On October 25, the National Labor Relations Board (NLRB) issued its Final Rule that dramatically expanded the definition of joint employment under the National Labor Relations Act (NLRA). This will affect both unionized and non-unionized employers whenever there is a joint employer issue.

Under the new rules, employees of franchisees and staffing agencies have a broadened ability to assert joint employment claims against the franchisor or the organization that uses staffing agency placements. Effectively, temporary employees with union representation could potentially force a non-unionized employer to the bargaining table to negotiate the terms and conditions of their joint employment. Further, organizations found to be joint employers are potentially liable for unfair labor practices committed by the other employer, and become subject to union picketing or other economic pressure during a labor dispute.

This Final Rule re-establishes the Obama-era standard of joint employment, wherein one company may be deemed a joint employer of a second company’s employees not only where it directly or immediately exercises control of the workforce, but where the first company’s control remains indirect, or even reserved but not ever used.

More precisely, the NLRB may find a joint employment relationship exists where two or more employers share or codetermine employees’ essential terms and conditions of employment. The NLRB defines “share or codetermine” to mean “possess the authority to control (whether directly, indirectly, or both) or to exercise the power to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” You may read the NLRB Fact Sheet on the Joint-Employer Standard Final Rule here.

This Final Rule rejects the 2020 rule of the Trump era, which focused on “direct and immediate control,” and takes a more expansive view of “essential” terms and conditions of employment. Under the new standard, “essential” terms are defined as

• Wages, benefits, and other compensation
• Hours of work and scheduling
• Assignment of duties to be performed (new)
• Supervision of the performance of duties
• Work rules and directions that govern the manner, means, and methods of the performance of duties and the grounds for discipline (new)
• Tenure of employment, including hiring and discharge
• Working conditions related to safety and health of employees (new)

If workers for a staffing firm claim the company they are subcontracted to calls most of the shots—and what employer does not decide which duties an employee is to perform, or decide the hours of work, or supervise employee performance?—the NLRB could be called on to decide whether that employer is, in fact, a joint employer. If the staffing firm employees were represented, the joint employer would then have to bargain over those terms of employment that it controls, or could control, even if that term or condition is not “essential” in determining joint-employer status to begin with.

Joint-employer status has often been the subject of controversy, and the NLRB’s stance has shifted with the changing politics of the NLRB. In 2015, it issued its decision in Browning-Ferris Industries of California, Inc., which threw out years of precedent by dramatically expanding the definition of joint employment. The decision received remarkable amounts of negative scrutiny and immediate congressional efforts to have it overturned. In December 2018, the U.S. Court of Appeals for the District of Columbia upheld that “indirect control” may be one factor in assessing joint-employer status, but expressed doubt that an unused indirect right of control could establish such a relationship. In February 2020, the NLRB promulgated a Final Rule that required “substantial direct and immediate control” over essential terms and conditions of employment before an employer could be found to be a joint employer.

This new swing of the political pendulum represents the most extreme to date toward a broad definition of joint employment. The rule takes effect December 26, 2023, and will only be applied to cases filed after that date.

Several business groups have already expressed discontent with the rule, and the U.S. Chamber of Commerce, the nation’s largest business lobbying group, said it was exploring litigation to challenge it. The rule will broadly affect industries such as manufacturing and construction that rely heavily on staffing agencies and contractors to provide workers, and franchises such as McDonald’s that are not typically involved in franchisees’ day-to-day workplace issues.

Labor unions, in contrast, say this change is necessary because of an uptick in the use of contract labor, which shields employers from accountability for workplace policies.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.