Update: March 14, 2024

The NLRB’s rule for determining joint employment status that was set to take effect on March 11 has been vacated by a federal judge. The US Chamber of Commerce and other business groups challenged the new rule, arguing that it is “inconsistent with common law” and the federal judge agreed.

It is likely that the decision will be appealed to the US Court of Appeals and the Supreme Court may ultimately weigh in. In the meantime, employers should utilize the 2020 NLRB regulations for determining joint-employer status. Under that rule, employers are considered a joint-employer if they exert “substantial and immediate control” over the terms and conditions of employment for a group of employees.

We will continue to provide updates here as the decision works through the appeals process, so follow along for updates. Please don’t hesitate to reach out to ESC with questions.

March 5, 2024

The NLRB’s Final Rule on Joint Employment is an important piece of legislation to watch in 2024. You can review the details in the 2024 HR Trends & Legislation to Watch blog post.

The final rule was meant to go into effect on December 26, 2023, and was delayed until February 26, 2024 to resolve legal challenges. A federal district court has again delayed the effective date to March 11, 2024. A lawyer for a dozen business groups led by the U.S. Chamber of Commerce urged a Texas federal judge to strike down the NLRB rule on February 13. The judge suggested the rule could complicate collective bargaining and that a motion will be issued soon.

In general, a joint employment relationship exists when two entities exercise control over the same employees. A finding of joint employment status is significant because all joint employers may be individually and jointly responsible for compliance with employment statutes. The National Labor Relations Board (NLRB) issued a long-anticipated final rule that substantially increases the number of employers who may be deemed joint employers. If two or more employers are joint employers under the National Labor Relations Act (NLRA), they are jointly liable for any unfair labor practices.

The new rule builds on the NLRB’s 2015 decision in Browning-Ferris Industries holding that an employer’s reserved or indirect control of the terms and conditions of a third party’s employees (such as a staffing agency or franchisee) were sufficient to create a joint employment relationship. That ruling was replaced by a 2020 rule that required such employers to meet a higher threshold of “substantial direct and immediate control.” The final rule states that an employer meets the joint-employer standard only if the employer has authority to control at least one of seven essential terms and conditions of employment.

The specified essential terms and conditions of employment are:

  • Wages, benefits and other compensation;
  • Hours of work and scheduling;
  • Assignment of duties;
  • Supervision of the performance of duties;
  • Work rules and directions governing the manner, means and methods of performing duties and the grounds for discipline;
  • Tenure of employment, including hiring and discharge; and
  • Working conditions related to the safety and health of employees.

According to the NLRB’s fact sheet, “the nature of the business-to-business relationship is incidental to the analysis established by the final rule. So, not all franchisors and their franchisees will be joint employers. Nor will all staffing or temporary agencies and their client employers.” Rather, regardless of the business model, the joint-employer analysis is driven by the relationship with the employees in question and the authority to control one or more of the employees’ essential terms and conditions of employment. The bottom line is that, while the final rule establishes a uniform joint-employer standard, the NLRB will still have to conduct a fact-specific analysis on a case-by-case basis to determine whether two or more employers meet the standard.

Despite the delay, it continues to be important to review agreements with third parties (such as staffing agencies and subcontractors) to determine if they could be viewed as providing the right to control an essential term or condition of your workers’ employment. Stay tuned for additional updates as a decision will be issued soon from the Texas federal judge. We will continue to keep you updated on the 2024 HR Trends & Legislation to Watch.