In September 2022, the National Labor Relations Board (NLRB) proposed a new rule to determine joint-employer status. The new rule, adopted in October 2023, will take effect on December 26, 2023, and be applied prospectively.[1]
One of the more controversial aspects of the new rule is that it removes the requirement that a putative employer actually exercise control over those essential terms and conditions of employment.[2] In fact, an employer need not actually exercise control, but “that a common-law employer’s possession of unexercised authority to control or exercise of the power to control indirectly, such as through an intermediary, one or more of the terms or conditions of employment would be sufficient to establish status as a joint employer.”[3]
The rule also requires that “a joint employer of particular employees must bargain collectively with the representative of those employees with respect to any term or condition of employment that is possesses authority to control or exercises the power to control (regardless of whether that term or condition is deemed to be an essential term or condition of employment under the new rule).”[4]
The proposed rule deviates from the rule proposed in February 2020. That rule required that the employer “must possess and exercise such substantial direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees.”[5] The rule required that the joint employer exercise “substantial direct and immediate control,” defined as “direct and immediate control that has a regular and continuous consequential effect on an essential term of condition of employment of another employer’s employees.”[6] The rule also defined “indirect control” to mean “indirect control over essential terms and conditions of employment of another employer’s employees but not control or influence over setting the objectives, basic ground rules, or expectations for another entity’s performance under a contract.”[7]
That brings us to the case filed in the Eastern District of Texas.[8] The plaintiffs, a coalition of business groups led by the U.S. Chamber of Commerce, argues in their motion for summary judgment that the NLRB overstepped their authority, and that the new rule is arbitrary and capricious and impermissibly expands the definition of employer to the stratosphere of the common law.
The joint employer doctrine generally does not lead to much litigation. Nevertheless, being cast as a joint employer can cause a company money and headaches. With the new rule, an employer who is found to be a joint employer may be held to violate a collective bargaining agreement, even if they don’t interact with the union, by exercising indirect “control” over any of the essential terms or conditions of employer. The opaque test of what now constitutes a joint employer will inevitably lead to more employers being brought into the NLRA fray, whereby any issue will be delayed adjudication until after the fight to determine who are the employers is finished.
In response to the new rule, employers should work with their attorneys to ensure their contracts do not give rise to a joint employer issue. Of equal importance, companies should train supervisors and managers who oversee contracted work so they do not overstep their authority and give rise to any appearance that the company is a joint employer.
[1] NLRB, Board Issues Final Rule on Joint-Employer Status (Oct. 26, 2023), https://www.nlrb.gov/news-outreach/news-story/board-issues-final-rule-on-joint-employer-status.
[2] Standard for Determining Joint Employer Status, 88 Fed. Reg. 73,946, 73,957 (Oct. 27, 2023) (to be codified at 29 CFR part 103).
[3] 88 Fed. Reg. at 73,956.
[4] Id.
[5] Joint Employer Status Under the National Labor Relations Act, 85 Fed. Reg. 11184, 11205 (April 27, 2020).
[6] Id. at 11227.
[7] Id. at 11193.
[8] U.S. Chamber of Commerce, Chamber of Commerce v. NLRB, Challenge to NLRB’s Joint Employer Rule (Nov. 13, 2023), https://www.uschamber.com/cases/labor-and-employment/chamber-of-commerce-v-nlrb