Effective December 26, 2023, the National Labor Relations Board (NLRB) is changing one of its rules to make it easier to characterize two businesses as joint employers and potentially making one business unexpectedly liable for the acts of the other under the National Labor Relations Act. Those in a franchisor/franchisee relationship or those utilizing a staffing company or temporary agency, vendors, or subcontractors are especially at risk and should seek advice of counsel if they believe they may be liable under the new rule.

What’s New?

Actual Control v. Indirect/Right to Control

The new rule drastically broadens the definition of a joint employer. Under the new rule, a joint employer is an entity that possesses the right to control (whether or not such control is exercised) or indirectly controls (such as through a third-party entity like a staffing or temporary agency) an essential term and condition of employment. This is in stark contrast to the previous rule, which required an entity to actually exercise direct control.

Essential Terms & Conditions

The new rule also expands the definition of essential terms and conditions of employment by providing a list of categories that qualify as “essential” in the context of determining joint-employer status:

1. wages, benefits, and other compensation;
2. hours of work and scheduling;
3. the assignment of duties to be performed;
4. the supervision of the performance of duties;
5. work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
6. the tenure of employment, including hiring and discharge; and
7. working conditions related to the safety and health of employees.

Risks of the Joint Employer

Once a company is deemed a joint employer (as may now be common for those in a franchisee/franchisor relationship or those that utilize staffing companies), it will become liable for the unfair labor practices committed by the other joint employer regardless of whether the employee is part of a union or not. This may include things like threatening to terminate an employee should he or she speak with a co-worker about his or her wages or working conditions or other protected concerted activities. In a union environment, a company found to be a joint employer will be obligated to bargain collectively with a union representative over those terms of employment that it controls or has authority to control, even where the term or condition may not be “essential” in determining joint-employer status.

Key Takeaways

The NLRB’s new rule significantly broadens the reach of the National Labor Relations Act by now designating entities as joint employers that would not have been categorized as such previously. Employers should assess their relationships and identify those that create the most risk, such as relationships with franchisees, subcontractors, and staffing/temporary agencies. Then, employers should look at the seven categories to determine if any of them are present in those relationships. Where there is potential risk, seek the advice of counsel to help minimize potential liability.

If you have any questions regarding the NLRB’s new final rule on joint-employer status or any other employment-related questions, please contact one of Gray Reed’s Labor & Employment attorneys.