November 3, 2023 • Jordan A. Fishman, W. Baker Gerwig, IV
Category: Legal Updates
The National Labor Relations Board (NLRB) has implemented a final rule effective December 26, 2023, which broadens the criteria for determining “joint employer” status under the National Labor Relations Act (NLRA). This rule reinstates the broader Obama-era interpretation of joint employer by emphasizing the importance of an employer’s potential control over the essential terms of employment, regardless of whether this control is actually exercised.
Under the new standard, an entity can be deemed a joint employer if it has authority to control at least one essential term, “whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect, such as through an intermediary.” The Board will consider the following “essential” employment terms when determining joint employer status:
(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.
This new standard is a meaningful departure from the former rule in that it eliminates the requirement for “substantial direct and immediate control” over one of more essential terms of employment. Now, the mere possession of such authority, alone, is sufficient to find joint employer status. Although the NLRB will still evaluate joint-employer status on a case-by-case basis, the implementation of this new standard could have serious consequences for businesses that were already edging toward a joint employment relationship. The common hospitality industry practices of using staffing agencies for certain positions, such as housekeeping, and of outsourcing entire departments to third party contractors, will be implicated by this change. Additionally, the relaxed standard may lead to third parties being involved in collective bargaining, introducing another element to the already intricate process. Employers should also note that, though this development is currently limited to the NLRB which enforces the NLRA, joint employment standards pertaining to other laws will likely be impacted by the trend towards expanding the definition of joint employment. Relationships with all third-party workers should be assessed against the new standard to determine whether the NLRB could find a joint employment relationship. As always, Stokes Wagner attorneys are available to perform these analyses and provide advice about prospective strategies.
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THIS DOCUMENT PROVIDES A GENERAL SUMMARY AND IS FOR INFORMATIONAL/EDUCATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO BE COMPREHENSIVE, NOR DOES IT CONSTITUTE LEGAL ADVICE. PLEASE CONSULT WITH COUNSEL BEFORE TAKING OR REFRAINING FROM TAKING ANY ACTION.