The National Labor Relations Board (NLRB) issued a final rule on October 26, 2023, that expanded the standard for when two employers conducting business with one another are considered joint employers under the National Labor Relations Act (NLRA). Being joint employers subjects them to various responsibilities under the NLRA, including being potentially liable for the unfair labor practices of one another.
The final rule replaces a previous rule that took effect in April 2020. Under that rule, an employer qualified as the joint employer of another entity only if it met certain conditions. More specifically, the employer had to have direct and immediate control over the essential terms and conditions of employment. Those conditions included wages, benefits, work hours, hiring and firing, and supervision.
The new rule, which takes effect on December 26, 2023, provides that entities are joint employers if they share or co-determine the essential terms and conditions of employment for employees. Furthermore, even indirect control over the terms and conditions of employment can establish entities to be joint employers, even if one employer never chooses to exercise that indirect control.
Some have criticized the final rule as removing the clarity to the definition of joint employer that the 2020 rule was intended to provide. U.S. Senators Bill Cassidy, R-La., and Joe Manchin, D-W.Va., intend to introduce a Congressional Review Act resolution concerning the measure. They believe that the final rule will adversely impact both small businesses and the franchise business model. Traditionally, franchisees handle the essential terms and conditions of employment, whereas franchisors do not. The final rule would consider franchisees and franchisors to be joint employers and thus share liability for unfair labor practices.
The final rule also could increase costs for employers. Joint employers must engage in collective bargaining with any unions representing the employees and are subject to picketing or other economic pressures in a labor dispute. Participation in collective bargaining has administrative costs for employers. Furthermore, unionized employees are more costly for employers, as they typically have better wages and benefits than non-unionized employees.
Businesses also have expressed opposition to the final rule. They, too, opine that businesses being liable for workers at workplaces over which they have no control is illogical. Michael Layman, a senior vice president for the International Franchise Association, deemed the final rule to be “overreaching,” “unworkable,” and “misguided.” He predicts that the final rule will result in increased lawsuits, lost job opportunities, and increased costs for franchised businesses, just as a similar rule did when it was in effect from 2015 to 2017.
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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