Last week, the National Labor Relations Board (“NLRB”) issued its final rule on the joint-employer standard under the National Labor Relations Act (“NLRA”). This “New Rule,” effective December 26, 2023, is essentially a rollback of the NLRB’s own 2020 joint-employer rule issued during the Trump administration.
The 2020 Rule
Under the 2020 Rule, an entity was to be considered a joint-employer of another’s employees if the entity had and actually exercised “substantial direct and immediate control” over an employee’s essential terms and conditions of employment. This was seen as a higher standard than that established under the NLRB’s 2015 decision in Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery, 362 NLRB 599 (2015). In Browning-Ferris, the NLRB held that a more common joint-employer test applied for purposes of the NLRA—an entity would be considered an employer where they simply had a “right to control” an employee’s essential term or condition of employment, whether such control was exercised or not.
The New 2023 Rule
The New Rule and its preamble is just under 73 pages, but it largely harkens back to the 2015 Browning-Ferris decision. That is, a joint-employer relationship is created under the New Rule insofar as an entity retains the right to exercise some minimal or even “indirect” control over one or more essential term or condition of employment. An essential term or condition includes: (1) wages, benefits and other compensation; (2) hours of work and scheduling; (3) the assignment of duties to be performed; (4) the supervision of duties; (5) work rules and directions regarding the manner, means and method of performance; (6) the grounds for discipline; (7) tenure of employment, including hiring and discharge; and (8) working conditions relative to health and safety.
Notice that the mere right to control or dictate just a single essential term or condition, even if not exercised in fact, can create a joint-employer relationship. For example, a joint-employer relationship could be created where an organization contracts with a staffing agency to fulfill labor needs but retains the contractual right or duty to establish conditions of health and safety for the staffing agency’s workers. Such an innocuous contractual provision could inadvertently cause the organization to be considered a joint employer of the staffing agency’s workers under the New Rule.
The New Rule importantly is limited to the NLRA, which governs collective bargaining and union activity, and does not apply in the context of the FLSA and other Department of Labor standards. Industry groups like the International Franchise Association seemingly are poised to attack the New Rule in the courts, while U.S. Senators Joe Manchin (D-WV) and Bill Cassidy, M.D. (R-LA) announced that they will seek to overturn the Rule by resolution under the Congressional Review Act. Although the New Rule will be challenged, care should be taken when utilizing staffing agencies or a franchise model given the now much lower bar to becoming a joint employer.