Understanding the New Joint Employer Rule

By Martin D. Kappenman - Peters, Revnew, Kappenman & Anderson, P.A.

November 10, 2023

The National Labor Relations Board ("NLRB") has recently issued a final rule that significantly expands the standard for determining joint-employer status under the NLRA. The new standard increases the likelihood of employers to be considered joint employers.

Effective December 26, 2023, the new rule marks a notable departure from the NLRB's 2020 joint-employer standard, which considered an employer as a joint employer if it exercised "substantial direct and immediate control" over essential terms and conditions of employment for another company's employees. Now, the 2023 rule marks a significant shift in the approach to joint-employer status. The new rule considers whether an employer has the authority to control essential terms and conditions of employment for another company's employees, regardless of whether this control is exercised directly, indirectly, or not at all.

Under this new rule, employers will be considered joint employers if they share or determine one or more of the essential terms and conditions of employment. These essential terms and conditions encompass (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.
 
Guidance for Employers

It is important for employers to understand that being classified as a joint employer under the new rule introduces potential collective bargaining requirements. The rule notes that joint employers must bargain collectively with the representative of those employees over any terms and condition of employment that it has the authority to control.

Considering the implications of the new rule, employers should review their contracts with third parties (such as contractors, freelancers, and staffing agencies). The purpose is to assess whether these agreements could be interpreted as granting the right to exercise control over an essential term or condition of employment for another company’s employees and add terms to mitigate any risk of potential liability for wage related claims.

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