Joint Employer

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Many thanks to our Franchise, Distribution & Global Brand Expansion colleague Will Woods for co-authoring this post.

On October 25, 2023 the National Labor Relations Board issued a final joint employer rule (accompanied by a fact sheet) making it easier for multiple companies to be deemed “joint employers” under the law. This legal classification can have profound consequence by making independent entities now liable for labor law violations as well as obligations to negotiate with unions.

The new standard casts a wider net for “joint-employer” status

Under the new rule, an entity may be considered a joint employer of a group of employees if the entity shares or codetermines one or more of the employees’ “essential terms and conditions of employment.” The Board defines the essential terms and conditions of employment as:

  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.

How the new rule dramatically shifts away from the 2020 rule

In issuing the final rule, the NLRB rescinded the prior 2020 joint employer rule (a remnant of the Trump-era Board), which provided that a business is a joint employer only if it both possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment-with “substantial” meaning control that is not exercised on a “sporadic, isolated, or de minimis basis. ” (For more on the 2020 rule, see our prior blog here.) The 2020 rule’s higher threshold meant a lower likelihood that businesses would be considered joint employers. The new rule’s impact on employers could be wide-ranging, and particularly difficult for non-unionized employers who are not used to navigating typical union activity such as being required to show up at the bargaining table, handling unfair labor practice charges, or dealing with picketing by a vendors’ employees (which would have previously been considered an illegal secondary boycott).

No direct (or even exercised) control required

The new rule rejects the previous rule’s focus on “direct and immediate control.” Instead, now, indirect or reserved control is sufficient to establish joint employer status. Thus, if a company has contractual authority over certain employment terms but never acts on that authority, that may be enough to establish a joint employer relationship. The same goes for a company that exercises authority over another company’s workers through a “go-between” company or intermediary, or a company requiring a vendors’ employees to follow certain health and safety rules while on-premises. In these instances, liability under the National Labor Relations Act, including the requirement to negotiate with a union, could ensue.Continue Reading NLRB Announces Most Expansive Definition of Joint Employment Yet, With Potential Significant Implications for Franchisors, Staffing Agencies and More

The Department of Labor (DOL) has proposed to put the final nail in the coffin on two Trump era rules under the Fair Labor Standards Act (FLSA) that were favorable to employers. On March 12, 2021, the DOL’s Wage and Hour Division published in the Federal Register both a proposed rule to rescind the Trump administration’s rule on joint employer status under the FLSA and a proposed rule to withdraw the Trump administration’s rule on independent contractor status under the FLSA. In both cases, the DOL is seeking public comments for 30 days (until April 11, 2021). Neither of these proposed rules comes as a surprise to those keeping tabs on the Biden administration’s agenda, but the DOL has not proposed any new guidance, leaving employers wondering what comes next.
Continue Reading The DOL Proposes to Nix the Trump Administration’s Joint Employer and Independent Contractor Rules

The US Department of Labor is developing a new regulation on joint employment under the FLSA, a possible first step towards reversing the Trump administration’s business-friendly rule on the joint employer standard.

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On August 8, 2020, a New York federal district judge struck down a significant portion of the DOL’s “joint employer” rule, meaning certain employers may be more likely to be deemed “joint employers” and exposed to liability for employee wage and hour violations under the FLSA. The “joint employer” final rule, which was issued by the DOL in January 2020, imposed a four-factor test for deciding whether employers in “vertical” employment relationships (i.e., when workers for a staffing company or other intermediary are contracted to another entity) are joint employers under the FLSA.
Continue Reading Are You A Joint Employer Now? Part of DOL’s “Joint Employer” Final Rule Struck Down

In February 2020, the NLRB finally unveiled its long-awaited joint-employer rule governing joint-employer status under the NLRA. The final rule returns the test for determining joint employment to the standard the Board applied for several decades before the 2015 Browning-Ferris decision. The test set forth by the new joint-employer rule provides that a business is a joint employer only if it has “substantial direct and immediate control” over another company’s workers and actually exercises that control. While this is no doubt a welcome relief for employers who routinely contract with subcontractors and staffing companies, it is important to note the limited scope and that this rule does not impact joint-employer tests applied under other employment laws. The proposed rule was initially released in late 2018 and ultimately generated nearly 30,000 public comments (see our coverage here).

Although the rule is an employer-friendly change, employees who are terminated for engaging in protected concerted actives will continue to have a claim for relief against their primary employer. Similarly, union organizing efforts can continue amongst temporary employees as they have for years. Bargaining will continue to occur as it always has between employers and their employees’ union representatives. The labor movement, however, is likely disappointed by the demise of the 2015 Browning-Ferris rule.  For years, unions have chaffed at the prohibition against secondary boycotts contained in the Taft Hartley Act of 1947. The 2015 Browning-Ferris rule allowed a backdoor repeal of a significant portion of the secondary boycott ban with its loose definition of joint employer.Continue Reading Much Ado About Joint Employers at the NLRB

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Companies with operations in California can exhale slightly, with the Ninth Circuit Court of Appeal and another California appellate court recently concluding, separately, that the rigid “ABC Test” established in Dynamex v. The Superior Court of Los Angeles County does not apply in the joint employer context.
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