The National Labor Relations Board recently issued a final rule broadening who may be considered a joint employer of another employer’s employees under the National Labor Relations Act.

Under the former rule, passed in February 2020 during the Trump administration, an entity is considered a joint employer of a separate’s employer’s employees only if the two employers “share or codetermine the employees’ essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”  Now, under the Biden administration, the NLRB has changed the joint employer standard to more closely mirror common-law agency principles.  The new rule, effective December 26, 2023, states than an entity now may be considered a joint employer of another employer’s employees “if the two share or codetermine the employees’ essential terms and conditions of employment.”  The new rule defines “share or control” as “possessing the authority to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” Importantly, joint employer status can be found where a putative employer has authority to determine essential terms and conditions of employment even if the authority is never exercised, or where an entity exerts indirect control over working conditions.

Based on feedback received in response to its proposed rule, the NLRB has structured the final rule so that “essential terms and conditions of employment” are limited to seven categories: “(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; and (7) working conditions related to the safety and health of employees.” Control over any aspect of the employment relationship would inevitably fall under at least one of the above categories and lead to joint employer liability.

The broadening of the joint employer standard, while not surprising, should not be ignored.  Any entity found to be a joint employer will be on the hook for any labor practices deemed to be unfair to the other employer’s employees.  Joint employers will also be shouldered with bargaining obligations pertaining to the employees.  Potential joint employers should therefore be cognizant of the fact that simply refraining from exercising control over another employer’s employees will not prevent them from being classified a joint employer.  Consideration should therefore be given to clarifying contracts to underscore the lack of authority of the entity to determine essential terms and conditions of employment where possible keeping in mind that, under the new rule, simply the fact that the entity could exercise control is all that is needed to classify an entity as a joint employer.  With the December 26 implementation date quickly approaching, employers who work in tandem with any other employers should determine where they may be considered a joint employer and review the terms of those relationships accordingly.

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