Revised, Stricter Joint Employer Standard Likely To Take Effect In Early 2023

As labor lawyers at Perkins Cole reminded readers, the National Labor Relations Board’s (NLRB) new joint employer legal standard is likely to go into effect at some point in 2023. (As a reminder, the joint employer 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, or NLRA).

This new regulation, available in its proposed form here, is consequential for both unionized and nonunionized entities because if an entity is deemed an employer under the NLRA it must recognize collective bargaining efforts and can be liable for violations arising from unfair labor practice allegations. Joint employer issues are most common between labor staffing firms and those using their services and in franchise/franchisor relationships.

When 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 rule would state 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 also expands 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 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.”

When implemented, the new standard also will raise 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.