National Labor Relation Board’s Final Rule on Joint Employment Broadens Impact

For the second time since 2020, impacted businesses will have to adjust to a new rule from the National Labor Relations Board (NLRB) regarding joint employer status under the National Labor Relations Act (NLRA).

On Oct. 27, 2023, the NLRB published its final rule on the Standard for Determining Joint Employer Status. It places an emphasis on control – direct or indirect – over the essential terms and conditions of employment as its overarching premise in determining the status, plus both entities must have a relationship with the employee. This rule, which according to the NLRB “grounds the standard in established common-law agency principals”, could make it easier for employers to be found to be joint employers for purposes of collective bargaining and similar labor obligations under the NLRA.

The rule currently in effect provides that joint employer status exists only where both employers exercised substantial direct control over terms and conditions of employment for an employee.

When will the NLRB Joint Employer Rule Take Effect?

The International Franchise Association (IFA) joined other national associations in a lawsuit filed by the U.S. Chamber of Commerce in U.S. District Court for the Eastern District of Texas. Additionally, several members of Congress introduced a measure under the Congressional Review Act to kill the regulation. However, the rule is likely to survive Congressional review.

In response, the NLRB announced an extension to the effective date, previously set for Dec. 26, 2023, to Feb. 26, 2024, to provide the NLRB time to resolve the legal challenge the rule faces.

The NLRB could also withdraw the rule before it takes effect, which is not unprecedented but also not likely.

Do Other Agencies Address Joint Employment?

The NLRB’s rule on joint employment should not be confused with the U.S. Department of Labor’s (DOL) standard for joint employment under the Fair Labor Standards Act (FLSA).

The DOL issued its own final rule on joint employer status in January 2020, which determined joint employment for purposes of wage and hour issues under the FLSA.  However, it has been rescinded following a court decision in New York and no plans have been announced for when a new rule might be considered.

Who Can Be a Joint Employer Under the NLRB Final Rule?

An employer could be considered a joint employer under the NLRB’s new standard if the entity has or retains authority to control, directly or indirectly, at least one of seven of the essential terms and conditions of employment detailed in the Final Rule.

The essential terms and conditions of employment, which are relevant to the determination of joint employment under the NLRB’s new rule, include:

• Wages, benefits, and other compensation
• Hours of work and scheduling
• Assigned duties
• Supervision of duties
• Workplace rules
• Hiring and firing
• Workplace health and safety conditions

What Impacts Might Be Felt from NLRB’s Joint Employer Rule?

With a much broader definition and wider circumstances under which an employer might be found to be a joint employer, the NLRB’s rule creates a greater likelihood that more employers will be:

• Subject to unfair labor practices
• Obligated to come to the bargaining table with unions (e.g., working conditions, wages, etc.)
• Targets for picketing

All businesses are subject to the NLRB’s joint employer rule, but it might be particularly impactful in the franchise and staffing agency industries, as well as with any business using staffing agencies or contractors.

Looking Ahead

Paychex will continue to monitor additional developments and guidance regarding the NLRB’s Final Joint Employment Rule. Businesses, meanwhile, should stay up to date and consult with their legal counsel to help prepare their business to address any potential challenges created by the NLRB’s final rule. 

Paychex can help you understand the complexities of the regulations that impact your business and offers HR solutions and services to help make it simpler for you to focus on running your business.

Additional Resources

NLRB: Fact Sheet on the Joint Employer Final Rule