Recently, the NLRB issued a rule revising the standard for determining a joint employer. Joint employment involves two or more businesses’ sharing of an employee’s activities and therefore sharing legal responsibilities.
Details of revised joint employer rule
Under the new rule, due to go into effect on Dec. 26, 2023, the scope of the joint employer standard is expanded and entities may be considered a joint employer if each entity has an employment relationship with the employees, and the entities have the right to exercise control over the employees’ essential terms and conditions of employment, regardless of whether the entities exercise the right to use that control. According to the new rule, direct, indirect or even reserved control will suffice for an entity to qualify as a joint employer.
Also under the new rule, terms and conditions of employment are now defined as:
- 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.
This expansion directly impacts collective bargaining. Under the National Labor Relations Act (NLRA), joint employer entities must bargain collectively over terms and conditions of employment. Not only will bargaining now have more parties negotiating, joint employers are also potentially liable for the unfair labor practices of the other employer and both may suffer the impact of any labor dispute.
Going forward, employers should evaluate all relationships with contractors, vendors, staffing agencies, franchisees and other third party organizations. Employers may consider revising agreements to relinquish prior reservations of authority over employees.
We will continue to monitor the status of this rule. Industry groups are opposed to the rule and may file challenges to the rule. In addition, some members of Congress may take action to overturn the rule. For now, we expect the NLRB will begin enforcing the rule when it takes effect.