Last week, the National Labor Relations Board (the ‘Board’) issued a final rule for joint-employer status that will make it far more likely for one business to be deemed a joint employer of another business’s employees under the National Labor Relations Act. The new rule eliminates the clear standards the current rule provides, making it harder for some employers to forecast risks associated with their relationships with providers, vendors, subcontractors, and franchisees.
The new rule establishes joint employment not only when one company has the right to exert control over terms and conditions of another company’s employees, but also when evidence exists of reserved, unexercised, or indirect control over any working conditions.
Under the Board’s previous joint-employer rule, adopted in 2020, an entity could be considered a joint employer if it exercised actual and direct control over a specified and clearly defined list of essential terms and conditions of employment.
The new rule eliminates the requirement that control be actually exercised, providing that an entity may be a joint employer if it “possesses the authority to control (whether directly, indirectly, or both), or to exercise the power to control … one or more of the employee’s essential terms and conditions of employment.” In the final rule notice, the NLRB explained that an entity has such direct or indirect control “regardless of whether the [entity] exercises such control.”
Specifically, 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 employee's essential terms and conditions of employment, which are defined exclusively as:
You may read the full rule here and may access a fact sheet from the NLRB here.
On December 7, 2022, HCAOA submitted comments expressing concern about the rule, which you may read here. Unfortunately, the NLRB chose not to significantly change its proposal.
HCAOA encourages members to contact legal counsel if they believe this new rule implicates their businesses.
The final rule is scheduled to take effect on December 26, 2023. HCAOA will keep you apprised of any additional developments.