The NLRB Seeks To Change The Joint Employer Test, Again

The National Labor Relations Board (Board) recently announced that it wants to change the test for determining whether two or more separate companies are a “joint employer” of employees under the National Labor Relations Act. The Democratic majority of the Board seeks to rescind and replace the joint-employer test that took effect in 2020 during President Trump’s term.

The joint-employer standard is important to nearly all employers who use other companies, vendors, or contractors to assist them with their employees or business or who are in relationship with other companies. For example, the joint-employer standard asks whether a parent and a subsidiary company are truly separate employers or whether they should be considered one employer for purposes of collective bargaining. The joint-employer standard seeks to determine whether a staffing company that provides employees is a joint employer with its customer client, or whether a franchisee’s employees are also employees of the franchisor. If a company is found to be a joint employer with another company, both companies will be required to bargain with a union elected by the employees and both will be liable for each other’s unfair labor practices.

The proposed new rule seeks to expand joint-employer status and return to a liberal, open-ended test that will leave employers guessing. Moreover, the new rule abandons the commonsense requirement that a company have “direct and immediate control” over terms and conditions of employment and would impose a joint-employer status where a contract provides a right to control (even if the right is never actually exercised) or where the company has indirect control or influence over terms and conditions of employment.

The two minority, Republican members of the Board dissented to the proposed new rule, highlighting the underlying waste and politics at play here. Board Members Marvin Kaplan and John Ring stated, in part: “The 2020 Rule was an immense undertaking, requiring thousands of personnel hours to complete. Today, however, with their Notice of Proposed Rulemaking . . . , the majority sets in motion a project to do it all over again. Worse, the rule they propose would be clearly inferior to the 2020 Rule, . . . Our colleagues offer no valid justification for launching a second resource-intensive joint-employer rulemaking. They do not purport to rely on any experience under the 2020 Rule. Indeed, they cannot do so, since the Board has yet to apply it in a single case.”

If you would like assistance with evaluating your business relationships for potential joint-employer liability, please contact a KZA attorney. The Board will accept public comments on the proposed rule until November 7, 2022, and as always, we will keep you updated. 

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.