The National Labor Relations Board (NLRB or the Board) has issued a final rule on its new standard for finding that two entities are a joint employer. The rule focuses on whether the alleged joint employer has the authority to control one or more essential terms of employment. The Board’s prior rule, issued in 2020, required joint employers to not only possess but also exercise substantial direct and immediate control. Under the new rule, all that is necessary is the reserved authority to control employment terms, regardless of whether that authority has ever been exercised. Indirect control through an intermediary or a third party can also trigger joint employer status.
The Board’s new rule does not require that a joint employer possess the authority to control all, or even most, of the essential terms and conditions of employment. In fact, a party can become a joint employer by reserving the ability to control just one aspect of the employment relationship. The new standard depends on whether the employer can control one of the following employment terms:
- 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
- Working conditions related to the safety and health of employees
In practical terms, what this means is that a single reservation of rights in the fine print of an agreement can now create a joint employment relationship. For example, if a contract gives one employer the ability to determine the safety conditions of a group of employees — but not their wages, hours, job duties, or any other employment terms — that alone could be enough for a joint employer finding.
The Board’s new rule reinstitutes and further expands the scope of the joint employer standard it originally applied in Browning-Ferris Industries of California, Inc., 362 NLRB 1599 (2015). Browning-Ferris departed from years of NLRB precedent and dramatically expanded the scope of the joint employer standard. Both the House and the Senate held hearings and introduced legislation intended to roll back the Board’s decision and protect small businesses. Like Browning-Ferris, the Board’s new rule is especially likely to impact hundreds of thousands of franchise businesses, contractors, staffing companies, and temp agencies as well as other types of collaborative businesses that work together to deliver products or services to consumers.
The Board’s new rule also clarifies the scope of a joint employer’s bargaining obligations. Under the new rule, a joint employer must bargain regarding any employment term that it has the authority or exercises the power to control. Joint employers also remain jointly and severally liable for unfair labor practices, and recent decisions and guidance from the Board have increased the risk of such liability tremendously.
The new rule on joint employer status takes effect on December 26, 2023 and will be applied to cases filed after that date. In the meantime, Steptoe & Johnson can help employers review their policies and agreements to reduce the risk of a joint employer finding. For assistance, please the contact the author or any member of the Steptoe & Johnson Labor Relations Team.