NLRB Proposes Changes to Joint Employer Rule

The National Labor Relations Board (NLRB) recently issued a Notice of Proposed Rulemaking that would alter the definition of when two employers doing business with one another become joint employers. This definition is important because it determines when one employer is liable for the other employer’s unfair labor practices.

Joint employers under the National Labor Relations Act (NLRA) both must bargain with the union representing the jointly employed workers. As a result, both employers are liable if one employer commits unfair labor practices. Likewise, both employers are subject to economic pressure from union actions, such as strikes or picketing. Furthermore, if the employees of one entity unionize, the employees of the second entity also will have a duty to bargain with the union and potentially unionize.

The Current Joint Employer Rule

The NLRB’s revised rule would replace the current rule, which went into effect on April 27, 2020. That rule provides that an employer can be a joint employer with another entity if it has direct and immediate control over one or more of the essential terms and conditions of employment of the other entity’s workers. The 2020 rule ended years of litigation before the NLRB and courts about the definition of a joint employer under the NLRA.

The Proposed Joint Employer Rule

Under the proposed rule, employers may be joint employers in terms of liability for one employer’s unfair labor practices if they “share or codetermine those matters governing employees’ essential terms and conditions of employment.” The NLRB will likely act quickly in reviewing public comments on the proposed rule and drafting a final one. At that point, the NLRB will establish a final rule and enforce it as necessary.

Indirect Staffing Arrangements

Employers that use indirect staffing arrangements, such as temporary agencies, franchises, and contractors, may need to review their contracts due to the NLRB’s proposed joint employer rule. In addition, since the proposed rule no longer requires direct control as an element of the joint employer definition, any form of indirect control could trigger joint liability.

Even if an employer only has reserved indirect control over the other entity’s employees – and never does or intends to exercise that control – the two employers still may meet the definition of joint employers under the NLRB’s proposed rule. For instance, if the contract allows the employer to retain control over essential elements of employment, such as wages, hours, or benefits, then a joint employer relationship might exist under the proposed version of the NLRB rule. Moreover, the contract may create the relationship even if the employer does not control any essential elements of employment but only retains the ability to do so.

Likewise, if the proposed rule goes into effect, employers that use indirect staffing arrangements should refrain from having their employees manage or supervise the other entity’s workers. If concerns about work performance arise, then the employer should address those issues with the staffing agency, not the worker.

While some welcome clarity to the definition of a joint employer, others note that the proposed rule does not resolve ongoing interpretation issues. More specifically, the references to common law concepts in the proposed rule do little to guide employers in structuring joint business ventures to avoid classification as a joint employer under the NLRA. Finally, as different federal laws define “joint employers’ differently, the revised definition only adds to various rules and tests that employers must adhere to if they wish to avoid liability and other consequences under applicable federal laws.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

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