NLRB Expands Definition of Joint Employment | JD Supra

The National Labor Relations Board (NLRB) has implemented a final rule, effective December 26, 2023, that expands the criteria for determining “joint employer” status under the National Labor Relations Act (NLRA). This rule restores the broader Obama-era interpretation of a joint employer, emphasizing the importance of an employer’s potential control over material terms of employment, whether or not that control is actually exercised.

Under the new standard, an entity can be considered a joint employer if it has the power to control at least one significant entity, “whether or not such control is exercised and regardless of whether the control is direct or indirect, such as through an intermediary.” In determining joint employer status, the Board will consider the following “essential” terms of employment:

(1) wages, benefits and other remuneration;

(2) working hours and schedule;

(3) assignment of responsibilities to be performed;

(4) supervision over the performance of duties;

(5) work regulations and directions specifying the manner, means and methods of performing duties and the basis of discipline;

(6) length of service, including employment and dismissal; AND

(7) working conditions related to the safety and health of workers.

This new standard is a significant departure from the previous rule because it eliminates the requirement for “substantial, direct and immediate control” over one of the more material terms of employment. Currently, simply having such an authorization is enough to obtain the status of a joint employer. While the NLRB will continue to evaluate joint employer status on a case-by-case basis, implementing this new standard could have serious consequences for businesses that were already approaching a joint employment relationship. This change will impact the common practice in the hospitality industry of using staffing agencies for specific roles, such as cleaning, and outsourcing entire departments to external contractors. Additionally, relaxing the standard may lead to the involvement of third parties in collective bargaining, adding another element to an already complex process. Employers should also remember that while these developments are currently limited to the NLRB, which enforces the NLRA, the Common Employment Standards as they apply to other laws will likely be impacted by the trend to expand the definition of joint employment. Relationships with all outside employees should be assessed against the new standard to determine whether the NLRB could find a common employment relationship.