In an anticipated move, the National Labor Relations Board (the
"NLRB") formally reinstated its 2020 rule that controls
when an employer is deemed a joint employer under the labor law.
This rulemaking does not change the standard that the NLRB
currently applies to determine joint employer status because of
prior litigation before a federal judge. However, the rulemaking
may settle—at least for the near future— a tumultuous
history for the NLRB's joint employer standard, which has been
the subject of longstanding litigation and repeated attempts at
rulemaking.
Under the National Labor Relations Act, "joint
employment" refers to a situation where two or more separate
entities allegedly codetermine employees' terms and conditions
of employment, such as decisions about hiring, firing,
disciplining, supervising, and directing employees. This issue
typically arises in the context of contractor/subcontractor
relationships, entities that engage temporary staff,
parents/subsidiaries and franchisor/franchisee situations. If a
company is deemed to be a joint employer of certain employees, it
will share labor-law liability and the duty to bargain with the
unions representing those employees.
In 2020, the NLRB during the first Trump administration
initiated rulemaking to overturn the joint-employer standard
established by the Obama administration in Browning-Ferris Industries of California,
Inc., 362 NLRB 1599 (2015).
In October 2023, the NLRB issued a new joint-employer rule,
relaxing the standard established by the Trump administration and
permitting a finding of joint-employer status even if an entity did
not directly exercise control over an employees' terms and
conditions of employment. Instead, it was enough if the employer
had indirect or reserved control over these terms.
However, as we previously covered, the October 2023 rule
never went into effect. Instead, just three days before the
rule's effective date, Judge J. Campbell Barker of the U.S.
District Court for the Eastern District of Texas struck down the
new standard.
The new rule formally reinstates the 2020 standard, which
provides that, in order to be a deemed a joint employer, the
employer must "share or codetermine" an
employee's "essential terms and conditions of
employment." The rule clarifies that, in order to "share
or codetermine" terms and conditions of employment, an
employer must "possess and exercise" substantial
"direct and immediate control."
Importantly, under the reinstated rule, an employer will
not be deemed to be a joint employer solely based on its
indirect control or reserved right to control essential terms and
conditions of employment.
The rule defines "essential terms and conditions of
employment" as "wages, benefits, hours of work, hiring,
discharge, discipline, supervision, and direction."
Though the new final rule does not institute a change to the
test that the NLRB will apply to determine joint employer status,
it aligns the NLRB's regulations with the standard it has been
applying in joint-employer matters. After the whiplash-inducing
changes to the standard in recent years, we anticipate that this
rule will continue to be applied for the foreseeable future.
However, there is a pending lawsuit in the U.S. District Court for
the District of Columbia brought by the SEIU challenging the 2020
standard, SEIU v. NLRB, et al., No. 1:21-cv-02443-RC, that could
again upend the joint employer standard.
We will continue to monitor for any changes to the joint
employer standard.