The National Labor Relations Board (“NLRB” or the “Board”) recently expanded its rules for defining “joint employment” status for purposes of the National Labor Relations Act (the “Act”). The new rule effectively lowers the bar for when two separate and distinct companies will be considered to be joint employers. As a joint employer, the two companies will be equally liable for alleged violations of the NLRA, and their joint workforce may unionize into one bargaining unit. For these reasons, it is important for employers to know these rules and recognize whether or not they are vulnerable to a joint employment liability with another company. The NLRB’s new rule will take effect on February 26, 2024 and the new standard will be applied to cases filed after the rule becomes effective.
The current NRLB rule for joint employment, promulgated in April 2020, is considered by many to be more favorable to employers because it requires the NRLB to differentiate between direct and indirect control over a worker by an employer, and it requires a showing of “substantial direct and immediate control” over the essential terms and conditions of employment of an employee before two distinct businesses will be considered a joint employer of that employee.
Conversely, the new NLRB rule will not require any differentiation between direct and indirect control nor will it require consideration of whether or not the employer exercised that control. Instead, the new rule merely provides that entities will retain joint employer status if they have authority to control essential terms and conditions of employment, even if the employer never actually exercises that control and their authority is indirect. These are the essential terms and conditions of employment that will be considered in the joint employment analysis:
- Wages, benefits and other compensation – does one or more entity control this in relation to the employee who might be jointly employed?
- Hours of work and scheduling – who controls the hours of work and scheduling (actually or indirectly)?
- The assignment of duties to be performed – same; which entities have actual or indirect control?
- The supervision of the performance of duties;
- Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
- The tenure of employment, including hiring and discharge; and
- Working conditions related to the safety and health of employees.
The new joint employment standard will be met when the employer has authority to control even just one of the above terms or conditions. At this time it appears to be unclear how much indirect control is going to be deemed sufficient to find joint employer status. The Board has responded to this by indicating that they will engage in a fact specific analysis on a case-by-case basis to determine whether two or more companies meet the standard.
Companies that share or coordinate control of a single worker in any capacity are vulnerable, under this new standard, to being a joint employer with the second entity or individual (in cases of domestic employment, for example, or cases of CDPAP fiscal intermediaries). The higher the level of control, actual or indirect, the higher the likelihood that – in cases of employment disputes coming under the NLRA – both entities will be deemed responsible for the employment law violation.
Employers should evaluate their affiliations, subsidiary relationships, workforce sharing, staffing, or other arrangements where a single worker is being affected, coordinated, controlled, scheduled, or affected in terms and conditions of employment with another entity or individual. Such a self-audit will help identify the level of exposure for the employer and provide an opportunity for the employer to engage in risk mitigation efforts.