NLRB Issues Revised, Stricter Joint Employer Standard
The Biden administration’s National Labor Relations Board (NLRB) issued its long-awaited draft proposed joint employer standard on September 7, 2022. This standard is used to determine whether more than one entity controls the terms and conditions of an employee, and thus, is responsible for the employee under the National Labor Relations Act (NLRA).
Joint employer issues are most common between labor staffing firms and those using their services and in franchise/franchisor relationships. If implemented, the new regulation would undo the standard put into place by the Trump administration in 2020 that maintained the joint employer standard must focus on whether a putative employer exercised “actual control” over the terms and conditions of employees. In contrast, the Biden administration’s proposed rule states that “two or more employers of the same particular employees are joint employers of those employees if the employers share or codetermine those matters governing employees’ essential terms and conditions of employment.”
This shift would allow employers to be more easily classified as joint employers, increasing their susceptibility to collective bargaining negotiations and unfair labor practice claims. The Biden administration rule would also expand the definition of “essential terms and conditions of employment” by including workplace health and safety, assignments, and work rules and directions governing the manner, means, or methods of work performance.
The Coalition for a Democratic Workplace, which MSCI is a member of, said, “The NLRB’s proposed rulemaking is more damaging than we anticipated. The proposal goes beyond the controversial Obama-era [NLRB] decision by requiring a joint employment determination based on ambiguous concepts of indirect and reserved control. … Whether by accident or design, the proposal disincentivizes larger companies from contracting, franchising or licensing with small and local businesses by injecting uncertainty and unnecessary liability into business relationships. The end result is fewer opportunities for entrepreneurs wishing to invest in their local economy, fewer local jobs, and fewer options for consumers.”
The NLRB has asked for public comment on the proposed rule. Comments must be received on or before November 7, 2022, and reply comments must be received on or before November 21, 2022.
If implemented, this new standard raises the potential for labor litigation for employers that have relationships with staffing agencies, are part of a franchise model, or use outside organizations, such as payroll companies, to handle certain aspects of their employees’ working conditions.
Click here to read the proposed rule and to find instructions for how to comment.