The NLRB’s Proposed Rule Change for the Standard Defining Joint Employers Should Raise Concern for All Large Employers

By Cameron Baker, Associate Attorney

On September 6, 2022, the National Labor Relations Board (the “Board”) released a Notice of Proposed Rulemaking that would change the current standard defining a joint employer relationship for purposes of potential liability for unfair labor practices.   Under the current standard, for an entity to be a “joint employer,” the entity must exert substantial direct and immediate control over one or more of the employee’s essential terms and conditions of employment.  The Board adopted this standard in 2020 and it marked a significant, employer-friendly shift in the Board’s approach to joint employer liability.

However, the proposed new rule would broaden the joint employer standard and would consider two or more entities joint employers if they simply possess the authority to control, or exercise the power to control (whether directly, indirectly, or both) essential employment conditions; including, but not limited to, wages, benefits and other compensation.  Thus, both the shared actual exercise of control or the mere authority to control (again, either directly or indirectly), may be sufficient to establish joint employer status between two or more entities. 

The rule also provides that evidence showing an employer who “communicates work assignments and directives to another entity’s managers or exercises ongoing oversight to ensure that job tasks are performed properly” potentially demonstrates the “indirect control over essential terms and conditions of employment” that could establish a joint employer relationship. 87 Fed. Reg. 54,650.

In other words, the proposed rule change reverts back to a much more relaxed version of the 2015 standard for establishing the joint employer relationship. For example, employers that assign or delegate tasks to contractors and/or business partners in carrying out their business activities could be classified as joint employers. The same concept applies to employers who manage or supervise other entities it does business with to enter contracts on the employer’s behalf.  Most large employers undertake these type of business activities on a daily basis and should be concerned with the possibility of this new standard if they wish to avoid joint employer liability.

Campbell Litigation will continue to monitor the progress of the proposed rule change and provide updates accordingly. In the meantime, employers can read the proposed rule and are encouraged to submit comments at the following link, which will be available until November 7, 2022 - Regulations.gov