NLRB Issues Long-Anticipated Joint-Employer Rule

Author: Robert S. Teachout, XpertHR Legal Editor

October 26, 2023

The National Labor Relations Board (NLRB) issued a long-anticipated final rule that substantially increases the number of employers who may be deemed joint employers. If two or more employers are joint employers under the National Labor Relations Act (NLRA), they are required to bargain with a union that represents the shared employees and are jointly liable for any unfair labor practices.

The new rule builds on the Obama-era Board's 2015 decision in Browning-Ferris Industries holding that an employer's reserved or indirect control of the terms and conditions of a third party's employees (such as a staffing agency or franchisee) were sufficient to create a joint employment relationship. That ruling was replaced by a 2020 rule that required such employers to meet a higher threshold of "substantial direct and immediate control."

In rescinding the 2020 rule, the NLRB stated that its framework was "contrary to the common-law agency principles that must govern the joint-employer standard" under the NLRA.

"The Board's new joint-employer standard reflects both a legally correct return to common-law principles and a practical approach to ensuring that the entities effectively exercising control over workers' critical terms of employment respect their bargaining obligations under the NLRA," said Chairman Lauren McFerran. She noted that although the final rule establishes a uniform joint-employer standard, the Board will still need to make a fact-specific analysis on a case-by-case basis to determine whether the employers involved meet the standard.

Essential Employment Terms and Conditions

The final rule states that an employer meets the joint-employer standard only if the employer has authority to control at least one of seven essential terms and conditions of employment. The specified essential terms and conditions of employment are:

• 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 performing duties and the grounds for discipline;
• Tenure of employment, including hiring and discharge; and
• Working conditions related to the safety and health of employees.

The new rule also stipulates that a joint employer is only required to bargain on the particular essential terms and conditions, as well as all other mandatory subjects of bargaining that it possesses or exercises the authority to control.

Minority Dissent

Board member Marvin Kaplan (the sole Republican and a member of the Board that issued the 2020 rule) voted against the rule, which passed 3 - 1, calling it an "unprecedented and unwarranted expansion of the board's joint-employer doctrine."

In a 58-page dissent, Kaplan criticized the majority's findings in support of the rule as "arbitrary and capricious." He noted that the supporting reasoning significantly understated the economic impact on small businesses of learning about and complying with the new standard, and contended that the majority failed to adequately address public comments criticizing the rule and its negative impact on the franchise business model.

Kaplan particularly rebuffed the majority's claim of returning to common-law agency principles. "The majority misapprehends common-law agency principles in holding that those principles compel the board to rescind its 2020 rule … and replace it with a joint-employer standard not seen anywhere else in the law," he said. He also stated that the rule unreasonably expands the list of essential terms and conditions of employment and creates bad policy by making employers joint employers by virtue of complying with the requirements of other federal laws.

The final rule will be published in the Federal Register on October 27 and will take effect 60 days later on December 26, 2023. The NLRB has also issued a fact sheet on the joint-employment standard final rule.