NLRB Issues New Rule On Joint Employers

Volume: 22 | Issue: 47
October 26, 2023

The National Labor Relations Board (Board) issued its new standard today for determining whether two or more separate companies are a “joint employer” of employees under the National Labor Relations Act. As we discussed last year, the Democratic majority of the Board has been working to rescind and replace the joint-employer test that took effect in 2020 during the Trump administration. The new rule will be applied to cases filed after December 26, 2023.

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.

Under the Board’s new test, a company will be considered a joint employer of another’s employees if the two companies “share or codetermine” one or more of the following essential terms and conditions of employment: 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 “good” news is that these are the only terms and conditions the Board will consider (although they will likely be applied as broadly as possible).

The most problematic part of this new test is that the Board will find a joint-employer relationship without regard to whether the company in question actually exercises control over the terms and conditions of employment of another company’s employees; instead, the Board will give determinative weight to the company’s authority to control those terms and conditions of employment whether or not the company ever actually exercises such control. Thus, evidence of reserved, unexercised or indirectly exercised control over the terms and conditions set forth above will be enough to result in a joint-employer finding.

Between now and December 26, when the new test becomes effective, employers should carefully consider their contracts and relationships with other companies to determine what changes can and should be made to avoid the risk of a joint-employer finding by the NLRB. If you would like assistance with evaluating your business relationships for potential joint-employer liability, please contact a KZA attorney. 

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.

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