New NLRB Proposed Rule Expands Joint Employer Definition

On September 6, 2022, the National Labor Relations Board (NLRB) proposed a new rule to expand the definition of “joint employer” under the National Labor Relations Act (NLRA). If the proposed rule is adopted, a party will be able to assert a joint-employment relationship with evidence of indirect and reserved forms of control over an employee’s essential terms and conditions of employment — a vast expansion from the current “substantial direct and immediate control” showing. Moving forward, franchisers and businesses utilizing contractors or temporary staffing may share liability for unfair labor practices and be forced to bargain with unions representing newly designated, jointly employed individuals.

The Notice of Proposed Rulemaking provides that the proposed rule will rely on common law agency principles to determine whether an employment relationship exists with an entity other than the individual’s W-2 employer. A joint employer designation under the NLRA requires two employers to share liability for unfair labor practices and to both bargain with the union representing the jointly employed individuals.

Under the proposed rule, 29 CFR Part 103, two or more employers will be considered joint employers if the employers “share or codetermine” an employee’s “essential terms and conditions of employment.” The proposed rule defines “share or codetermine” to mean the employer (1) possesses the authority to control or (2) exercises the power to control an employee’s essential terms and conditions of employment — directly or indirectly. In essence, this is a return to the NLRB’s Browning-Ferris ruling wherein the NLRB held that an entity that retained the power to control an individual’s conditions of employment was a joint employer even if that entity never actually used that power. See Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB 1599 (2015). The proposed rule provides a non-exhaustive list of essential terms and conditions of employment, including wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, and methods of work performance.

Allowing a party to assert a joint-employment relationship with evidence of indirect and reserved forms of control over an employee’s essential terms and conditions of employment greatly expands the current rule, which took effect on April 27, 2020. Under the 2020 rule, an employer could only be a joint employer with another employer if it had “substantial direct and immediate control” over the essential terms and conditions of an individual’s employment. The proposed rule seeks to rescind and replace the 2020 rule. The dissenting NLRB members criticized the proposed rule for offering a “fuzzier standard with no bright lines” that does not provide guidance in the rule itself and requires unions, employers, and employees to search the common law for guidance on determining a joint-employer relationship.

Expanding the joint employer definition will have a massive impact on franchisers and companies utilizing contractors and temporary staffing which would not have previously been subject to the NLRA. Clearly, the NLRB’s focus is presently situated on expanding the scope of joint employer findings.

The proposed rule will be published in the Federal Register on Wednesday, September 7, 2022. Stakeholders will then have until November 7, 2022, to provide feedback and comments to the NLRB before a final joint employer rule is issued.

For questions about this alert, please contact the authors and the Steptoe & Johnson Labor & Employment Team.