On October 26, 2023, the National Labor Relations Board (NLRB) issued a long-anticipated final rule that substantially increases the number of employers who may be deemed joint employers. The new rule builds on the Obama-era Board’s 2015 decision in Browning-Ferris Industries holding that an employer’s reserved or indirect control of the terms and conditions of a third party’s employees such as a staffing agency or franchisee are sufficient to create a joint employment relationship. The new joint employer rule is significant because it broadens the scope of joint employment under the National Labor Relations Act (NLRA). Under the previous 2020 rule, employers were only considered joint employers if they exercised direct and immediate control over the worker’s essential terms and conditions of employment. The new rule, on the other hand, considers both direct and indirect control, as well as the reserved right to control. This means that employers may be considered joint employers even if they do not directly control the worker’s employment, or if they only have the potential to control the worker’s employment.
What is joint employment?
Joint employment occurs when two or more employers are jointly responsible for the employment of a worker. This can happen when two employers share or codetermine the worker’s essential terms and conditions of employment, such as wages, benefits, hiring, firing, discipline, and supervision.
Highlights of the Final Rule
The final rule states that an employer meets the joint-employer standard only if the employer has the authority to control at least one of seven essential terms and conditions of employment. The specified essential terms and conditions of employment are:
- Wages, benefits, and other compensation;
- Hours of work and scheduling;
- Assignment of duties;
- Supervision of the performance of duties;
- Work rules and directions governing the manner, means, and methods of performing duties and the grounds for discipline;
- Tenure of employment, including hiring and discharge; and
- Working conditions related to the safety and health of employees.
The new rule also stipulates that a joint employer is only required to bargain on the particular essential terms and conditions, as well as all other mandatory subjects of bargaining that it possesses or exercises the authority to control.
Impact on Employers
The new joint employer rule is likely to have a significant impact on employers. For example, employers who use staffing agencies or contractors may now be considered joint employers of the workers employed by those agencies or contractors. This means that employers may be liable for unfair labor practices committed by those agencies or contractors, and they may be required to bargain with unions that represent the workers employed by those agencies or contractors.
The new rule may also impact employers who engage in franchising or other business relationships where they share control over the employment of workers. For example, a franchisor may be considered a joint employer of the franchisee’s employees, even if the franchisor does not directly control the employees’ employment.
Impact on Other Federal Laws
The new joint employer rule is also likely to have an impact on other federal laws that regulate joint employment, such as the Fair Labor Standards Act (FLSA) and the Occupational Safety and Health Act (OSHA). For example, under the FLSA, employers are jointly liable for the wages and hours of their employees, as well as the wages and hours of any employees who are considered joint employees of the employer and another employer. Under OSHA, employers are jointly liable for the safety and health of their employees, as well as the safety and health of any employees who are considered joint employees of the employer and another employer.
The new joint employer rule is a significant development for employers. Employers should carefully review the new rule to assess its impact on their operations and to take steps to comply with the new rule including but not limited to reevaluating relationships with staffing agencies, contractors, franchisees, and other businesses to determine whether they could be considered joint employers under the new rule and updating their employment policies and procedures to ensure that they comply with the new rule.
Employers should consult with an employment attorney to discuss the specific impact of the new joint employer rule on their operations and to develop strategies for compliance.