On October 26, 2023, the National Labor Relations Board released a final rule, which sets forth its revised standard for joint-employer status. The new rule repeals and replaces the Board’s 2020 regulations and allows the Board to consider broader evidence when determining joint-employer Status.
KingSpry’s Employment Law Chair, Attorney Avery E. Smith, details this new standard and what employers need to know.
Overview
The National Labor Relations Board (the “Board”) has established a new standard for determining whether two employers are joint employers of a particular employee under the National Labor Relations Act (the “Act”).
The new standard intends to streamline the standard for determining joint employer status by making it easier for the Board to find that two companies are joint employers. The Board published its final rule in the Federal Register on October 27, 2023, and believes that this rule will “explicitly ground the joint-employer standard in established common-law agency principles.”
The Board also indicated that its new rule will provide guidance to parties covered by the Act as it pertains to their rights and responsibilities when more than one employer possesses the authority to control an employees’ essential terms and conditions of employment.
What is a Joint Employer?
A joint employer is an individual or entity who is jointly and severally liable with another employer for an employee’s wages. This joint employer status creates a “primary” and “secondary” employer relationship, under which the primary employer is responsible for the secondary employer’s liabilities. Joint employers each bargain over particular essential terms and conditions of employment.
Comparison of Old and New Standard
The Board’s 2020 rule provided that an employer may be considered a joint employer only if the two employers share or codetermine the employees’ essential terms and conditions of employment. Ultimately, the 2020 rule made it easier for joint employers to avoid a determination of joint-employer status due to its high threshold.
Additionally, the 2020 rule determined that wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction were “essential terms and conditions of employment.”
In contrast, the new 2023 rule replaces the 2020 standard, and considers (1) the alleged joint employers’ authority to control essential terms and conditions of employment, and (2) whether or not such control is exercised, without consideration of whether control is direct or indirect.
Essential Terms and Conditions of Employment
Under the new rule, essential terms and conditions of employment are defined as:
- Wages, benefits, and other compensation;
- Hours of work and scheduling;
- The assignment of duties to be performed;
- 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.
Effective Date
The Board’s new standard will take effect on December 26, 2023.
Key Takeaways for Employers
The Board’s new rule reaffirms its 2015 Browning-Ferris standard. Following December 26, 2023, an entity may be considered a joint employer of another employer’s employees if the two share or codetermine the employees’ essential terms and conditions of employment.
Additionally, the Board will consider bothdirect evidence of control and evidence of indirect control of employees’ essential terms and conditions of employment, when analyzing joint-employer status.
Joint employers or those who may gain joint-employer status under this new rule should be proactive and review their agreements with other entities to determine whether one party has the ability to exercise control over the employees of the other.
If you have questions about the Board’s expansion of joint employer status, or your company’s status and responsibilities, an experienced Employment Law Attorney at KingSpry is prepared to assist you.
