NLRB Relaxes Requirements to Establish Joint Employment Relationship

Rob Thomas, Of Counsel

            On October 26, 2023, the National Labor Relations Board (the “Board”) announced and published its “final” rules[1] regarding the standard for determining joint employer status under the National Labor Relations Act (“NLRA” or the “Act”)—abandoning its prior published rules from April, 2020[2] which were significantly more employer-friendly.  The Board’s latest rulemaking signifies yet another move to undo its regulations and precedent established by it during the Trump administration.     

Joint Employment under the NLRA[3] 

            Under the Act, a separate business entity may be considered a joint employer of another employer’s employees under certain circumstances, thereby rendering the joint employer potentially liable for the unfair labor practices committed by the other employer, or requiring the joint employer to bargain with the employees’ union, as applicable.  However, the law regarding joint employment status under the Act has been in flux for years.  Beginning in 2015, the Board re-adopted a joint employment test first articulated by the Court of Appeals for the Third Circuit in NLRB v. Browning-Ferris Industries,[4] holding that two employers could be considered joint when they share or codetermine matters governing the essential terms and conditions of employment (hiring, firing, compensation, discipline, supervision, etc.), and such control could be direct, indirect, or simply a reserved right to control that is not exercised.[5]  To that end, if an employer had the discretion, for example, to discipline a staffing agency’s employees (but never exercised it), or to indirectly influence the employees’ compensation by the staffing agency, the employer could potentially be considered a joint employer of the staffing agency and liable for the unfair labor practices of the staffing agency. 

            In February of 2020, the Board issued a final rule, effective April 27, 2020, and published regulations abrogating the indirect, Browning-Ferris approach.  The 2020 regulations required a showing that the alleged joint employer possessed and exercised direct and immediate control over one or more essential terms or conditions of employment, and that such control had a regular or continuous effect on an essential term or condition of another employer’s employees.  Thus, for example, an alleged joint employer would not exercise “direct and immediate control” over another employer’s employee if it simply prohibited the employee from performing further work under a contract, or if it brought the employee’s misconduct to the attention of the other employer in order for the other employer to discipline the employee accordingly.    

The Return to Browning-Ferris Principles in the Joint Employment Analyses

            Now, the Board has again reversed course on its prior regulations and precedent[6] to codify the less employer-friendly standards utilized under Browning-Ferris.   Under the new rules, a putative joint employer shares or codetermines the matters governing employees’ essential terms and conditions of employment when it possesses the authority to control (directly, indirectly, or both), or exercises the power to control (again, directly, indirectly, or both), one or more of the employees’ essential terms and conditions of employment.  Such essential terms and conditions include compensation (including benefits), hours of work and scheduling, assignments of duties, supervision of duties, work rules and control over the manner and method of the performance of employment duties (including grounds for discipline), hiring and firing, and health and safety matters.

            The rules emphasizes that the mere authority to control such essential terms is sufficient, as is the power to control matters indirectly, such as through an intermediary.  When the joint employer relationship is established, the joint employer must bargain with the employees’ exclusive bargaining representative over any term or condition of employment which it possesses the power or authority to control, but is not obligated to bargain over matters that it does not have the authority or power to control.  

Employer Considerations

            While the new rules are subject to Congressional review and therefore the effective date is subject to change, the rules is nonetheless scheduled to become effective on or about December 26, 2023.  To the extent employers utilize franchisees or staffing agencies to man their operations, they should review and evaluate their contracts with these franchisees and/or staffing agencies closely to ensure that the contracts maintain appropriate separations of powers between the entities.  Similarly, employers should evaluate their operations in practice to ensure that they are not exercising undue control over the employees of other businesses insofar as the essential terms of employment are concerned.  Again, such control can be indirect, or simply reserved, and a putative joint employer’s mere inaction or lack of exercise of control is not sufficient to avoid a finding of joint employment.  

            Campbell Litigation remains available to assist employers with these and other labor-related concerns in light of the Board’s ever-changing rules and precedent over critical labor matters.

[1] See https://public-inspection.federalregister.gov/2023-23573.pdf for a full copy of the final rules regarding the Board’s joint employer standard.

[2] 29 C.F.R. § 103.40 (2020). 

[3]Note that the joint employer analysis under the NLRA and as articulated by the Board in its new rules is separate from and otherwise does not affect the joint employer analysis under federal anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964, which continues to focus on whether an independent entity exercises sufficient control over the terms and conditions of an employee’s employment such that it could be considered a “joint employer,” with the ability to terminate the employment relationship being the most telling factor in the analysis. See, e.g. Knitter v. Corvias Military Living, LLC, 758 F.3d 1214, 1226 (10th Cir. 2014).   

[4]NLRB v. Browning-Ferris Indus., 691 F.2d 1117 (3d Cir. 1982).

[5]Browning-Ferris Indus. of Cal., Inc., 362 NLRB 1599 (2015).

[6]See, e.g. https://www.rockymountainemployersblog.com/blog/2023/9/21/nlrb-expands-what-may-be-considered-protected-concerted-activity; https://www.rockymountainemployersblog.com/blog/2023/8/31/the-nlrb-issues-final-rule-on-representation-election-procedures-restoring-obama-era-quickie-election-rules; https://www.rockymountainemployersblog.com/blog/2023/3/2/the-national-labor-relations-board-returns-to-pre-2020-precedent-governing-the-legality-of-severance-agreement-language.