The Standard for Determining Joint-Employer Status – Final Rule published 10/27/2023
The National Labor Relations Board’s final rule establishes that, under the National Labor Relations Act, two or more entities may be considered joint employers of a group of employees if each entity has an employment relationship with the employees, and if the entities share or codetermine one or more of the employees’ essential terms and conditions of employment. The new standard will only be applied to cases filed after the effective date. The effective date of the new rule is on hold pending litigation.
How does the 2023 standard differ from the 2020 standard?
The final rule rescinds and replaces the 2020 final rule that was promulgated by the prior Board and which took effect on April 27, 2020.
The 2023 rule more faithfully grounds the joint-employer standard in established common-law agency principles. In particular, the 2023 rule considers the alleged joint employers’ authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect. The common law clearly recognizes that reserved control and indirect control are relevant to the analysis.
By contrast, the 2020 rule made it easier for actual joint employers to avoid a finding of joint-employer status because it set a higher threshold of “substantial direct and immediate control” over essential terms of conditions of employment, which has no foundation in common law.
What are essential terms and conditions of employment under the final rule?
Essential terms and conditions of employment are defined as:
- wages, benefits, and other compensation;
- hours of work and scheduling;
- the assignment of duties to be performed;
- the supervision of the performance of duties;
- work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
- the tenure of employment, including hiring and discharge; and
- working conditions related to the safety and health of employees.
The joint-employer standard is only implicated if an entity employs the workers at issue and has authority to control at least one of these terms or conditions. Authority over other matters is not sufficient.
Why does the standard include reserved control?
The standard’s inclusion of reserved control is grounded in the common law. Including reserved control is important to account for situations in which an alleged joint employer maintains authority to control essential terms and conditions of employment but has not yet exercised such control.
The reality is that an entity holding such control may step in at any moment to affect essential terms. Indeed, even when the entity remains on the sidelines, it may cast a shadow over the other employer’s decision-making with respect to such terms.
Why does the standard include indirect control?
Section 2(2) of the National Labor Relations Act defines “employer” to include “any person acting as an agent of an employer, directly or indirectly.” By including indirect control in the joint-employer standard, the final rule accounts for control exercised through an intermediary or controlled third parties. Indirect control is also a well-established common-law consideration.
Considering indirect control prevents an entity that has an employment relationship with employees from avoiding joint-employer status—and the bargaining obligation that goes with it—by using an intermediary to implement decisions about essential terms and conditions of employment.
What does a joint employer have to bargain over?
For the purposes of collective bargaining, once an entity is deemed a joint employer by virtue of its control over one or more essential terms and conditions of employment, it will be required to bargain over those particular essential terms and conditions as well as all other mandatory subjects of bargaining that it possesses or exercises the authority to control. It will not be required to bargain over subjects that it does not have authority to control.