After several years – and a Notice of Proposed Rulemaking (NPRM) that received more than 13,000 comments – the National Labor Relations Board (NLRB) issued its final rule on the Standard for Determining Joint Employer Status under the National Labor Relations Act (NLRA).
Pursuant to the new rule, an entity may be considered a joint employer of a group of employees if each entity has an employment relationship with the employees and they share or codetermine one or more of the employees’ essential terms and conditions of employment.
Essential terms and conditions of employment are defined exclusively as: (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.
“The joint employer standard is only implicated if an entity employs the workers at issue and has authority to control at least one of these terms or conditions,” the NLRB explained. “Authority over other matters is not sufficient.”
According to the agency, the final rule “more faithfully grounds the joint employer standard in established common law agency principles. In particular, the [final] rule considers the alleged joint employers’ authority to control essential terms and conditions of employment, whether or not such control is exercised and without regard to whether any such exercise of control is direct or indirect. The common law clearly recognized that reserved control and indirect control are relevant to the analysis.”
Including reserved control is important, the NLRB said, because it accounts for situations where an alleged joint employer maintains authority to control essential terms and conditions of employment but has not yet exercised such control.
“The reality is that an entity holding such control may step in at any moment to affect essential terms,” the agency said. “Indeed, even when the entity remains on the sidelines, it may cast a shadow over the other employer’s decision making with respect to such terms.”
For several years, the Board’s standard for joint employers has been in flux.
After many decades of following a single standard in evaluating the scope of joint employer liability, the NLRB adopted a controversial new standard in the 2015 decision Browning-Ferris Industries of California, Inc.
The situation became more complicated when, in Hy-Brand Industrial Contractors, Ltd. & Brandt Construction Co., an administrative law judge applied Browning-Ferris to find that two entities were joint employers. When the employers appealed to the NLRB, the Board – with new members courtesy of the change from a Democratic to a Republican administration – took the opportunity to throw out Browning-Ferris and establish a new test.
In 2018, the NLRB decided formal rulemaking would be the best path forward and published an NPRM to establish a new joint employer standard.
Pursuant to the proposal, an employer could be found to be a joint employer only if it possessed and exercised substantial, direct and immediate control over the essential terms and conditions of employment and had done so in a manner that was not “limited and routine.”
Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint employer relationship, the NLRB said. Almost 29,000 comments were submitted in response to that NPRM before another change in administration and the launch of a new proposal in September 2022, now finalized.
The final rule “significantly resembles” the Browning-Ferris decision, the NLRB said, but it also provides “extensive guidance to parties regarding their rights and responsibilities when more than one statutory employer employs particular workers and controls (or has authority to control) one or more of their essential terms and conditions of employment.”
To read the final rule, click here.
Why it matters
Employers should study up on the final rule, which takes effect on December 26, 2023. The new standard will only be applied to cases filed after that date.