Key Takeaways:
- On October 27, 2023, the National Labor Relations Board (NLRB) published a new standard for determining joint-employer status.
- The new standard sets a lower bar for an employer to be deemed a joint-employer and is more explicitly grounded in common law agency principles.
- The new standard broadens the universe of employers who may satisfy the requirements for joint-employer status, potentially resulting in additional legal responsibilities and requirements for collective bargaining for those employers.
On October 27, 2023, the National Labor Relations Board (NLRB)
published a final rule that establishes a new standard for
determining whether two or more employers, as defined by the
National Labor Relations Act, may be classified as joint-employers.
The final rule signifies a significant departure from the 2020
final rule, which the 2023 final rule rescinds and replaces, and
lowers the threshold required to make a finding of joint-employer
status.
Under the 2020 final rule, effective since April 27, 2020, a
finding of joint-employer status was triggered where an employer
possessed and actually exercised substantial direct and immediate
control over employees' essential terms and conditions of
employment. By contrast, the new standard allows a finding of
joint-employer status based on reserved joint control, indirect
control, or control that was limited and routine (in addition to
direct and actual control).
The NLRB's final rule sets forth a more employee-friendly
standard, classifying two or more entities as joint-employers where
each entity has an employment relationship with a group of
employees and where the entities share or codetermine one or more
of the employees' essential terms and conditions of
employment. The phrase “essential terms and conditions of
employment,” as written in the final rule, encompasses the
following:
- wages, benefits, and other compensation;
- hours of work and scheduling;
- the assignment of duties to be performed;
- the supervision of the performance of duties;
- 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.
Moreover, the standard also places an emphasis on inclusion of
employers who exercise either reserved control or indirect control.
Reserved control brings employers who maintain authority to control
essential terms and conditions of employment, but have not yet
exercised such control, into the joint-employer universe.
Similarly, indirect control accounts for employers who exercise
control of essential terms and conditions of employment through an
intermediary or controlled third parties.
In effect, the NLRB's standard broadens the pool of employers
subject to joint-employer status. As such, the final rule obligates
this newly expanded universe of joint-employers to bargain over the
particular and essential terms and conditions of employment that it
controls, as well as all other mandatory subjects of bargaining
that it possesses or exercises the authority to control, and may
subject those employers to joint and several liability for unfair
labor practices.
The new standard is expected to take effect on December 26, 2023,
and will only be applied to cases filed after the effective date.
Despite its hotly contested nature, and the likelihood of resulting
litigation, employers should operate under the assumption that
enforcement of the new standard will proceed as anticipated and are
recommended to review relevant employment terms and conditions
applicable to current and future employees to determine whether
joint-employer status may apply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
