NLRB Issues Final Rule on Joint Employment - American Society of Employers - Anthony Kaylin

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NLRB Issues Final Rule on Joint Employment

On Friday October 26th the NLRB promulgated their final rule on joint employment.  The rule replaces a 2020 policy that excused alleged joint employers from bargaining unless workers could show they had "direct and immediate control."  This policy, according to the majority of NLRB members, was "contrary to the common-law agency principles that must govern the joint-employer standard" under the National Labor Relations Act. 

This policy was enacted in the previous administration to overcome the 2015 Browning-Ferris decision, in which temporary employees working at a site were attempting to unionize and the NLRB found that Browning-Ferris had indirect control of these temporary employees and thus Browning-Ferris employees would be eligible to be included in the union organizing campaign.  The facts were opposite of what would be normally expected, the employees were organizing and the temps were drawn into the pool, which came to an interesting result.

The final rule did not change much from the proposed rule. The employer may be considered a joint employer of another employer’s employees if the two share or codetermine essential terms and conditions of employment.  According to the NLRB rule, joint employment is considered under the following circumstances:

“Under the new standard, an entity may be considered a joint employer of a group of employees if each entity has an employment relationship with the employees and they share or codetermine one or more of the employees’ essential terms and conditions of employment, which are defined exclusively as:

(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.”

Therefore, if an employer exerts control over another firm’s workers through an intermediary or has contractual authority over employment terms but never used that power, there would be a joint employer relationship. Under these circumstances, if one party had employees organizing, the other party’s employees would also be considered part of the union organizing campaign. 

Unfortunately, the NLRB does not provide any guidance regarding how these terms work and will be considered, so employers will have to wait for NLRB rulings to get more clarity. "The biggest issue the rule leaves open is failing to provide any standard the business community can divine and structure its contractual relations upon to ensure (or even roughly estimate) that the reserved or potential control...that exists in the relationship will not subject it to an NLRB joint employer finding,” says Mark Kisicki, a shareholder at Ogletree Deakins Nash Smoak & Stewart PC.

When Browning-Ferris was appealed to the federal courts, the appeals court sent the case back to the NLRB, directing that it reevaluate the case by considering “indirect control” of only those factors directly related to the terms and conditions of employment of the subject employees. The court noted that by “failing to distinguish evidence of indirect control that bears on workers’ essential terms and conditions from evidence that simply documents the routine parameters of company-to-company contracting,” the Board had exceeded its authority and “overshot” the common-law mark. Moreover, the court held, “‘global oversight’ is a routine feature of independent contracts” which should not be a factor relevant to the analysis of a joint-employment relationship.

It is expected that once this rule is final, there will be litigation, but the rule has held up on appeal for the most part.  However, the various courts have different definitions that they have been applying to joint employment.  Further, it should not be considered that the rule will be applied solely in the NLRB context.  This administration has been reconciling and recalibrating so there is more consistency in rules and enforcement among the various agencies.  Therefore, it will be important to work with labor counsel to ensure proper roadmaps of control are developed and implemented to reduce the risk of unionization to wage and hour claims and more.


Source: Littler 10/25/23, NLRB 10/5/23, Law360 10/26/23, 10/25/23, Bloomberg Law 10/25/23


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