Anticipated Final Rule on Joint Employer Status Issued by NLRB

Based on long-standing federal law, two distinct entities could be considered joint employers of their shared employees. However, a recent agency development offers new guidance to clarify the circumstances in which joint-employer status would apply.

On October 27, 2023, the National Labor Relations Board (“NLRB”) published its Standard for Determining Joint Employer Status. The new standard replaces the NLRB’s 2020 rule requiring proof of “direct and immediate control” being exercised over the “essential terms and conditions” of that person’s employment to be considered a joint employer relationship.

Under the new rule, a joint employer relationship can be established if a potential 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 of and conditions employment, regardless of whether the employer exercises such control.

The rule separates “essential terms and conditions” into seven categories:

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.

This rule will affect the business community, particularly the franchise industry and those who use subcontractors (particularly labor subcontractors), because an employment relationship may be found even if an organization does not ever exercise control over a worker. A possible real-world example of when a joint employer relationship would form under the new rule is if, within a subcontract or staffing agreement, there are parameters and guidance about maintaining hours, performance, number of workers hired, uniforms on safety protocols.

Under this latest revision, an upstream contractor may be required to negotiate with unionized workers under the National Labor Relations Act if it maintains the right to control a subcontractor’s pay, benefits, or other key job terms. This applies whether the alleged joint employer wields that power itself or through another entity, such as a staffing firm, and whether it has used that power or merely retains it.

The new rules are set to take effect on February 26, 2024. There is, however, already new legislation introduced in Congress that would block this rule from going into effect. Stay tuned.