National Labor Relations Board Proposes Expansion of Joint Employer Liability

One of the most hotly contested labor law issues got even hotter this week. On September 6, the National Labor Relations Board (NLRB) proposed a rule that would end the current standard used by the NLRB for determining whether an employer is a “joint employer” for purposes of the National Labor Relations Act (NLRA).

Under the NLRA, the term “employer” includes “any person acting as an agent of an employer, directly or indirectly…” Moreover, “the term ‘employee’ shall include any employee, and shall not be limited to the employees of a particular employer….” These expansive definitions of employer and employee have created much debate over the years as to who may be compelled to recognize and bargain with a labor union and who might be held liable for unfair labor practices when two companies share control over the working conditions of employees. In April 2020, the NLRB issued the current rule, under which companies must exercise “substantial direct and immediate” control over workers to be considered a “joint employer.” Under the rule, “substantial and direct immediate control” is “direct and immediate control that has a regular or continuous consequential effect on a term or condition of employment of another employer’s employees.” Control is not substantial where it is “exercised on a sporadic, isolated, or de minimis basis.” Control over setting objectives, ground rules, or performance expectations does not suffice to establish “indirect control over essential terms and conditions of employment.” Under the current rule, then, it would be difficult to argue that a manufacturer is a joint employer with the staffing agency that actually employs the worker.

In contrast, the proposed new rule expands the factors considered in determining a joint employment relationship. Under the new rule, two or more companies would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment.” “Share or co-determine” means that the employer “possess[es] the authority to control…, or exercise[s] the power to control…, one or more of the employee’s essential terms and condition of employment.” “Essential terms and conditions” would include wages, benefits and other compensation, work and scheduling, hiring and termination, discipline, workplace health and safety, supervision, assignment, and work rules. Importantly, the control exerted can be either direct or indirect.

The new NLRB proposal thus expands who may be considered a joint employer, increasing potential liability for companies previously excluded from the definition of “joint employer.” For example, if a manufacturer contracts for parts, and sets a production quota and timeline, is it indirectly controlling the terms and conditions of employment of non-employees? Notably, those in the franchising and source labor industries are likely to be most impacted by the rule and should pay close attention to its further developments. In its current form, the proposed rule could subject certain employers to shared liability with respect to labor and employment violations committed by a separate business.

The proposed rule was published on September 7, 2022, with a 60-day public comment period ending on November 7, 2022. The NLRB is expected to adopt the final version of the final rule in early 2023.

Nemeth Law will continue to monitor legislation, regulation, and litigation in the everchanging labor and employment landscape. We encourage you to contact any Nemeth Law attorney with your labor and employment-related employment questions.

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