2009), the Administrative Procedure Act, 5 
U.S.C. 553, prohibits agency actions that are arbitrary and capricious, 
and ``the APA together with the Regulatory Flexibility Act require that 
a rule's impact on small businesses be reasonable and reasonably 
explained.'' Id. A regulatory flexibility analysis is, for APA 
purposes, part of an agency's explanation of its rule. Id. (citing 
Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 539 
(D.C. Cir. 1983)); see also Thompson v. Clark, 741 F.2d 401, 405 (D.C. 
Cir. 1984) (``[I]f data in the regulatory flexibility analysis--or data 
anywhere else in the rulemaking record--demonstrates that the rule 
constitutes such an unreasonable assessment of social costs and 
benefits as to be arbitrary and capricious, the rule cannot stand.''). 
Further, the Regulatory Flexibility Act specifically provides for 
judicial review and authorizes a reviewing court to take corrective 
action, including remanding the rule to the agency and deferring 
enforcement of the rule against small entities (unless the court finds 
that continued enforcement of the rule is in the public interest). 5 
U.S.C. 611(a)(4).
    According to numerous commenters, the Board's initial regulatory 
flexibility analysis ignored significant direct compliance costs and 
drastically underestimated the costs that small businesses will incur 
to familiarize themselves with the rule.\500\ My colleagues fail to 
correct the defects identified by the commenters, and their assessment 
of the rule's costs is so unreasonable as to render their FRFA 
arbitrary and capricious.
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    \500\ See comments of the U.S. Small Business Administration 
Office of Advocacy, Wyoming Bankers Association, National Federation 
of Independent Business; National Association of Convenience Stores; 
McDonald's USA, LLC, and The Colorado Bankers Association.
---------------------------------------------------------------------------

    In its FRFA, the majority acknowledges that the Regulatory 
Flexibility Act requires agencies to consider ``direct compliance 
costs.'' But the majority asserts that ``the RFA does not require an 
agency to consider speculative and wholly discretionary responses to 
the rule, or the indirect impact on every stratum of the economy,'' and 
it treats bargaining expenses as falling into this category. The 
majority is wrong on this point. The final rule will dramatically 
increase the number of entities that will be deemed joint employers by 
changing the status of entities that merely possess an unexercised 
contractual right to control one or more essential terms and conditions 
of employment of another company's employees, as well as entities that 
have exercised some amorphous ``indirect control,'' a term the final 
rule neither defines nor cabins. Such entities, which were not joint 
employers under the 2020 Rule, now will be and, under Section 
103.40(h), will be obligated to bargain with unions representing their 
business partners' employees. Reviewing existing contracts and 
practices is not a ``discretionary response'' to the rule because a 
business must determine whether it has a duty to bargain. And for those 
that have that duty, placing an agent at the bargaining table also will 
not be a ``discretionary response'' to the rule. They will have to 
participate in collective bargaining as set forth in Section 103.40(h) 
of the final rule, on pain of violating Section 8(a)(5) if they fail to 
do so. Good-faith bargaining for a collective-bargaining agreement can 
take months, even years, and can entail hundreds of hours of 
negotiations.\501\ The cost of paying a representative to be at the 
table, bargaining in good faith, will be substantial. These compliance 
costs will be especially difficult to bear for small businesses that do 
not independently meet the discretionary monetary standards for the 
Board to assert jurisdiction but will become subject to its 
jurisdiction by virtue of the Board's

[[Page 74007]]

practice of combining gross revenues of joint employers for 
jurisdictional purposes. My colleagues err in ignoring these direct 
compliance costs for purposes of their FRFA.
---------------------------------------------------------------------------

    \501\ One study found that it takes an average of 409 days for 
an employer and a union to reach a first contract. Robert Combs, 
ANALYSIS: How Long Does It Take Unions to Reach First Contracts? 
(Bloomberg Law News, June 1, 2021), available at https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-how-long-does-it-take-unions-to-reach-first-contracts (last visited Oct. 19, 
2023).
---------------------------------------------------------------------------

    In deeming these direct costs of compliance irrelevant, my 
colleagues cite a quartet of cases: Mid-Tex Electric Cooperative, Inc. 
v. FERC, 773 F.2d 327 (D.C. Cir. 1985); White Eagle Cooperative Assn. 
v. Conner, 553 F.3d 467 (7th Cir. 2009); Cement Kiln Recycling 
Coalition v. EPA, 255 F.3d 855 (D.C. Cir. 2001); and Colorado State 
Banking Board v. Resolution Trust Corp., 926 F.2d 931 (10th Cir. 1991). 
These cases do not support the majority's position. In three of them, 
the court held that under the Regulatory Flexibility Act, an agency 
must consider direct compliance costs imposed by the rule on small 
entities subject to its regulation but need not consider the costs 
imposed on unregulated entities. See Mid-Tex Electric, 773 F.2d at 342 
(holding that FERC need not consider indirect impact of its regulation, 
which governed electrical utilities, on those utilities' small 
wholesale and retail customers because the latter were not subject to 
the rule); White Eagle Cooperative Assn., 553 F.3d at 478 (holding that 
USDA need not consider the indirect impact that a rule governing milk 
handlers would have on small milk producers not subject to the rule); 
Cement Kiln Recycling Coalition, 255 F.3d at 869 (rule more stringently 
regulated emissions for hazardous waste combustors; no need to consider 
indirect impact of the rule on generators of hazardous waste not 
subject to the rule). In the fourth case, Colorado State Banking Board, 
the court held that a federal agency had properly certified that the 
rule at issue, which authorized banks to operate failed savings and 
loans, imposed no direct compliance costs on regulated parties. 926 
F.2d at 948. Here, in contrast, it is beyond dispute that small 
businesses subject to the Board's jurisdiction are governed by the 
final rule, unlike the challengers in Mid-Tex Electric, White Eagle 
Cooperative Association, and Cement Kiln Recycling Coalition. And 
unlike in Colorado State Banking Board, it is equally beyond dispute 
that the final rule, by converting small businesses that were not joint 
employers under the 2020 Rule into joint employers and imposing a 
bargaining obligation on them, will impose direct compliance costs on 
those entities as described above.
    Unlike the inapposite cases on which the majority relies, AFL-CIO 
v. Chertoff, 552 F. Supp. 2d 999 (N.D. Cal. 2007), speaks directly to 
the issue at hand. In that case, the court issued a preliminary 
injunction against the Department of Homeland Security (DHS) based on 
serious concerns that it had violated the Regulatory Flexibility Act by 
failing to consider certain costs of compliance imposed on small 
businesses. As shown below, AFL-CIO exposes the inadequacy of my 
colleagues' FRFA analysis.
    Before the district court was a final rule promulgated by DHS that 
defined ``knowing'' for purposes of the statutory prohibition on 
knowingly hiring or continuing to employ an unauthorized alien under 
the Immigration Reform and Control Act, 8 U.S.C. 1324a (IRCA). The rule 
provided that ``knowing'' includes constructive knowledge and that 
receipt of a no-match letter from the Social Security Administration 
could contribute to a finding of constructive knowledge. However, the 
rule included a safe-harbor provision that precluded DHS from relying 
on an employer's receipt of a no-match letter to prove constructive 
knowledge where the employer had taken certain steps. Specifically, the 
no-match letter could not be used to establish constructive knowledge 
if the employer checked its records for error within 30 days of receipt 
of the letter and, if no error was found, if it asked the employee to 
confirm her information and advised the employee to resolve the 
discrepancy with the Social Security Administration within 90 days of 
receipt of the letter. The Secretary of Homeland Security certified 
that the rule would not have a significant economic impact on a 
substantial number of small entities, and therefore DHS did not conduct 
a FRFA. Id. at 1012.
    A consortium of unions and business groups moved for a preliminary 
injunction, contending among other things that the rule was promulgated 
in violation of the Regulatory Flexibility Act because DHS had failed 
to consider significant compliance costs that the rule imposed on small 
businesses. The court granted the plaintiffs' motion, finding that 
small businesses could ``expect to incur significant costs associated 
[with] complying with the safe harbor rule.'' Id. at 1013. Those costs 
included the cost of dedicating human resources staff to track and 
resolve mismatches within the 90-day time limit, of hiring ``legal and 
consultancy services'' to help employers comply with the safe-harbor 
provision, and of training in-house counsel and human resources staff. 
Id. The court rejected DHS's claim that the safe-harbor provision would 
impose no costs on small entities because compliance was ``voluntary'':

    It is true that the safe harbor rule does not mandate 
compliance. This Court's ``concern, however, is with the practical 
effect . . . of the rule, not its formal characteristics.'' Chamber 
of Commerce of the United States v. United States DOL, 174 F.3d 206, 
209 (D.C. Cir. 1999). Because failure to comply subjects employers 
to the threat of civil and criminal liability, the regulation is 
''the practical equivalent of a rule that obliges an employer to 
comply or to suffer the consequences; the voluntary form of the rule 
is but a veil for the threat it obscures.'' Id at 210. The rule as 
good as mandates costly compliance with a new 90-day timeframe for 
resolving mismatches. Accordingly, there are serious questions 
whether DHS violated the RFA by refusing to conduct a final 
flexibility analysis.

AFL-CIO v. Chertoff, 552 F. Supp. 2d at 1013-1014.
    Here, the compliance costs imposed on small businesses by the 
majority's final rule are even more direct than some of the compliance 
costs imposed by the safe-harbor provision of the final rule at issue 
in AFL-CIO. Under the DHS rule, an employer would not have to assign 
human resources staff to deal with no-match letters within safe-harbor 
time limits until it actually received a no-match letter following the 
effective date of the rule. Accordingly, the costs of doing so were not 
imposed by issuance of the DHS rule without more. Under my colleagues' 
final rule, in contrast, the compliance costs described above are 
imposed by issuance of the rule without more. This is so because the 
final rule immediately makes joint employers of many small businesses 
that were not joint employers under the 2020 Rule. And these new joint 
employers include some that immediately incur a duty to bargain and are 
immediately exposed to unfair labor practice liability if they fail to 
comply with that duty. The majority is simply wrong in suggesting that 
the costs of determining whether that duty exists and of complying with 
it if it does are the result of discretionary choices.\502\
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    \502\ My colleagues unpersuasively attempt to distinguish AFL-
CIO v. Chertoff on the ground that the agency in that case made a 
``procedural error'' (emphasis added) by certifying the rule as not 
having a significant impact on a substantial number of small 
entities instead of conducting an initial or final regulatory 
flexibility analysis. My colleagues point out that they have 
performed that analysis. But they concede that, in AFL-CIO v. 
Chertoff, the agency's error was its failure to consider certain 
direct compliance costs imposed by the rule at issue, and my 
colleagues commit the same error. They fail to acknowledge that 
their final rule imposes certain direct compliance costs on 
regulated entities. My colleagues incorrectly treat the costs of 
evaluating business contracts and practices and the expense of 
placing a bargaining representative at the table as ``indirect 
costs'' and deem them irrelevant to a regulatory flexibility 
analysis. It is immaterial whether one characterizes that error as 
``procedural'' or ``substantive'' and equally immaterial whether an 
agency commits that error when certifying a rule as having no 
significant impact on a substantial number of small entities or 
when, as here, it conducts a FRFA and reaches the exact same 
conclusion. Simply put, by misclassifying direct costs as indirect 
costs, my colleagues have sidestepped their statutory obligation to 
give ``a description of the steps the agency has taken to minimize 
the significant economic impact on small entities'' imposed by their 
rule. 5 U.S.C. 604(a)(6).
     There is also no merit to my colleagues' position that AFL-CIO 
v. Chertoff is distinguishable on the ground that the rule there 
exposed regulated parties to civil and criminal liability where 
here, they say, their rule does neither. More specifically, they say 
that ``[b]eing a joint employer imposes a duty to bargain in good 
faith, but it is Sec. 8(a)(5) of the Act, and not the joint-employer 
rule, that imposes civil liability for refusing to bargain.'' That 
may be, but it misses the point, which is that the final rule 
dramatically expands the universe of entities that are exposed to 
civil liability under Sec. 8(a)(5). Moreover, even though Sec. 
8(a)(5) is the ultimate source of potential liability, a statute--
the IRCA, which makes it unlawful to knowingly employ an 
unauthorized alien--was similarly the ultimate source of liability 
in AFL-CIO v. Chertoff.
    Further, my colleagues' position finds no support in the Board's 
statement in the 2020 Rule that ``[u]nfair labor practice liability 
is the cost of not complying with the NLRA, not the cost of 
compliance with the Board's joint-employer rule.'' 85 FR 11230. The 
Board made that statement when rejecting certain public comments 
asserting that the 2020 Rule imposed direct costs insofar as 
``liability and liability insurance costs may increase for small 
entities [that are undisputed employers of the employees at issue] 
because they may no longer have larger entities [that were joint 
employers under BFI but would no longer be under the 2020 Rule] with 
which to share the cost of any NLRA backpay remedies ordered in 
unfair labor practice proceedings.'' A possible increase in the cost 
of liability insurance for undisputed employers was plainly an 
indirect (not to mention speculative) cost of the 2020 Rule. In 
contrast, by imposing a duty to bargain on businesses that 
heretofore have had no such duty, the majority's final rule imposes 
on those entities, necessarily and therefore directly, the 
unavoidable costs of collective bargaining.

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[[Page 74008]]

    Further, the majority underestimates the final rule's 
familiarization costs. In its FRFA, the majority estimates that small 
businesses will take ``at most one hour to read the text of the rule 
and the supplementary information published in the Federal Register,'' 
and they unjustifiably assume that all small businesses have human 
resources or labor relations personnel to carry out this task. The 
majority also estimates that one hour will suffice for a consultation 
between a small employer and an attorney. Citing hourly wage figures 
from the Bureau of Labor Statistics (BLS), the majority assesses the 
total compliance costs to be between $208.60 and $227.98.
    In my view, the majority's estimate is absurdly low. The length of 
time it would take an employer's representative to read the rule and 
its accompanying supplemental information and adequately absorb it, 
even with the assistance of an attorney, will surely exceed the two 
hours the majority allocates to this complex endeavor. The final rule 
and its supplementary information is nearly 63,000 words long and 
replete with dense legal analysis that will challenge all but the most 
experienced specialist in traditional labor law, let alone non-
specialist attorneys and small businesspersons.\503\ As one commenter 
wrote in response to the proposed rule:
---------------------------------------------------------------------------

    \503\ For two reasons, I am unpersuaded by my colleagues' 
attempt to justify their one-hour reading estimate by pointing to an 
estimate contained in the 2020 Rule's FRFA for the reading of that 
rule. First, the 2020 Rule returned Board law to the familiar and 
easy-to-understand pre-BFI standard. In contrast, the majority's 
final rule breaks new legal ground--going well beyond even BFI--and 
injects significant uncertainty into the joint-employer analysis. 
Second, in the 2020 rulemaking, the Board received no public 
comments that would have provided a basis for departing from the 
estimate contained in the 2018 NPRM's initial regulatory flexibility 
analysis. Here, in contrast, public comments indicate that my 
colleagues' estimate is unreasonably low.

    The Board claims businesses will only spend one hour reading the 
rulemaking and one hour speaking with counsel. These estimates are 
frankly astounding. The Proposed Rule is 70 pages long, and a final 
rule would likely be similar in length. [Wishful thinking.] 
Additionally, no legal counsel would require only one hour to 
analyze a contractual relationship or business operations and 
provide a legal and/or risk analysis for a business entity. Such 
analyses are comprehensive and do not take one hour whether a 
business has in-house counsel or must look to hire a firm. Risk 
analyses take several hours, if not days or weeks, to review a 
program, analyze it, and compile a report. Furthermore, program and/
or operational changes may be needed to protect the business from 
any potential liability. This would involve even more time from 
counsel. All in all, businesses will assuredly take more than one 
hour to read the standard and one hour to speak with counsel.\504\
---------------------------------------------------------------------------

    \504\ See Comment of Modern Economy Project.

    The majority also underestimates the cost to a small business of 
paying for a consultation. Citing the most recent BLS statistics, my 
colleagues say that the average hourly wage for an attorney is $78.74. 
But the average hourly wage earned by a lawyer is not the average rate 
that a client will be billed for an hour of a lawyer's services. The 
average billable rate for an hour of an attorney's services--i.e., the 
rate at which a client is billed--is substantially higher. According to 
Clio's 2022 Legal Trends Report, the national average billable rate for 
a labor and employment attorney is currently $341.\505\ Various surveys 
list even higher average billable rates nationwide. See, e.g., Andrew 
Maloney, Associate Billing Rates Are Growing Faster Than Partner Rates, 
THE AMERICAN LAWYER (Feb. 3, 2022), available at https://www.bloomberglaw.com/document/X9IS07HG000000?jcsearch=hdi45mllfg#jcite 
(last visited Oct. 19, 2023) (indicating that as of 2021, the average 
rate billed for legal services by partners was $728 per hour, and for 
legal services by associates, $535 per hour). \506\
---------------------------------------------------------------------------

    \505\ The full report is available at https://www.clio.com/wp-content/uploads/2022/09/2022-Legal-Trends-Report-16-02-23.pdf (last 
visited Oct. 19, 2023). Billable-hour rates broken down by practice 
area appear on page 72 of the report.
    \506\ Contrary to my colleagues' assertion, the Maloney article 
contains an adequate explanation of the methodology used: ``ELM 
[i.e., ELM Solutions, a legal analytics company and source of the 
data used by the author] uses anonymized legal spend data from law 
firms' e-billing and time management software to compile national 
average billing rates for partners, associates and paralegals, as 
well as rate data for specific markets, practices and types of 
matters. ELM said all the data in the report is derived `from the 
actual rates charged by law firm professionals as recorded on 
invoices submitted and approved for payment.' ''
---------------------------------------------------------------------------

    To determine the amount to seek for awards of attorneys' fees, 
federal agencies--including the Board--refer to the Laffey Matrix, 
available at https://www.laffeymatrix.com/see.html, which sets forth 
hourly rates for attorneys practicing civil law in the Washington, DC 
metropolitan area. See, e.g., Newport News Shipbuilding & Dry Dock Co. 
v. Holiday, 591 F.3d 219, 229 (4th Cir. 2009) (characterizing the 
Laffey Matrix as ``a useful starting point to determine fees''); NLRB 
v. Cobalt Coal, Ltd., 2018 U.S. Dist. LEXIS 183276, at *2 (W.D. Va. 
Oct. 25, 2018) (awarding the Agency attorneys' fees based on a modified 
version of the Laffey Matrix); Frankl ex rel. NLRB v. HGH Corp., 2012 
U.S. Dist. LEXIS 66761, at *18 (D. Haw. Apr. 23, 2012) (considering the 
Laffey Matrix but declining to apply it to determine rates for out-of-
District attorneys). A cursory examination of the Laffey Matrix (and 
the other sources cited above) shows how out of sync the BLS-identified 
average wage rate for lawyers is with actual costs a small employer 
will incur to have an outside lawyer consult on a matter. For the most 
recent calendar year, the Laffey Matrix lists the hourly rate for an 
attorney with one to three years of legal experience as $413, and the 
hourly rate for a paralegal or law clerk as $225. The BLS average wage 
rate the majority relies on is just over one-third of the Laffey Matrix 
average billable rate for a paralegal. Even taking into consideration 
that billable-hour rates for attorneys who practice in the District of 
Columbia are higher than in many parts of the country, it is all but 
certain that the BLS wage rate of $78.74 is far less than small 
businesses will have to pay for an hour of legal

[[Page 74009]]

services.\507\ And it is also all but certain that an attorney will 
need far more than one hour to analyze, and help her client understand, 
the impact of the final rule on her client's business.
---------------------------------------------------------------------------

    \507\ The Laffey Matrix is a useful but imperfect guide as it 
primarily focuses on the costs of civil rights and environmental 
litigation in the Washington, DC metropolitan area, not labor and 
employment counseling nationwide. Nevertheless, this database and 
others like it (including the Fitzpatrick Matrix, which the 
Department of Justice uses to calculate attorneys' fees and is 
available at https://www.justice.gov/usao-dc/page/file/1189846/download) provide useful data points illustrating the inadequacy of 
the majority's estimates. Relatedly, the majority notes that 
``[w]hile some commenters asserted that the wage rates for an 
attorney were at least $300/hour, none of the comments provided any 
evidence to which the Board could cite.'' I believe that by 
identifying relevant sources of average billable rates nationwide, I 
have refuted my colleagues' contention that small businesses will be 
able to secure a lawyer for about $78.74 per hour.
---------------------------------------------------------------------------

    For these reasons, the majority's FRFA is arbitrary and capricious.
Conclusion
    For all the above reasons, I dissent from the majority's decision 
to promulgate the final rule.

VIII. Other Statutory Requirements

A. The Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (RFA), as amended by the 
Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 
601-612, requires an agency promulgating a final rule to prepare a 
Final Regulatory Flexibility Analysis (FRFA) when the regulation will 
have a significant impact on a substantial number of small entities. An 
agency is not required to prepare a FRFA if the Agency head certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. 5 U.S.C. 605(b). Although the 
Board believed that this rule would not have a significant economic 
impact on a substantial number of small entities, in the NPRM the Board 
issued its Initial Regulatory Flexibility Analysis (IRFA) to provide 
the public the fullest opportunity to comment on the proposed rule. See 
87 FR 54659. The Board solicited comments from the public that would 
shed light on potential compliance costs that may result from the rule 
that it had not identified or anticipated.
    The RFA does not define either ``significant economic impact'' or 
``substantial number of small entities.'' \508\ Additionally, ``[i]n 
the absence of statutory specificity, what is `significant' will vary 
depending on the economics of the industry or sector to be regulated. 
The agency is in the best position to gauge the small entity impacts of 
its regulations.'' \509\ After reviewing the comments, the Board 
continues to believe that the only cost of compliance with the rule is 
reviewing and understanding the substantive changes to the joint-
employer standard. Given that low cost, detailed below, the Board finds 
that this final rule will not have a significant economic impact on any 
small entity. Nevertheless, the Board publishes this FRFA to 
acknowledge and respond to the comments received in response to the 
proposed rule.
---------------------------------------------------------------------------

    \508\ 5 U.S.C. 601.
    \509\ U.S. Small Business Administration (SBA) Office of 
Advocacy, A Guide for Government Agencies: How to Comply with the 
Regulatory Flexibility Act (SBA Guide) 18 (Aug. 2017), https://www.sba.gov/sites/default/files/advocacy/How-to-Comply-with-the-RFA-WEB.pdf.
---------------------------------------------------------------------------

1. Statement of the Need for, and Objectives of, the Rule
    The final rule establishes the standard for determining, under the 
NLRA, whether a business is a joint employer of a group of employees 
directly employed by another employer. This rule is necessary to 
explicitly ground the joint-employer standard in established common-law 
agency principles and provide guidance to parties covered by the Act 
regarding their rights and responsibilities when more than one 
statutory employer possesses the authority to control or exercises the 
power to control employees' essential terms and conditions of 
employment.
    The guidance furnished by the final rule will enable regulated 
parties to determine in advance whether their actions are likely to 
result in a joint-employer finding, which may result in a duty to 
bargain collectively, exposure to what would otherwise be unlawful 
secondary union activity, and unfair labor practice liability. 
Accordingly, a final rule setting forth a comprehensive and detailed 
standard is important to businesses covered by the NLRA, employees of 
those businesses, and labor organizations that represent or seek to 
represent those employees. The final rule accomplishes these objectives 
by defining critical elements of the joint-employer standard and by 
enumerating the factors that will determine whether an entity is a 
joint employer.
2. Statement of the Significant Issues Raised by the Public Comments in 
Response to the Initial Regulatory Flexibility Analysis, a Statement of 
the Assessment of the Agency of Such Issues, and a Statement of any 
Changes Made in the Proposed Rule as a Result of Such Comments
a. Response to Comments Concerning the Direct Cost of Compliance
    The only direct compliance cost for any of the 6.1 million American 
business firms (both large and small) with employees is reading and 
becoming familiar with the text of the new rule. That cost is too low 
to be considered ``significant'' within the meaning of the RFA. NPRM, 
87 FR at 54662 (estimating compliance costs of $151.51 to small 
employers and $99.64 to small labor unions).\510\
---------------------------------------------------------------------------

    \510\ As stated in the Board's IRFA, this minimal compliance 
cost does not increase for the small number of businesses that are 
alleged to be joint employers in Board proceedings. 87 FR 54661. 
Such allegations are not a consequence of the rule, but a 
consequence of members of the public filing charges that initiate 
Board investigations. In any event, they are rare. Between 2018 and 
2021, only 0.15% of all 6.1 million American businesses were alleged 
to be joint employers in Board proceedings.
---------------------------------------------------------------------------

    Some commenters address the direct compliance costs that the Board 
estimated in its IRFA. Some of those comments criticize the Board's 
assumption that reviewing the rule would only require one hour of 
reading time for a human resources specialist and that understanding 
the rule would only require a one-hour consult with an attorney.\511\ 
One comment argues that the one hour of reading time does not account 
for reviewing the materials referenced in the proposed rule, such as 
the Restatement of Agency, which would be necessary to determine 
whether an entity is a joint employer.\512\ Yet, without any empirical 
evidence to demonstrate that reading the text of the rule or meeting 
with an attorney to gain greater understanding of the rule would 
require more than one hour, the Board declines to change its estimates 
of the length of time it will take to do so. To the extent that 
comments are arguing that it will take longer than one hour for an 
attorney to analyze the application of

[[Page 74010]]

the rule to an employer's workforce,\513\ that is an issue of indirect 
cost, which is not considered under the RFA but will be discussed 
below.
---------------------------------------------------------------------------

    \511\ Comments of Independent Bakers Association; Job Creators 
Network; Modern Economy Project; National Association of Convenience 
Stores; U.S. Chamber of Commerce. The U.S. Chamber of Commerce also 
asserts that large business firms will need even more time to read 
and review the rule and that a larger number of managers and 
professionals will be involved in the review, but the comment does 
not explain why this is so, which additional job classifications 
would be involved in reviewing the rule, how much more time would be 
required, or how many additional employees would have to read the 
rule. See comments of U.S. Chamber of Commerce.
    \512\ Comments of Freedom Foundation.
    \513\ Comments of Modern Economy Project; National Association 
of Convenience Stores; Rachel Greszler.
---------------------------------------------------------------------------

    The dissent also disagrees with our estimate of one hour to read 
the rule, but it does not support its assertion that such a 
determination is arbitrary or unreasoned. The estimate is consistent 
with the familiarization time estimated in prior Board rules. In 2018, 
the Board's IRFA estimated that a labor compliance employee at a small 
employer could review the rule--approximately 60,185 words--in ``at 
most one hour.'' 83 FR 46695. Receiving no evidence contradicting this 
estimate, the Board's FRFA contained the same estimate. 85 FR 11234. No 
public comments have provided any empirical basis for an assertion that 
one hour would be insufficient to read this final rule (including 
preamble), which is approximately 61,476 words. Moreover, one hour is 
an average estimated amount of reading time for the approximately 
6,119,657 entities the Board assumes would be subject to the rule. As 
discussed below, the Board has reason to believe that many small 
employers will not read the rule at all because they do not have any 
business relationships that would make this rule applicable to them, 
and others with a history of joint-employment relationships may spend 
more time reviewing the rule. One hour is simply a reasonable average.
    In addition to criticizing the amount of time the Board estimates 
it will take to read and understand the rule, several commenters assert 
that the Board's estimate of the cost of a human resources specialist 
and an attorney are too low.\514\ These commenters, however, provide no 
cost estimates for a human resources specialist.\515\ The current rule 
uses the figure from the Department of Labor's Bureau of Labor 
Statistics (BLS) for a labor relations specialist, even though some 
small businesses may not have such a credentialed and experienced 
employee, because the national average wage rate for that position is 
comparable to that of all private sector employees. The average hourly 
wage for a labor relations specialist was last reported at $42.05; the 
average hourly wage for a private industry employee was last reported 
at $41.03.\516\
---------------------------------------------------------------------------

    \514\ Comments of Independent Bakers Association; Job Creators 
Network Foundation; Modern Economy Project; National Association of 
Convenience Stores; U.S. Chamber of Commerce.
    \515\ The dissent calls the assumption that all small businesses 
have human resources or labor relations personnel to read the rule 
``unjustifiable.'' This is the same assumption, however, that the 
Board made in its 2018 IRFA and reaffirmed in its 2020 FRFA. Compare 
83 FR 46695 with 85 FR 11234. The Board has received no public 
comments suggesting that the assumption is unreasonable.
    \516\ Compare Occupational Employment and Wages, May 2022, 13-
1075 Labor Relations Specialists, found at https://www.bls.gov/oes/current/oes131075.htm (last visited Oct. 19, 2023), with Employer 
Costs for Employee Compensation--June 2023, found at https://www.bls.gov/news.release/pdf/ecec.pdf (last visited Oct. 19, 2023).
---------------------------------------------------------------------------

    Some commenters argue, without any evidence, that the cost of legal 
counsel is at least $300 per hour.\517\ The dissent attempts to buoy 
this argument, criticizing the Board for using the most recent data 
from the BLS. For each of the alternative methods that the dissent 
suggests, it does not explain why those sources are so superior to the 
BLS as to render the majority's analysis arbitrary and capricious. The 
Bloomberg article claims to have compiled national average billing 
rates but only cites rates in atypically expensive markets--New York, 
Washington, DC, Chicago, and San Francisco--and provides little 
information on its survey subjects and research methodology. The Clio 
Legal Trends Report claims that the 1,168 consumers surveyed are 
representative of the U.S. population but does not provide any evidence 
of that or make the same claim for the 1,134 legal professionals who 
responded to the survey. In fact, in its detailed methodology, it 
acknowledges that the only customers included were paid subscribers to 
Clio, not those using a free trial or the Academic Access Program. 
Further, the report excluded data from customers who opted out of 
aggregate reporting. Finally, even though the dissent references the 
Laffey Matrix, which is guided by ``the reasonably hourly rate 
prevailing in the community for similar work,'' it also acknowledges 
that the rate is only applicable to attorneys in the D.C. area. Laffey 
v. Nw. Airlines, Inc., 572 F. Supp. 354, 371 (D.D.C. 1983), aff'd in 
part, rev'd in part, 746 F.2d 4 (D.C. Cir. 1984). It is not arbitrary 
or capricious for the Board to rely on the national average attorney 
wage rates calculated by a federal agency with responsibility for 
compiling data on national labor costs.
---------------------------------------------------------------------------

    \517\ Comments of Independent Bakers Association; Rachel 
Greszler; U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    Another commenter argues that the Board should have included the 
cost of hiring an unknown number of management consultants in order to 
comply with the rule.\518\ And yet another comment presumes that 
compliance with the proposed rule could require hiring a dedicated 
staffer, who would cost thousands of dollars per year.\519\ Other 
commenters fault the Board for undervaluing a small business owner's 
time at just $151.51 per hour and for not taking into account the 
``full opportunity cost of lost overhead and profit contribution 
entailed by the diversion of labor from normal productive activity'' to 
reading the rule.\520\
---------------------------------------------------------------------------

    \518\ Comments of U.S. Chamber of Commerce.
    \519\ Comment of SBA Office of Advocacy.
    \520\ Comments of National Association of Convenience Stores; 
U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    None of these comments justify changes to the Board's initial 
assumptions regarding the job classifications that would be involved in 
reading the final rule or the cost of that time. None of the comments 
provide evidence that the Board could use to reevaluate its estimated 
costs, which are derived from wage and benefit figures provided by the 
Department of Labor's BLS.
    Comments regarding the ``full opportunity cost of lost overhead and 
profit contribution entailed by the diversion of labor from normal 
productive activity'' misunderstand the Board's calculus. The Board 
does not assume that these job functions are already being performed by 
a small business's owner or employees. That is why the Board identifies 
the time spent reading and consulting about the rule as an additional 
cost of compliance rather than assuming that keeping abreast of changes 
in employment and labor law is already a part of a human resources 
specialist's or in-house counsel's job function. However, these 
comments have persuaded the Board to add to its assessment of direct 
compliance costs an additional hour of time for a human resources or 
labor relations specialist to meet with the attorney, rather than 
assuming that the one-hour consult is already part of that human 
resources or labor relations specialist's job function. That addition 
is reflected in Section VI.A.5 below.
    Other comments generally assert that the Board's estimated 
compliance costs are inaccurate, and a new assessment of costs is 
required.\521\ They provide no detail or evidence to support their 
assertions.
---------------------------------------------------------------------------

    \521\ Comments of Colorado Bankers Association; National 
Association of Insurance and Financial Advisors; RaceTrac, Inc.; 
Restaurant Law Center; Rio Grande Foundation; U.S. Black Chambers, 
Inc.
---------------------------------------------------------------------------

b. Response to Comments Concerning Indirect or Speculative Cost of 
Compliance
    The remaining comments regarding the Board's estimated compliance 
costs

[[Page 74011]]

concern indirect or speculative costs that are not direct costs of the 
rule.
    Avoidance Costs. The majority of the remaining comments focus on 
the cost associated with avoiding a joint-employer relationship.\522\ 
For example, two commenters argue that the proposed rule increases the 
``price'' for an employer to avoid joint-employer status because 
businesses that structured their relationships to avoid joint-employer 
liability under the 2020 rule will have to change existing policies, 
procedures, and contracts to achieve the same end under this final 
rule.\523\ Some commenters fear that the proposed rule will cause 
larger businesses to cancel contracts with smaller entities to avoid 
joint-employer status and the liability that comes with it.\524\ Other 
commenters count as compliance costs the cost of regularly hiring legal 
counsel to ensure that any change in supplier or contracts does not 
inadvertently create a joint-employer relationship.\525\ In the 
building industry, one commenter notes, there are several potential 
joint-employment relationships between builders and a multitude of 
subcontracted businesses that vary by jobsite.\526\ The increased 
number of business relationships at play, the commenter states, will 
make it more costly to obtain legal counsel to determine which entities 
will be classified as joint employers under the final rule.
---------------------------------------------------------------------------

    \522\ Comments of Elizabeth Boynton; Job Creators Network 
Foundation; Modern Economy Project; National Association of 
Convenience Stores.
    \523\ Comments of Colorado Bankers Association; U.S. Chamber of 
Commerce.
    \524\ Comments of Modern Economy Project; Rio Grande Foundation; 
SBA Office of Advocacy; U.S. Chamber of Commerce.
    \525\ Comments of Elizabeth Boynton; Goldwater Institute; 
Independent Electrical Contractors; One Energy; Reid Stores, Inc. d/
b/a Crosby's.
    \526\ Comments of NAHB.
---------------------------------------------------------------------------

    Other comments focus on the possibility that larger companies and 
franchisors will provide less support to smaller companies, 
subcontractors, and franchisees to avoid liability for the smaller 
entities' labor violations.\527\ These commenters predict that the 
proposed rule will result in a decrease in entrepreneurial 
opportunities for small businesses and contractors,\528\ which would 
result in economic inefficiencies as larger businesses and general 
contractors would supplant the work of smaller ones and no longer focus 
on their core competencies.\529\
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    \527\ Comments of IFA; Job Creators Network Foundation; 
McDonald's USA, LLC; National Association of Convenience Stores; 
NFIB; Rachel Greszler; SBA Office of Advocacy; U.S. Black Chambers, 
Inc.
    \528\ Comments of IFA; Independent Bakers Association; Job 
Creators Network Foundation; McDonald's USA, LLC; Modern Economy 
Project; National Association of Convenience Stores; NFIB; Rachel 
Greszler; SBA Office of Advocacy; U.S. Black Chambers, Inc.
    \529\ Comments of NFIB; SBA Office of Advocacy.
---------------------------------------------------------------------------

    Conversely, one commenter notes, the proposed rule could result in 
a franchisor seeking to exert more control over its franchises. For 
example, in response to a single franchisee unionizing or engaging in 
collective bargaining, the franchisor could impose a standardized 
minimum wage at all its franchise locations.\530\
---------------------------------------------------------------------------

    \530\ Comments of U.S. Black Chambers, Inc.
---------------------------------------------------------------------------

    Potential Legal Expenses. Commenters also assert that the proposed 
rule will increase an employer's exposure to allegations of unfair 
labor practices, which will in turn increase insurance and legal costs 
for small businesses.\531\ Some commenters believe the costs will come 
from new or increased liability under the new rule.\532\ Other comments 
focus on the supposed vagueness of the proposed rule, arguing that it 
increases the likelihood of litigation over whether a business is a 
joint employer. Accordingly, these comments argue that the Board should 
have included as a compliance cost the cost of participating in a Board 
case.\533\ In support of this position, two comments note that, after 
Browning-Ferris issued, some franchisors claimed to experience a 
significant increase in joint-employer claims across all spectrums of 
the law and some franchisees incur increased costs because they were 
compelled to seek outside guidance through attorneys or other 
consultants on matters in which the franchisor used to assist.\534\ 
Some commenters also note that every contract their companies enter 
into will need additional legal scrutiny for its possible exposure to a 
joint-employer finding \535\ or to determine whether they are required 
to be a party to another business's collective-bargaining process.\536\
---------------------------------------------------------------------------

    \531\ Comments of Job Creators Network Foundation; National 
Association of Convenience Stores; NFIB; SBA Office of Advocacy; 
U.S. Chamber of Commerce.
    \532\ Comments of Colorado Bankers Association; Rio Grande 
Foundation; SBA Office of Advocacy.
    \533\ Comments of Goldwater Institute; Independent Electrical 
Contractors; Independent Lubricant Manufacturers Association; Modern 
Economy Project; One Energy; Reid Stores Inc. d/b/a Crosby's; U.S. 
Chamber of Commerce.
    \534\ Comments of IFA; Rachel Greszler.
    \535\ Comments of Independent Lubricant Manufacturers 
Association; Modern Economy Project.
    \536\ Comments of Elizabeth Boynton.
---------------------------------------------------------------------------

    Potential Costs If Entities Are Joint Employers Under the New Rule. 
If a party is determined to be a joint employer, it will have to 
allocate time and resources to collective bargaining and other costs 
associated with unionization efforts and elections, some commenters 
assert.\537\ The dissent also contemplates reviewing existing business 
contracts and participating in collective bargaining as direct 
compliance costs. Another commenter adds that unions will seek to 
exploit collective bargaining with franchisors to impose higher wages 
on small business franchisees.\538\ Yet another comment states that the 
Board failed to consider costs associated with revising or outsourcing 
training materials, such as training regarding operational best 
practices, guidance on employee handbooks or other personnel policies, 
and sample policies or best practices regarding workplace civil rights 
issues.\539\
---------------------------------------------------------------------------

    \537\ Comments of Elizabeth Boynton; Rachel Greszler.
    \538\ Comments of NFIB.
    \539\ Comments of Modern Economy Project.
---------------------------------------------------------------------------

    Respectfully, neither the dissent nor the foregoing comments raises 
direct economic impacts under the RFA. How a small entity structures 
its business relationships is discretionary. The rule sets forth no 
requirement that employers embrace or avoid joint-employer status. It 
merely brings the Board's test for determining joint-employer status 
back in line with the common law, as interpreted by the District of 
Columbia Circuit in Browning-Ferris Industries of California, Inc. v. 
NLRB, 911 F.3d 1195 (D.C. Cir. 2018). If a regulated entity chooses to 
reevaluate its contractual or business relationships in light of the 
rule's return to the common-law standard, that is a choice within its 
discretion, but it is not a direct compliance cost of the rule. 
Similarly, if an entity chooses to accept or dispute an allegation of 
joint-employer status in litigation or elsewhere, that is a 
discretionary choice. It is not required to do so under the rule. 
Moreover, the implications of that choice are entirely speculative. No 
commenter provided any quantifiable evidence demonstrating that a 
joint-employer finding inevitably increases costs on small businesses.
    Our conclusion that the RFA requires agencies to consider only 
direct compliance costs finds support in the RFA, its caselaw, and 
guidance from the SBA's Office of Advocacy. The RFA does not require an 
agency to consider speculative and wholly discretionary responses to 
the rule, or the indirect impact on every stratum of the economy. 
Section 603(a) of the RFA states that if an IRFA is required, it 
``shall describe the impact of the

[[Page 74012]]

proposed rule on small entities.'' 5 U.S.C. 603(a). Although the term 
``impact'' is undefined, its meaning can be gleaned from Section 
603(b), which recites the required elements of an IRFA. One such 
element is ``a description of the projected reporting, recordkeeping 
and other compliance requirements of the proposed rule, including an 
estimate of the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record.'' 5 U.S.C. 603(b)(4) (emphasis 
added). Section 604 further corroborates the Board's conclusion, as it 
contains an identical list of requirements for a FRFA (if one is 
required). 5 U.S.C. 604(b)(4).
    The courts, too, have recognized that the statute only requires 
that the regulatory agency consider the direct burden that compliance 
with a new regulation will likely impose on small entities. See Mid-Tex 
Electric Cooperative, Inc. v. FERC, 773 F.2d 327, 342 (D.C. Cir. 1985) 
(``[I]t is clear that Congress envisioned that the relevant `economic 
impact' was the impact of compliance with the proposed rule on 
regulated small entities.''); accord White Eagle Cooperative Assn. v. 
Conner, 553 F.3d 467, 478 (7th Cir. 2009); Colorado State Banking Board 
v. Resolution Trust Corp., 926 F.2d 931, 948 (10th Cir. 1991).
    Additional support for confining the regulatory analysis to direct 
compliance costs is found in an authoritative guide published by the 
SBA Office of Advocacy. The SBA Guide explains that ``other compliance 
requirements'' under section 603 include the following examples:

    (a) capital costs for equipment needed to meet the regulatory 
requirements; (b) costs of modifying existing processes and 
procedures to comply with the proposed rule; (c) lost sales and 
profits resulting from the proposed rule; (d) changes in market 
competition as a result of the proposed rule and its impact on small 
entities or specific submarkets of small entities; (e) extra costs 
associated with the payment of taxes or fees associated with the 
proposed rule; and (f) hiring employees dedicated to compliance with 
regulatory requirements.

SBA Guide at 37. These are all direct, compliance-based costs.
    In the IRFA, the Board noted that the only identifiable compliance 
cost imposed by the proposed rule is reviewing and understanding the 
substantive changes to the joint-employer standard. 87 FR at 54659. 
Otherwise, there will be no ``reporting, recordkeeping and other 
compliance requirements'' for these small entities. See 5 U.S.C. 
603(b)(4), 604(b)(4). The same is true of the final rule. The final 
rule imposes no mandatory capital costs or mandatory costs of modifying 
existing processes, results in no lost sales or profits, and creates no 
appreciable changes in market competition. See SBA Guide at 37. Lastly, 
there are no costs associated with taxes or fees and no costs for 
additional employees dedicated to compliance, as no compliance 
requirements exist. See id.
    Consistent with these principles, the Board rejects the view that 
it must include as direct compliance costs employers' discretionary 
responses to the rule, as suggested by the comments discussed above. 
See Mid-Tex Electric Cooperative, 773 F.2d at 343 (``Congress did not 
intend to require that every agency consider every indirect effect that 
any regulation might have on small businesses in any stratum of the 
national economy.''). ``[R]equir[ing] an agency to assess the impact on 
all of the nation's small businesses possibly affected by a rule would 
be to convert every rulemaking process into a massive exercise in 
economic modeling, an approach we have already rejected.'' Cement Kiln 
Recycling Coalition v. EPA, 255 F.3d 855, 869 (D.C. Cir. 2001) (citing 
Mid-Tex Electric Cooperative, 773 F.2d at 343). The rule does not 
require contracting parties to alter their arrangements now or in the 
future. It therefore cannot be said that actions taken by employers to 
avoid a joint-employer relationship, or any costs associated with those 
actions or passed on to other entities because of that attempt at 
avoidance, is a direct cost of compliance with the rule.
    Commenters also ask the Board to count as a direct compliance cost 
of the rule the cost of actions that other entities might take in 
response to the rule without any indication that those actions are 
required for compliance with the rule. These comments about what larger 
companies or franchisors might do to avoid joint-employer liability are 
speculative and too attenuated to be incorporated into the Board's 
analysis of compliance costs with the rule. Many of these concerns are 
not even specific to joint-employer relationships. For example, the 
costs associated with opposing unionization efforts, participating in 
Board elections, and bargaining with employees' duly elected 
representatives can exist even where no joint-employer relationship 
does.
    The dissent takes issue with our citations to four cases, which 
were also cited in the FRFA of the 2020 rule: Mid-Tex Electric 
Cooperative, White Eagle Cooperative Assn., Cement Kiln Recycling 
Coalition, and Colorado State Banking Board, and instead suggests that 
AFL-CIO v. Chertoff, 552 F. Supp. 2d 999 (N.D. Cal. 2007) is more 
instructive. The problem with the dissent's objection to these cases is 
twofold. First, it mischaracterizes their use: the rule cites these 
cases because they hold that the RFA only requires an agency to 
consider the direct burden that compliance imposes on small entities, 
not every indirect effect that regulation might have on any other 
business, regardless of size and whether the entity is directly 
regulated by the rule. Compare 83 FR 46695 and 85 FR 11229 with 87 FR 
54662.
    Second, the dissent's reliance on Chertoff is misplaced because, in 
that case, the agency made a procedural error by certifying the rule 
instead of conducting an initial or final regulatory flexibility 
analysis. 552 F. Supp. 2d at 1013.\540\ The agency's rationale was that 
the rule did not place any new burdens on the employer or impose any 
new or additional costs because its new safe harbor procedure was 
voluntary. Id. But the court took exception with the agency's refusal 
to consider the direct compliance costs raised by the plaintiffs. Id. 
Here, no such procedural error exists because the Board has conducted 
an initial and final regulatory flexibility analysis, considered and 
engaged with all comments regarding the rule's direct compliance costs, 
and found no evidence, only unsupported argument, contradicts its 
findings.\541\
---------------------------------------------------------------------------

    \540\ Contrary to the dissent, it is material, if not 
dispositive, that Chertoff's holding is limited to finding 
procedural error in DHS's failure to conduct a regulatory 
flexibility analysis. In the context of a motion for a preliminary 
injunction, the court in Chertoff held only that, ``there are 
serious questions whether DHS violated the RFA'' by failing ``to 
conduct a final flexibility analysis'' that evaluated possible 
direct costs. 552 F. Supp. 2d at 1013. The Court never decided 
whether the proffered costs were actually direct costs under the 
Regulatory Flexibility Act.
    \541\ Moreover, the agency's argument in Chertoff that there 
were no compliance costs because the rule was voluntary is distinct 
from the voluntary nature of the joint employer rule. In that case, 
an employer's failure to voluntarily comply with the regulation's 
safe harbor procedure could have exposed the employer to criminal 
and civil liability. But the Board has no authority to impose 
criminal liability, and the joint-employer rule imposes no civil 
liability. Being a joint employer imposes a duty to bargain in good 
faith, but it is Sec. 8(a)(5) of the Act, and not the joint-employer 
rule, that imposes civil liability for refusing to bargain. As the 
Board noted in the 2020 joint-employer rule, ``[u]nfair labor 
practice liability is the cost of not complying with the NLRA, not a 
cost of compliance with the Board's joint-employer rule.'' 85 FR 
11230.
---------------------------------------------------------------------------

c. Response to Comments Concerning Potential Conflicts With Other 
Federal Laws
    Some comments contend that the Board has failed to identify all 
relevant

[[Page 74013]]

rules and regulations that may ``conflict with the proposed rule,'' as 
section 603(b)(5) of the RFA requires, but those comments do not 
specifically identify any potential conflicts.\542\ One commenter 
argues that the proposed rule directly undermines the Lanham Act's 
requirements that franchisors maintain control over the use of their 
marks and would penalize franchisors who maintain that control by 
labeling them joint employers.\543\ Another asserts that businesses 
will now need to reconcile the differences between how the Board and 
the Internal Revenue Service view employer relationships.\544\ And 
other comments argue that the proposed rule conflicts with the federal 
law requiring prime contractors to have indirect and reserved control 
over their subcontractors' compliance with federal laws such as the 
Occupational Safety and Health Act, the Fair Labor Standards Act, the 
Davis-Bacon Act, and the prohibition of discrimination in hiring 
administered by the Department of Labor's Office of Federal Contract 
Compliance Programs.\545\ These comments further argue that these 
required terms, which are also present in many third-party contracts, 
should be considered routine and not indicative of a joint-employer 
relationship.
---------------------------------------------------------------------------

    \542\ Comments of Goldwater Institute; IFA; National Association 
of Insurance and Financial Advisors; SBA Office of Advocacy.
    \543\ Comments of IFA.
    \544\ Comments of Elizabeth Boynton.
    \545\ Comments of Goldwater Institute; SBA Office of Advocacy.
---------------------------------------------------------------------------

    According to the SBA Guide, at 40, rules are conflicting when they 
impose two conflicting regulatory requirements on the same classes of 
industry.\546\ None of the comments demonstrate a conflict under this 
definition. The comments do not cite the purportedly conflicting 
authorities (such as the Federal Acquisition Regulation or the Internal 
Revenue Code). In any event, it is axiomatic that the same term may 
have different meanings in different statutes, based on each law's 
text, purpose, and legislative history.\547\ As we state above, the 
rule applies only to the NLRA,\548\ and commenters have not shown that, 
to the extent they exist, any dissimilar requirements would not be 
workable. Finally, because the final rule does not mandate that 
employers structure their business relationships in any particular 
manner, the final rule does not directly expose regulated entities to 
conflicting obligations. While entities may choose to rearrange their 
business relationships to avoid joint-employer status, that is distinct 
from a regulation obligating entities to engage in a particular 
business relationship.
---------------------------------------------------------------------------

    \546\ SBA Guide, at 40.
    \547\ Yates v. United States, 574 U.S. 528, 537 (2015) 
(``Ordinarily, a word's usage accords with its dictionary 
definition. In law as in life, however, the same words, placed in 
different contexts, sometimes mean different things.''); 
Environmental Defense v. Duke Energy Corp., 549 U.S. 561, 574 (2007) 
(``We also understand that `[m]ost words have different shades of 
meaning and consequently may be variously construed, not only when 
they occur in different statutes, but when used more than once in 
the same statute or even in the same section.' '') (quoting Atlantic 
Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 433 (1932)). 
For example, the term ``employee'' has different meanings under the 
NLRA and the Fair Labor Standards Act. See supra fn. 338.
    \548\ See supra fn. 340.
---------------------------------------------------------------------------

3. Response of the Agency to any Comments Filed by the Chief Counsel 
for Advocacy of the Small Business Administration in Response to the 
Proposed Rule, and a Detailed Statement of any Change Made to the 
Proposed Rule in the Final Rule as a Result of the Comments
    The SBA Office of Advocacy submitted a comment that expresses four 
main concerns: that the proposed rule is so ambiguous and broad that it 
does not provide guidance on how to comply or avoid joint-employer 
liability, and that the Board should resolve purported conflicts with 
existing federal requirements, reassess the cost of compliance with the 
proposed rule, and consider significant alternatives that would 
accomplish the objectives of the NLRA while minimizing the economic 
impacts to small entities as required by the RFA.
    As discussed in Section II.B above, the final rule heeds the SBA 
Office of Advocacy's request for more specific guidance in three ways: 
(1) Sec.  103.40(d) of the final rule provides an exhaustive list of 
the seven categories of terms and conditions of employment that will be 
considered essential for the joint-employer inquiry; (2) Sec.  
103.40(e) of the final rule clarifies that, to establish joint-employer 
status, the common-law employer must possess exercised or unexercised 
authority to control, or exercise the power to control indirectly, such 
as through an intermediary, an essential term or condition of 
employment; and (3) Sec.  103.40(f) of the final rule clarifies that 
evidence of an entity's control over matters that are immaterial to the 
existence of an employment relationship under common-law agency 
principles and that do not bear on the employees' essential terms and 
conditions of employment is not relevant to the determination of joint-
employer status.
    Contrary to the SBA Office of Advocacy's second criticism, the 
final rule does not contain any conflicts with existing federal 
requirements. The SBA Office of Advocacy's first asserted conflict is 
with federal requirements that require prime contractors to have 
indirect and reserved control over their subcontractor's terms and 
conditions of employment, such as wages, safety, hiring, and firing, 
which is discussed in Section VI.A.2.c. above. The SBA Office of 
Advocacy's second asserted conflict is that the proposed rule may 
conflict with a recent Presidential initiative to bolster the ranks of 
underserved small business contractors by discouraging mentorship and 
guidance from larger prime contractors.\549\ The NLRB strongly supports 
efforts to increase diversity and inclusion in federal contracting. The 
SBA Office of Advocacy's comment, however, does not identify any way in 
which the final rule would prohibit larger contractors from offering 
mentorship and guidance to smaller contractors from underserved 
populations. Nor does its comment explain, as it implicitly suggests, 
how a larger contractor's provision of mentorship and guidance to a 
smaller contractor could create a joint-employer relationship under the 
rule.
---------------------------------------------------------------------------

    \549\ Press Release, The White House, Statements and Releases, 
FACT SHEET: Biden-Harris Administration Announces Reforms to 
Increase Equity and Level the Playing Field for Underserved Small 
Business Owners, (Dec. 2, 2021).
---------------------------------------------------------------------------

    The SBA Office of Advocacy's comment also asserts that the Board 
has underestimated the compliance costs of the final rule. However, the 
comment did not identify any direct compliance costs that the Board has 
overlooked and only mentioned indirect or speculative costs, which were 
raised by other commenters and addressed by the Board in Section 
VI.A.2.b above.
    Finally, the comment twice encourages the Board to consider 
significant alternatives that would accomplish the objectives of the 
statute while minimizing the economic impacts on small entities, as 
required by the RFA, but provides no suggestions to that end. 
Consistent with the RFA's mandate, the Board has considered such 
alternatives in Section VI.6 below.
4. Description and Estimate of Number of Small Entities to Which the 
Rule Applies
    In order to evaluate the impact of the proposed rule, the Board 
first identified the entire universe of businesses that could be 
impacted by a change in the joint-employer standard. According to the 
United States Census Bureau, there were 6,140,612 business firms with

[[Page 74014]]

employees in 2020.\550\ Of those, the Census Bureau estimates that 
about 6,119,657 were firms with fewer than 500 employees.\551\ While 
this final rule does not apply to employers that do not meet the 
Board's jurisdictional requirements, the Board does not have the data 
to determine the number of excluded entities (nor were data or comments 
received on this particular issue).\552\
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    \550\ U.S. Department of Commerce, Bureau of Census, 2020 
Statistics of U.S. Businesses (``SUSB'') Annual Data Tables by 
Enterprise Employment Size, https://www.census.gov/data/tables/2020/econ/susb/2020-susb-annual.html (from downloaded Excel Table 
entitled ``U.S. & States, 6-digit NAICS'' found at https://www2.census.gov/programs-surveys/susb/tables/2020/us_state_6digitnaics_2020.xlsx. ``Establishments'' refer to single 
location entities--an individual ``firm'' can have one or more 
establishments in its network. The Board has used firm-level data 
for this IRFA because establishment data is not available for 
certain types of employers discussed below. Census Bureau 
definitions of ``establishment'' and ``firm'' can be found at 
https://www.census.gov/programs-surveys/susb/about/glossary.html 
(last visited June 2, 2023).
    The proposed rule references the Census Bureau's 2019 Statistics 
of U.S. Businesses (``SUSB'') data tables, the most recent data 
available at the time of publication. Because the 2020 SUSB data 
tables are now available, the FRFA uses that updated data. However, 
the changes are not statistically significant, as the joint-employer 
standard will continue to most directly impact the same percentage 
of businesses large and small.
    \551\ The Census Bureau does not specifically define small 
business but does break down its data into firms with 500 or more 
employees and those with fewer than 500 employees. See U.S 
Department of Commerce, Bureau of Census, 2020 SUSB Annual Data 
Tables by Enterprise Employment Size, https://www.census.gov/data/tables/2020/econ/susb/2020-susb-annual.html (from downloaded Excel 
Table entitled ``U.S. & States, 6-digit NAICS''), found at https://www2.census.gov/programs-surveys/susb/tables/2020/us_state_6digitnaics_2020.xlsx. Consequently, the 500-employee 
threshold is commonly used to describe the universe of small 
employers. For defining small businesses among specific industries, 
the standards are defined by the North American Industry 
Classification System (NAICS), which we set forth below.
    \552\ Pursuant to 29 U.S.C. 152(6) and (7), the Board has 
statutory jurisdiction over private sector employers whose activity 
in interstate commerce exceeds a minimal level. NLRB v. Fainblatt, 
306 U.S. 601, 606-607 (1939). To this end, the Board has adopted 
monetary standards for the assertion of jurisdiction that are based 
on the volume and character of the business of the employer. In 
general, the Board asserts jurisdiction over employers in the retail 
business industry if they have a gross annual volume of business of 
$500,000 or more. Carolina Supplies Cement Co., 122 NLRB 88 (1959). 
But shopping center and office building retailers have a lower 
threshold of $100,000 per year. Carol Management Corp., 133 NLRB 
1126 (1961). The Board asserts jurisdiction over nonretailers 
generally where the value of goods and services purchased from 
entities in other states is at least $50,000. Siemons Mailing 
Service, 122 NLRB 81 (1959). See also supra fn. 104.
    The following employers are excluded from the NLRB's 
jurisdiction by statute: federal, state and local governments, 
including public schools, libraries, and parks; Federal Reserve 
banks, and wholly owned government corporations, 29 U.S.C. 152(2); 
employers that employ only agricultural laborers, those engaged in 
farming operations that cultivate or harvest agricultural 
commodities or prepare commodities for delivery, 29 U.S.C. 152(3); 
and employers subject to the Railway Labor Act, such as interstate 
railroads and airlines, 29 U.S.C. 152(2).
---------------------------------------------------------------------------

    The final rule will only be applied as a matter of law when 
businesses are alleged to be joint employers in a Board proceeding. 
Therefore, the frequency with which the issue comes before the Board is 
indicative of the number of entities of any size most directly impacted 
by the final rule. A review of the Board's representation petitions and 
unfair labor practice charges provides a basis for estimating the 
frequency with which the joint-employer issue comes before the Agency. 
Between January 1, 2013, and December 31, 2017, the five-year period 
before the Board began rulemaking on this issue, joint-employer 
relationships were only alleged in 1.39% of the Board's cases. 83 FR 
46693; 85 FR 11232. Accounting for repetitively alleged joint-employer 
relationships in these cases, the Board identified 823 separate joint-
employer relationships involving an estimated 1,646 employers, .028% of 
all 5.9 million business firms, large and small, 83 FR 46693, which the 
Board deemed ``very few employers,'' 83 FR 46695.
    Using the same methodology, the current majority found that, during 
the four-year period between January 1, 2018 and December 31, 2021, a 
total of 75,343 representation and unfair labor practice cases were 
initiated with the Agency. In 772 of those filings, the representation 
petition or unfair labor practice charge asserted a joint-employer 
relationship between at least two employers, which accounts for 1.02% 
of the Board's cases.\553\ Accounting for repetitively alleged joint-
employer relationships in these filings, the Board has identified 467 
separate alleged joint-employer relationships involving an estimated 
934 employers.\554\ Accordingly, the joint-employer standard most 
directly impacted approximately .015% of all 6,140,612 business firms 
(including both large and small businesses) over the four-year period. 
And, the Board is unaware of any cases between 2018 and 2021 that were 
determined by contractually reserved or indirectly exercised control, 
and no public comments have directed us to one.
---------------------------------------------------------------------------

    \553\ This includes initial representation case petitions (RC 
petitions) and unfair labor practice charges (CA cases) filed 
against employers.
    \554\ Since a joint-employer relationship requires at least two 
employers, we have estimated the number of employers by multiplying 
the number of asserted joint-employer relationships by two. Some of 
these filings assert more than two joint employers, but, on the 
other hand, some of the same employers are named multiple times in 
these filings. Additionally, this number is certainly inflated 
because the data do not reveal those cases where a joint-employer 
relationship exists but the parties' joint-employer status is not in 
dispute.
---------------------------------------------------------------------------

    This data belies the dissent's assertion that this rule will make 
``many'' small businesses joint employers for the first time or 
``dramatically increase'' the number of entities deemed joint employer 
since the new standard is so closely aligned with the pre-rulemaking 
standard, under which a similar number of employers were alleged as 
joint employers. In fact, since a large share of our joint-employer 
cases involve two large employers, the Board expects that an even lower 
percentage of small businesses have been and will be most directly 
impacted by the Board's application of the rule.
    As discussed in the NPRM, irrespective of an Agency proceeding, the 
rule may be more relevant to certain types of small employers because 
their business relationships involve the exchange of employees or 
operational control.\555\ 87 FR at 54660. In addition, labor unions, as 
organizations representing or seeking to represent employees, will be 
impacted by the Board's change in its joint-employer standard. Thus, 
the Board identified the following five types of small businesses or 
entities as those most likely to be impacted by the rule: contractors/
subcontractors; temporary help service suppliers; temporary help 
service users; franchisees; and labor unions.\556\
---------------------------------------------------------------------------

    \555\ The Board acknowledges that there are other types of 
entities and/or relationships between entities that may be affected 
by this change in the joint-employer rule. Such relationships 
include but are not limited to lessor/lessee and parent/subsidiary. 
However, the Board does not believe that entities involved in these 
relationships would be impacted more than the entities discussed 
below.
    \556\ Comments received in response to the 2022 IRFA did not 
reveal any other categories of small entities that would likely take 
a special interest in a change in the standard for determining 
joint-employer status under the Act or indicate that there is a 
unique burden for entities in these categories. 85 FR 11234.
---------------------------------------------------------------------------

    (1) Businesses commonly contract with vendors to receive a wide 
range of services that may satisfy their primary business objectives or 
solve discrete problems they are not qualified to address. And there 
are seemingly unlimited types of vendors that provide these types of 
contract services. Businesses may also subcontract work to vendors to 
satisfy their own contractual obligations--an arrangement common to the 
construction industry. Businesses that contract to receive or provide 
services often share workspaces and sometimes share control over 
workers, rendering their relationships subject to application of the 
Board's

[[Page 74015]]

joint-employer standard. The Board does not have the means to identify 
precisely how many businesses are impacted by contracting and 
subcontracting within the United States or how many contractors and 
subcontractors would be small businesses as defined by the SBA.\557\
---------------------------------------------------------------------------

    \557\ Though the Board has previously solicited input on the 
number of contractors and subcontractors that qualify as small 
businesses, 83 FR 46694 fn. 56, 85 FR 11234, 87 FR 54660, it has 
received no responsive comments.
---------------------------------------------------------------------------

    (2) Temporary help service suppliers (NAICS #561320) are primarily 
engaged in supplying workers to supplement a client employer's 
workforce. To be defined as a small business temporary help service 
supplier by the SBA, the entity must generate receipts of less than $34 
million annually.\558\ In 2017, there were 14,343 temporary service 
supplier firms in the United States.\559\ Of these temporary service 
supplier firms, 13,384 had receipts of $29,999,999 or less. Since the 
Board cannot determine how many of the 117 firms with receipts between 
$30 million and $34,999,000 fall below the $34 million annual receipt 
threshold, it assumes that these are all small businesses as defined by 
the SBA. Therefore, for purposes of this FRFA, the Board assumes that 
13,501 temporary help service supplier firms (94.1% of total) are small 
businesses.
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    \558\ 13 CFR 121.201. Between the publication of the NPRM and 
the final rule, changes in the Small Business Size Regulations 
increased the total number of potentially affected entities by 166 
firms across all five categories. Though that change is 
statistically insignificant, the Board chose to include the most 
updated figures in this FRFA.
    \559\ The Census Bureau only provides data about receipts in 
years ending in 2 or 7, so the 2017 data is the most recent 
available information regarding receipts. See U.S Department of 
Commerce, Bureau of Census, 2017 SUSB Annual Data Tables by 
Establishment Industry, NAICS classification #561320, https://www2.census.gov/programs-surveys/susb/tables/2017/us_6digitnaics_rcptsize_2017.xlsx.
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    (3) Entities that use temporary help services to staff their 
businesses are widespread throughout many industries. The Census 
Bureau's 2020 Annual Business Survey revealed that of the 2,687,205 
respondent firms with paid employees, 94,930 of those firms obtained 
staffing from temporary help services in that calendar year.\560\ This 
survey provides the only gauge of employers that obtain staffing from 
temporary help services, and the Board is without the means to estimate 
what portion of those are small businesses as defined by the NAICS. For 
that reason, and because no other comments were received on this topic, 
the Board assumes for purposes of this FRFA that all users of temporary 
services are small businesses.
---------------------------------------------------------------------------

    \560\ U.S. Department of Commerce, Bureau of Census, 2020 Annual 
Business Survey--Characteristics of Businesses, https://www.census.gov/data/tables/2020/econ/abs/2020-abs-characteristics-of-businesses.html (from downloaded Excel Table entitled ``Type(s) 
of Workers Employed by Sector, Sex, Ethnicity, Race, and Veteran 
Status,'' found at https://data.census.gov/cedsci/
table?q=ab1900%2a&tid=ABSCB2019.AB1900CSCB01&hidePreview=true&nkd=QDE
SC~B20).
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    (4) Franchising is a method of distributing products or services in 
which a franchisor lends its trademark or trade name and a business 
system to a franchisee, which pays a royalty and often an initial fee 
for the right to conduct business under the franchisor's name and 
system.\561\ Franchisors generally exercise some operational control 
over their franchisees, which potentially renders the relationship 
subject to application of the Board's joint-employer standard. The 
Board explained in the NPRM that it does not have the means to identify 
precisely how many franchisees operate within the United States or how 
many are small businesses as defined by the SBA. The Census Bureau's 
2020 Annual Business Survey revealed that, of the 130,492 firms that 
operated a portion of their business as a franchise, 125,989 had fewer 
than 500 paid employees.\562\ Based on this available data and the fact 
that the 500-employee threshold is commonly used to describe the 
universe of small employers, we assume that 125,989 (96.5% of total) 
are small businesses.
---------------------------------------------------------------------------

    \561\ See International Franchising Establishments FAQs, found 
at https://www.franchise.org/faqs-about-franchising.
    \562\ U.S. Department of Commerce, Bureau of Census, 2020 Annual 
Business Survey--Characteristics of Businesses, https://www.census.gov/data/tables/2020/econ/abs/2020-abs-characteristics-of-businesses.html (from downloaded Excel Table entitled 
``Businesses Operated as a Franchise by Sex, Ethnicity, Race, 
Veteran Status, and Employment Size of Firm,'' found at https://
data.census.gov/cedsci/
table?q=ab1900%2a&tid=ABSCB2019.AB1900CSCB04&hidePreview=true&nkd=QDE
SC~B06).
---------------------------------------------------------------------------

    (5) Labor unions, as defined by the NLRA, are entities ``in which 
employees participate and which exist for the purpose . . . of dealing 
with employers concerning grievances, labor disputes, wages, rates of 
pay, hours of employment, or conditions of work.'' \563\ By defining 
which employers are joint employers under the NLRA, the final rule 
impacts labor unions generally, and more directly impacts those labor 
unions that organize in the specific business sectors discussed above. 
The SBA's small business standard for ``Labor Unions and Similar Labor 
Organizations'' (NAICS #813930) is $16.5 million in annual 
receipts.\564\ In 2017, there were 13,137 labor union firms in the 
U.S.\565\ Of these firms, at least 12,964 labor union firms (98.6% of 
total) had receipts of under $15 million and are definitely small 
businesses according to SBA standards. Since the Board cannot determine 
how many of the 49 labor union firms with receipts between $15 million 
and $19,999,999 fall below the $16.5 million annual receipt threshold, 
it assumes that these are all small businesses as defined by the SBA. 
For the purposes of the IRFA, the Board assumes that 13,013 labor union 
firms (99% of total) are small businesses.
---------------------------------------------------------------------------

    \563\ 29 U.S.C. 152(5).
    \564\ 13 CFR 121.201.
    \565\ See U.S Department of Commerce, Bureau of Census, 2017 
SUSB Annual Data Tables by Establishment Industry, NAICS 
classification #722513, https://www2.census.gov/programs-surveys/susb/tables/2017/us_6digitnaics_rcptsize_2017.xlsx.
---------------------------------------------------------------------------

    Based on the foregoing, the Board assumes that 13,501 temporary 
help supplier firms, 125,989 franchise firms, and 13,013 union firms 
are small businesses; and it further assumes that all 94,930 temporary 
help user firms are small businesses. Therefore, among these four 
categories of employers that are most interested in the final rule, 
247,433 business firms are assumed to be small businesses as defined by 
the SBA. The Board believes that all these small businesses, and also 
those businesses regularly engaged in contracting/subcontracting, have 
a general interest in the rule and would be impacted by the compliance 
costs, discussed below, related to reviewing and understanding the 
rule. But, as previously noted, employers will only be most directly 
impacted when they are alleged to be a joint employer in a Board 
proceeding. Given the Board's historic filing data, this number is very 
small relative to the number of small employers in these five 
categories.
    Throughout the IRFA, the Board requested comments or data that 
might improve its analysis, 87 FR at 54659-61, but no additional data 
was received regarding the number of small entities to which the rule 
will apply.\566\
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    \566\ Job Creators Network Foundation argues that the proposed 
rule is so vague and amorphous that the Board could not possibly 
identify all business that would be impacted. Rachel Greszler 
objects to the Board's determination that the issue of whether two 
entities were joint employers only involved 934 employers, or 0.15% 
of all business firms, over the four-year period. However, neither 
commenter provided any concrete data for the Board to consider.

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[[Page 74016]]

5. Description of the Projected Reporting, Recordkeeping and Other 
Compliance Requirements of the Rule, Including an Estimate of the 
Classes of Small Entities That Will be Subject to the Requirement and 
the Type of Professional Skills Necessary for Preparation of the Report 
or Record
    The RFA requires an agency to consider the direct burden that 
compliance with a new regulation will likely impose on small 
entities.\567\ Thus, the RFA requires the Agency to determine the 
amount of ``reporting, recordkeeping and other compliance 
requirements'' imposed on small entities.\568\ In providing its FRFA, 
an agency may provide either a quantifiable or numerical description of 
the effects of a rule or alternatives to the rule, or ``more general 
descriptive statements if quantification is not practicable or 
reliable.'' \569\
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    \567\ See Mid-Tex Electric Cooperative, 773 F.2d at 342 (``[I]t 
is clear that Congress envisioned that the relevant `economic 
impact' was the impact of compliance with the proposed rule on 
regulated small entities.'').
    \568\ See 5 U.S.C. 604(a)(4).
    \569\ 5 U.S.C. 607.
---------------------------------------------------------------------------

    The Board concludes that the final rule imposes no capital costs 
for equipment needed to meet the regulatory requirements; no direct 
costs of modifying existing processes and procedures to comply with the 
final rule; no lost sales and profits resulting from the final rule; no 
changes in market competition as a result of the final rule and its 
impact on small entities or specific submarkets of small entities; no 
extra costs associated with the payment of taxes or fees associated 
with the final rule; and no direct costs of hiring employees dedicated 
to compliance with regulatory requirements.\570\ The final rule also 
does not impose any new information collection or reporting 
requirements on small entities.
---------------------------------------------------------------------------

    \570\ See SBA Guide at 37.
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    Small entities, with a particular emphasis on those small entities 
in the five categories with special interest in the final rule, will be 
interested in reviewing the rule to understand the restored common-law 
joint-employer standard. We estimate that a human resources or labor 
relations specialist at a small employer who undertook to become 
generally familiar with the proposed changes may take at most one hour 
to read the text of the rule and the supplementary information 
published in the Federal Register.\571\ It is also possible that a 
small employer may wish to consult with an attorney, which we estimated 
to require one hour as well.\572\ Using the Bureau of Labor Statistics' 
estimated wage and benefit costs, we have assessed these labor costs to 
be between $208.60 and $227.98.\573\
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    \571\ Data from the BLS indicates that employers are more likely 
to have a human resources specialist (BLS #13-1071) than to have a 
labor relations specialist (BLS #13-1075). Compare Occupational 
Employment and Wages, May 2022, 13-1075 Labor Relations Specialists, 
found at https://www.bls.gov/oes/current/oes131075.htm, with 
Occupational Employment and Wages, May 2022, 13-1071 Human Resources 
Specialists, found at https://www.bls.gov/oes/current/oes131071.htm 
(last accessed July 3, 2023).
    \572\ In the NPRM, the Board asserted that an experienced labor 
relations specialist or labor relations attorney would not expend 
more than an hour to read and understand the rule, which returns to 
the pre-2020 rule standard and incorporates the common-law 
definition of ``employer'' that already applies in most 
jurisdictions throughout the nation. Therefore, the Board's initial 
direct compliance costs were one hour of time for the human 
resources or labor relations specialist to read the rule and one 
hour of an attorney's time for a consultation. The Board did not 
receive any comments that provided evidence or support for the 
assertion that employers or labor relations attorneys would need any 
additional time to read and understand the final rule. However, the 
comments persuaded the Board to add an additional hour of time for 
an employer's human resources or labor relations specialist to 
attend the attorney's consultation.
    \573\ For wage figures, see May 2021 National Occupancy 
Employment and Wage Estimates, found at https://www.bls.gov/oes/current/oes_nat.htm. The Board has been administratively informed 
that BLS estimates that fringe benefits are approximately equal to 
40 percent of hourly wages. Thus, to calculate total average hourly 
earnings, BLS multiplies average hourly wages by 1.4. In May 2021, 
average hourly wages for labor relations specialists (BLS #13-1075) 
were $42.05. The same figure for a lawyer (BLS #23-1011) is $78.74. 
Accordingly, the Board multiplied each of those wage figures by 1.4 
and added two hours for the labor relations specialist and one hour 
for the lawyer to arrive at its estimate.
    These average hourly wages, which are based on the BLS's May 
2022 figures released on April 25, 2023, are $5 to $7 higher than 
those reported in the IRFA when the most updated BLS figures were 
from May 2020. See 83 FR 54662. The increase is not statistically 
significant. While some commenters asserted that the wage rates for 
an attorney were at least $300/hour, none of the comments provided 
any evidence to which the Board could cite. Therefore, the Board 
continues to rely on the BLS wage figures.
---------------------------------------------------------------------------

    As to the impact on unions, the Board anticipates they may also 
incur costs from reviewing the rule. The Board believes a union would 
consult with an attorney, which is estimated to require no more than 
one hour of attorney time costing $169.11 because, like labor 
compliance professionals or employer labor-management attorneys, union 
counsels would already be familiar with the pre-2020 standard for 
determining joint-employer status under the Act and common-law 
principles.\574\
---------------------------------------------------------------------------

    \574\ The Board's revised compliance cost for unions covers the 
cost of a one-hour consultation between the union's labor relations 
specialist and legal counsel, which totals $169.11 per the formula 
described in fn. 573 above.
---------------------------------------------------------------------------

    The Board does not find the estimated $227.98 cost to small 
employers and the estimated $169.11 cost to unions to review and 
understand the rule to be significant within the meaning of the RFA. In 
making this finding, one important indicator is the cost of compliance 
in relation to the revenue of the entity or the percentage of profits 
affected.\575\ Other criteria to be considered are the following:
---------------------------------------------------------------------------

    \575\ See SBA Guide at 18.

--Whether the rule will cause long-term insolvency, i.e., regulatory 
costs that may reduce the ability of the firm to make future capital 
investment, thereby severely harming its competitive ability, 
particularly against larger firms;
--Whether the cost of the proposed regulation will (a) eliminate 
more than 10 percent of the businesses' profits; (b) exceed one 
percent of the gross revenues of the entities in a particular 
sector, or (c) exceed five percent of the labor costs of the 
entities in the sector.\576\
---------------------------------------------------------------------------

    \576\ Id. at 19.

    The minimal cost to read and understand the rule, $227.98 for small 
employers and $169.11 for small unions, will not generate any such 
significant economic impacts.
    In the NPRM, the Board requested comments from the public that 
would shed light on any potential compliance costs, 87 FR 54659, and 
considered those responses in the comments section above.
6. Description of the Steps the Agency Has Taken To Minimize the 
Significant Economic Impact on Small Entities Consistent With the 
Stated Objectives of Applicable Statutes, Including a Statement of the 
Factual, Policy, and Legal Reasons for Selecting the Alternative 
Adopted in the Final Rule and Why Each One of the Other Significant 
Alternatives to the Rule Considered by the Agency Which Affect the 
Impact on Small Entities was Rejected
    Pursuant to 5 U.S.C. 604(a)(6), agencies are directed to examine 
``why each one of the other significant alternatives to the rule 
considered by the agency which affect the impact on small entities was 
rejected.'' In the NPRM, the Board requested comments identifying any 
other issues and alternatives that it had not considered. See 87 FR 
54651, 54662. Two commenters suggest that the Board consider 
alternatives but do not provide any suggestions.\577\ Several comments 
suggest that the Board withdraw the proposed rule and leave in place 
the 2020 rule, an alternative that the Board

[[Page 74017]]

considered and rejected for reasons stated in the NPRM and reiterated 
above.\578\ One comment suggests simply modifying the 2020 rule by, for 
example, broadening the list of terms and conditions of employment that 
may demonstrate joint-employer status.\579\ Or, in the alternative, the 
comment suggests that the Board could leave the rule untouched and 
examine its application through subsequent caselaw, which would reveal 
any deficiencies in the standard.\580\ As discussed in Section IV.K 
above, the Board has considered each of these alternatives, and several 
others, and has provided a detailed rationale for rejecting the status 
quo and revising the joint-employer standard through the rulemaking 
process.
---------------------------------------------------------------------------

    \577\ Comments of McDonald's USA, LLC; SBA Office of Advocacy.
    \578\ See, e.g., comments of U.S. Chamber of Commerce.
    \579\ Comments of U.S. Chamber of Commerce.
    \580\ Id.
---------------------------------------------------------------------------

    In the NPRM, the Board considered exempting certain small entities 
and explained why such an exemption would be contrary to judicial 
precedent and impracticable.\581\ Two commenters suggested that the 
Board reconsider an exemption but did not address the Board's 
previously stated concerns with such an exemption or provide any 
further detail on how such an exemption would function.\582\ 
Accordingly, the Board again rejects this exemption as impractical 
because such a large percentage of employers and unions would be exempt 
under the SBA definitions, thereby substantially undermining the 
purpose of the final rule. Moreover, as this rule often applies to 
relationships involving a small entity (such as a franchisee) and a 
large enterprise (such as a franchisor), exemptions for small 
businesses would decrease the application of the rule to larger 
businesses as well, potentially undermining the policy behind this 
rule. Additionally, given the very small direct cost of compliance, it 
is likely that the burden on a small business of determining whether it 
fell within a particular exempt category would exceed the burden of 
compliance. Further, Congress gave the Board very broad jurisdiction, 
with no suggestion that it wanted to limit coverage of any part of the 
Act to only larger employers.\583\ As the Supreme Court has noted, 
``[t]he [NLRA] is federal legislation, administered by a national 
agency, intended to solve a national problem on a national scale.'' 
\584\ As such, this alternative is contrary to the objectives of this 
rulemaking and of the NLRA.
---------------------------------------------------------------------------

    \581\ 87 FR 54662.
    \582\ Comments of IFA; Rachel Greszler.
    \583\ However, as mentioned above, there are standards that 
prevent the Board from asserting authority over entities that fall 
below certain jurisdictional thresholds. This means that extremely 
small entities outside of the Board's jurisdiction will not be 
affected by the final rule. See 29 CFR 104.204.
    \584\ NLRB v. National Gas Utility District of Hawkins County, 
Tennessee, 402 U.S. 600, 603-604 (1971) (quotation omitted).
---------------------------------------------------------------------------

    The purpose of considering alternatives is to determine whether 
they could minimize the compliance burdens on small businesses. SBA 
Guide at 36. But an agency may select a course that is more 
economically burdensome than a proposed alternative if there is 
evidence that the proposed alternative would not accomplish the 
objectives of the statute. See AML International v. Daley, 107 F. Supp. 
2d 90, 105 (D. Mass. 2000). None of the alternatives proffered and 
considered accomplish the objectives of issuing this rule while 
minimizing the familiarization cost on small businesses. Accordingly, 
the Board believes that promulgating this final rule is the best 
regulatory course of action.

B. Paperwork Reduction Act

    In the NPRM, the Board explained that the proposed rule would not 
impose any information collection requirements. Accordingly, the 
proposed rule is not subject to the Paperwork Reduction Act (PRA), 44 
U.S.C. 3501-3521. See 87 FR 54662-63. No substantive comments were 
received relevant to the Board's analysis of its obligations under the 
PRA.

C. Congressional Review Act

    The provisions of this rule are substantive. Therefore, the Board 
will submit this rule and required accompanying information to the 
Senate, the House of Representatives, and the Comptroller General as 
required by the Small Business Regulatory Enforcement Fairness Act 
(Congressional Review Act or CRA), 5 U.S.C. 801-808.\585\
---------------------------------------------------------------------------

    \585\ Several comments note that the proposed rule did not 
include a CRA analysis. See comments of Colorado Bankers 
Association; Elizabeth Boynton; National Association of Convenience 
Stores; U.S. Chamber of Commerce. Such an analysis is included in 
final rules rather than in proposed ones. See 5 U.S.C. 801-808.
---------------------------------------------------------------------------

    Pursuant to the CRA, the Office of Information and Regulatory 
Affairs will designate this rule as a ``major rule'' because it will 
have an effect on the economy of more than $100 million during the year 
it takes effect. 5 U.S.C. 804(2)(A). Accordingly, the rule will become 
effective no earlier than 60 days after its publication in the Federal 
Register.

Final Rule

    This rule is published as a final rule.

List of Subjects in 29 CFR Part 103

    Jurisdictional standards, Election procedures, Appropriate 
bargaining units, Joint Employers, Remedial Orders.

    For the reasons stated in the preamble, the National Labor 
Relations Board amends 29 CFR part 103 as follows:

PART 103--OTHER RULES

0
1. The authority citation for part 103 continues to read as follows:

    Authority: 29 U.S.C. 156, in accordance with the procedure set 
forth in 5 U.S.C. 553.

Subpart D--[Removed and Reserved]

0
2. Remove and reserve subpart D, consisting of Sec.  103.40.

0
3. Add subpart E, consisting of Sec.  103.40, to read as follows:

Subpart E--Joint Employers


Sec.  103.40  Joint employers.

    (a) An employer, as defined by section 2(2) of the National Labor 
Relations Act (the Act), is an employer of particular employees, as 
defined by section 2(3) of the Act, if the employer has an employment 
relationship with those employees under common-law agency principles.
    (b) For all purposes under the Act, two or more employers of the 
same particular employees are joint employers of those employees if the 
employers share or codetermine those matters governing employees' 
essential terms and conditions of employment.
    (c) To ``share or codetermine those matters governing employees' 
essential terms and conditions of employment'' means for an employer to 
possess the authority to control (whether directly, indirectly, or 
both), or to exercise the power to control (whether directly, 
indirectly, or both), one or more of the employees' essential terms and 
conditions of employment.
    (d) ``Essential terms and conditions of employment'' are
    (1) Wages, benefits, and other compensation;
    (2) Hours of work and scheduling;
    (3) The assignment of duties to be performed;
    (4) The supervision of the performance of duties;
    (5) Work rules and directions governing the manner, means, and 
methods of the performance of duties and the grounds for discipline;
    (6) The tenure of employment, including hiring and discharge; and

[[Page 74018]]

    (7) Working conditions related to the safety and health of 
employees.
    (e) Whether an employer possesses the authority to control or 
exercises the power to control one or more of the employees' essential 
terms and conditions of employment is determined under common-law 
agency principles. For the purposes of this section:
    (1) Possessing the authority to control one or more essential terms 
and conditions of employment is sufficient to establish status as a 
joint employer, regardless of whether control is exercised.
    (2) Exercising the power to control indirectly (including through 
an intermediary) one or more essential terms and conditions of 
employment is sufficient to establish status as a joint employer, 
regardless of whether the power is exercised directly.
    (f) Evidence of an entity's control over matters that are 
immaterial to the existence of an employment relationship under common-
law agency principles and that do not bear on the employees' essential 
terms and conditions of employment is not relevant to the determination 
of whether the entity is a joint employer.
    (g) A party asserting that an employer is a joint employer of 
particular employees has the burden of establishing, by a preponderance 
of the evidence, that the entity meets the requirements set forth in 
paragraphs (a) through (f) of this section.
    (h) A joint employer of particular employees
    (1) Must bargain collectively with the representative of those 
employees with respect to any term and condition of employment that it 
possesses the authority to control or exercises the power to control, 
regardless of whether that term or condition is deemed to be an 
essential term and condition of employment under this section for the 
purposes of establishing joint-employer status; but
    (2) Is not required to bargain with respect to any term and 
condition of employment that it does not possess the authority to 
control or exercise the power to control.
    (i) The provisions of this section are intended to be severable. If 
any paragraph of this section is held to be unlawful, the remaining 
paragraphs of this section not deemed unlawful are intended to remain 
in effect to the fullest extent permitted by law.

    Dated: October 20, 2023.
Roxanne L. Rothschild,
Executive Secretary, National Labor Relations Board.
[FR Doc. 2023-23573 Filed 10-26-23; 8:45 am]
BILLING CODE 7545-01-P