Two Employers Are Better Than One: NLRB Spreads the Joy of Joint Employment

By Tim Murphy and Meaghan E. Murphy - Skoler Abbott

October 31, 2023

The National Labor Relations Board has made it easier for multiple companies to qualify as joint employers that share liability for labor law violations and legal obligations to negotiate with unions under a new rule issued last Thursday. The rule will significantly impact franchisors and employers that utilize workers from staffing firms.

What’s a Joint Employer?

Under the new rule, multiple entities 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, which 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 new rule provides that indirect and unexercised control can establish joint employment. So if a company exerts control over another firm’s workers through a third party, or has authority over employment terms that it never even used, that now could be enough – according to the NLRB –  to demonstrate a joint employer relationship.

The new joint employer rule rescinded the 2020 rule issued by the Trump Board. That version required direct and immediate control actually exercised over workers – not just that it could be. That Trump-era rule in turn overwrote the broader standard handed down by the Obama board in 2015.

The new rule goes into effect on December 26, 2023; its new standard will apply to cases filed that date and thereafter. The NLRB issued a fact sheet summarizing the rule in case you don’t want to read the entire seventy-three page rule linked to above.

What’s Next?

Legal and political challenges to the new rule are expected. The International Franchise Association has already vowed to sue to stop the rule. It probably won’t be the only group to do so. However, a previous legal challenge to a revised joint-employer standard issued by the Obama Board in 2015’s Browning-Ferris decision was largely rejected by the US Court of Appeals for the District of Columbia Circuit. The NLRB’s new rule is similar to the Browning-Ferris standard.

Congress may seek to scuttle the new rule as well. Sens. Bill Cassidy (R-La.) and Joe Manchin (D-W.Va.) said they’ll introduce a Congressional Review Act resolution to kill the regulation. Even if that resolution passes Congress, the votes may not be there to override an anticipated presidential veto.

Bottom Line

The new rule complicates labor law compliance for employers, especially franchisors and those who use contracted workers via staffing agencies, by holding them accountable for what other employers may do or not do. Maintaining positive employee relations is challenging enough when it comes to one’s own employees, but now the NLRB says you could be legally responsible for the employment practices of other companies even if you don’t dictate those practices.

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