NLRB FINAL RULE ON JOINT EMPLOYER STATUS

Are you an “employer” under the National Labor Relations Act notwithstanding your engagement with another company (e.g., a staffing firm) to supply workers? As 2023 begins to wrap up, the National Labor Relations Board (“NLRB”) is upping their standards for deciding whether an entity meets the definition of a joint employer. The NLRB, which enforces the National Labor Relations Act (“NLRA”) issued a final rule for determining joint-employer status on October 26, 2023, introducing a much stricter approach.

Differences From the Previous Rule

Under the previous joint employer rule, which was issued in 2020, an entity had to both possess and actually exercise control over the essential terms and conditions of employment. Now, however, the NLRB will only assess whether an entity merely possesses control over the essential terms and conditions, regardless of whether the entity actually exercises that control. Essential terms and conditions specifically include:

1. Wages, benefits, and other compensation;
2. Hours of work and scheduling;
3. Assignment of job duties;
4. Supervision of job duties;
5. Work rules and discipline;
6. Hiring and discharge; and
7. Safety and health conditions.

Effects on Employers

Under the new standard, a much larger number of entities will likely meet the definition of joint employer. Now, even if entities choose not to exercise control over another entity’s employees, they may still be subject to liability under the NLRB standard. Entities that share employees with other entities, such as contractors and subcontractors, companies using temporary employees, and franchisors and franchisees are likely to see the greatest effects from the new rule, and will be subject to greater risk of liability.

Steps Employers Should Take

Entities that share employees with other entities should take steps to determine their potential liability under the new rule by evaluating their control over each of the essential terms and conditions. Employers that do exercise control over essential terms and conditions should review their policies and procedures and take steps to ensure full NLRA compliance.