LEGAL UPDATE: Understanding the New Joint Employer Standard
by Katie Robinson | March 27, 2024NOTE: This rule is currently in litigation and has not taken effect. We will continue to monitor and update this post. Employers should be aware of the continuing trends toward employee rights and be prepared for this kind of rule from states and the federal government.
The National Labor Relations Board (NLRB) has rolled out a new joint employer standard and businesses should be paying attention. The NLRB’s new joint employer rule will expand the standard for determining a joint employment relationship under the National Labor Relations Act
What’s Changed?
Previously, joint employers were required to “possess and exercise” “substantial direct and immediate control” over essential terms and conditions of employment. However, the New Standard shifts the focus. Now, two or more entities are joint employers when they “share or codetermine those matters governing employees’ essential terms and conditions of employment.”
Essential Terms and Conditions Defined
Let’s break down what these essential terms and conditions entail, which are quite expansive:
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
7. Working conditions related to the safety and health of employees
Keep in mind that under this new standard, entities can be considered joint employers simply when they have the authority to directly or indirectly control any of these seven items listed above. This applies even if they never actually exercise that authority. This is a big change from the old standard and something that employers need to keep in mind.
What Does This Mean and Why Does It Matter?
Understanding the presence of joint employment is crucial due to its significant implications for employers. Employers deemed joint employers may be held accountable for labor violations and disputes of others, and they might also be required to collectively bargain with a group of union-represented employees.
Finally, keep in mind that this standard will have even more important consequences for employers in certain industries, especially those who rely on commercial agreements to conduct day-to-day business such as staffing agencies, franchises, contractors, and subcontractors.
What Should Businesses Do?
While the status of this new standard remains in flux, we recommend businesses to start assessing their exposure, examine their written service agreements, and policies, and update their business practices accordingly. Even businesses that weren’t considered joint employers under the previous rule might now fall into this category. Businesses that want to mitigate risks and properly allocate liability should review and revise contracts with entities such as subcontractors, and staffing agencies that may control their employees and present a risk of joint employment. It’s equally important to continually assess any instances of actual control being exercised, whether directly or indirectly. Businesses should also proactively train their management team on this new rule and its implications.
Conclusion
In summary, the NLRB’s new standard for joint employers significantly changes how joint employment is determined. Understanding these changes and taking proactive steps can help businesses navigate the evolving labor environment and protect their interests.
Resources
- NLRB’s Joint-Employer Rule Vacated by U.S. District Judge
- NLRB FACT SHEET Joint-Employer Standard Final Rule
- Standard for Determining Joint Employer Status
- National Labor Relations Act