Nov. 2, 2023

NLRB Issues Joint Employer Final Rule

On November 2, 2023 by Mark Schulz

On Oct. 26, the National Labor Relations Board (NLRB) released a final rule that will significantly broaden the standard for determining whether separate entities are “joint employers” of particular employees within the meaning of the National Labor Relations Act.

The NLRB did not significantly change its final rule compared to its earlier proposed version. The final rule will be effective on Dec. 26.

Rule changes

The final rule will change the standard for when two employers who do business together are considered joint employers and are, thus, liable for one another's unfair labor practices under the National Labor Relations Act (NLRA) and be required to bargain for such joint subjects.

Under the new standard, 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:

• 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.

The rule represents a significant expansion of joint-employer status by using either the authority to control conditions of employment or exercising the power to indirectly control conditions of employment as sufficient to establish joint-employer status. This means that either indirect or reserved control may serve as the basis for determining a joint employer relationship, and the existence of either, without regard to the extent of the reserved or indirect control, indicates joint employer status.

The NLRB states the analysis for determining a joint employer relationship will remain a fact-specific analysis conducted on a case-by-case basis.

Implications

With the final rule known, impact analyses should start, or previously identified actions needed to comply with the rule should occur. Contracts that could be deemed to give an employer direct or indirect authority over another entity's employees should be reviewed, and many of these contracts will likely need to be amended. For example, situations in which an employer could be deemed a joint employer of another entity's employees likely include:

• Temporary staffing contracts
• Contracts for therapy, food service, and maintenance agreements
• Shared service agreements with hospitals or other providers sharing a facility's campus

It should also be noted that common arrangements involving affiliated entities in the health care systems may also implicate joint employment status under the final rule.

Other activities that may assist in complying with the new rule include:

• Training your managers to ensure they understand the implications of the new rule and are clear about the legal boundaries surrounding both direct and indirect control.
• Reviewing or creating clear policies regarding the role and authority of third-party vendors with respect to your business practices, especially in their interactions with direct employees.

Collective bargaining

There is no doubt this new rule will result in increased union organizing and collective bargaining efforts. You can expect unions to return to traditional organizing tactics targeting temporary employees with promises of “regular” status and all the perceived perks that come with it to secure their signatures and their votes. This could allow unions to gain a toehold that may ultimately extend to organizing your direct employees.

For more information

NLRB’s Fact Sheet on the final rule is a good summary and specific issue document.

You can review the final rule here.

Please reach out to Mark Schulz with any questions.