NLRB Issues New Joint Employer Rule

On October 26, 2023, the National Labor Relations Board (“Board”) issued a new joint employer rule. If this feels something like déjà vu all over again, that’s because it is. The Board changed its joint employer analysis by case law in 2015, and again in 2020. This time the change comes via issuing a new regulation.

The Board has long held that when two or more employers share or co-determine essential terms and conditions of employment they are both considered employers of the employees in question. They are “joint employers” of those employees. When that is the situation both employers can be liable for unfair labor practices. Also, both employers can be required to bargain
with a union at least with respect to the terms and conditions they are jointly controlled.

The new rule spells out what the Board considered “essential” terms and conditions of employment.
They are:
(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 performanceof 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 new rule emphasizes that an employer’s right to control one or more essential terms will be considered, even if it is not exercised. This is true whether the right is reserved or exercised directly or indirectly (via a third party). For example, where a contract states that the customer employer has the right to request that specific persons not be assigned to the customer employer, the Board would view that as a reserved right to control an assignment at the least, if not tenure of employment as a practical matter.

The burden of proof is on the party asserting joint employer status. Determinations will be made based on the totality of circumstances.

The new rule is set to take effect December 26, 2023. It will not be surprising if industry groups file legal challenges. The outcome of such litigation is uncertain, however.

In the meantime, employers who provide or who utilize employees of another organization will want to review the terms of their agreements. To what extent is control reserved regarding one or more of the identified essential terms of employment? Is such reservation necessary under the circumstances? Are there ways in which the provider employer can be given more independence?

In a great many circumstances the customer employer will set schedules, make assignments, and direct the work of provider employees. This will likely be sufficient to establish joint employer status under the new role. Note, however, that each joint employer is only required to bargain over those terms of employment that it co-determines. By making it clear that the provider employer determines wages and benefits, and in fact operating in that manner, the primary employer should be able to avoid bargaining over those subjects even if the employees are represented.

Last but not least, the best way to avoid joint employment issues in the Board arena is to avoid becoming organized. Assess your vulnerability. Get plans in place for how you will train your management and supervision team, how you will create strong employee relations, and how you will create a positive culture.