New year, new rules…maybe. On October 26, 2023, the National Labor Review Board (NLRB) issued a final rule for determining joint employer status. Entities that share employees with other entities, such as contractors and subcontractors, companies using temporary employees, and franchisors and franchisees may be significantly affected by the final rule and may face a greater risk of liability as a result.
The final rule overturned Trump administration regulations, and created a much stricter standard, greatly increasing the number of entities that could be considered employers for NLRB purposes. While the previous rule only considered whether an entity exercises control over an employee, the final rule assesses whether an entity at all possesses control over an employee in determining joint-employer status. For an in-depth look at the final rule, check out our article covering the changes and potential effects on employers.
The final rule was set to go into effect on December 26, 2023. However, the NLRB has issued an extension of the effective date to February 26, 2024. The NLRB cited a number of legal challenges as the reason for the extension. Because the final rule would be much more expansive, the NLRB is now facing a lawsuit from a collection of groups led by the U.S. Chamber of Commerce, challenging the validity and justification of the final rule. Similarly, the final rule is facing a Congressional Review Act resolution seeking to overturn the rule, due to concerns about its potential negative impact on the economy and extensive impact on companies around the country. On the other side of the spectrum, the Service Employees International Union (SEIU) has taken issue with the final rule, contending that it does not go far enough in protecting employees.
Because of the numerous legal challenges faced by the NLRB and its final rule, it is unclear whether the final rule will take effect even in February. However, the extension of the effective date gives employers more time to evaluate their current practices and employee relationships to determine whether they may qualify as a joint employer under the new final rule. Employers should continue to prepare for the implementation of the final rule by reviewing their policies, procedures, and agreements, especially with staffing agencies.
If you have questions or concerns about your EEO policies or procedures, please do not hesitate to reach out to any member of Gardner Skelton’s employment team.