On October 27, 2023, the National Labor Relations Board (“NLRB”) published a final rule that changed the standard for determining whether two or more entities may be classified as joint-employers for purposes of the National Labor Relations Act. The final rule broadened the standard to include more employers than would have previously been classified as joint-employers under the final rule published in 2020. The new rule is expected to take effect on December 26, 2023.
The 2020 final rule set a standard under which joint-employer status was found where an employer possessed and actually exercised substantial direct and immediate control over employees’ essential terms and conditions of employment. In contrast, under the new standard, an entity may be a joint-employer if it has an employment relationship with the employees and shares or codetermines one or more of the employees’ essential terms and conditions of employment. Thus, actual and direct control is no longer needed to find joint-employer status, which can now be found based on reserved joint control, indirect control, or control that is limited and routine.
The NLRB’s new rule is more employee friendly than its previous rule because it broadens the pool of employers subject to joint-employer status. Once classified as a joint-employer, an entity is obligated to bargain over the terms and conditions of employment that it controls as well as other mandatory subjects of bargaining that it exercises the authority to control. Additionally, joint-employer status may subject an entity to joint and several liability for unfair labor practices.
This new standard is important because it can potentially open an employer to liability and create new obligations to bargain. Employers should thus understand how this new standard applies to their situation before it takes effect on December 26th and, if this standard changes their status, should be prepared to assume the full implications of joint-employer status.
If you have any questions about the content of this update, please contact us. We are pleased to assist public and private employers with all issues related to joint-employer status.
This update is provided for informational purposes only and should not be considered legal advice.