National Labor Relations Board Expanded Joint Employer Rule: What Businesses Need to Know

The National Labor Relations Board (NLRB) has introduced a significant change in the definition of "joint employer" under the National Labor Relations Act. The new rule, effective from October 27, 2023, expands the criteria for two or more companies to be considered joint employers of the same employees. Under this rule, joint employment is established when these companies "share or codetermine those matters governing employees' essential terms and conditions of employment," including factors such as wages, benefits, work scheduling, hiring, discipline, and more. A notable change is the consideration of both direct evidence of control and evidence of reserved and indirect control over these essential employment terms.

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This new rule impacts various industries, including franchise relationships, where franchisors and franchisees must adapt to the shifting joint employer standards and take measures to avoid being deemed joint employers for labor relations purposes. For example, franchisors should:

• Clear Documentation Disclaiming Authority to Control Franchisee's Employees
• Avoid Actual Control Over Franchisee’s Employees
• Limit Contact with Franchisee’s Non-Management Employees 
• Avoid Administrative Functions for Franchisee’s Employees
• Announce Independent Relationship

It is essential for companies to stay informed about these developments and adjust their practices to ensure compliance with the new joint employer rules.

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