NLRB Issues Final Rule on Joint Employer Standard
Senior Compliance Attorney
On March 8, 2024 a federal judge in the Eastern District of Texas vacated the National Labor Relations Board’s (NLRB) current rule on joint-employer status and the recission of the 2020 rule. This effectively means that until further action, the 2020 joint-employer status rule that established a direct and immediate control standard is applicable. This issue will most likely remain tied up in the courts for some time.
On October 26, 2023, the National Labor Relations Board (NLRB) issued a final rule on the joint employer standard under the National Labor Relations Act (NLRA). This final rule essentially negates the previous rule issued in 2020 and reverts to a broader standard as previously adopted.
Under this new rule, a business is liable as a joint employer when it holds “indirect” or “reserved” control over one or more essential terms and conditions of employment. The rules adopted in 2020 had re-established a “direct and immediate” standard which limited a joint employer relationship to those situations in which a business directly and actually exercised control and had a regular or continuous effect on another business’ employees.
Businesses may be considered a joint employer of a group of employees if each entity in the group has an employment relationship with the employees and they share or codetermine one or more of the following conditions of employment:
- Wages, benefits, and other compensation
- Hours of work and scheduling
- Assignment of duties
- Supervision of the performance of duties
- Work rules and directions governing the manner, means and methods of performance and grounds for discipline
- Tenure, including hiring and discharge
- Working conditions related to health and safety
The standard to determine whether these factors are shared or co-determined does not have to be direct and immediate, but rather if the businesses have a “reserved” authority to control the terms and conditions of employment without regard to any actual control or whether that control is indirect. The only type of control under this new final rule that is not relevant is alleged control that is “immaterial”.
The Board acknowledges that while the new rule establishes a uniform joint-employer standard, the Board will be required to conduct a fact specific case analysis for each case to determine whether two or more employers meet the standard.
Key Takeaways:
This update is important for organizations which leverage joint employer status as part of their business model. If your organization has questions about how this rule may apply to your operations, we strongly encourage you to work with your employment counsel.
The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.
