September 07, 2022

NLRB Releases Notice of Proposed Rulemaking to Increase Scope of Joint Employment Relationships

On September 6, 2022, a split National Labor Relations Board (NLRB or the Board) released its long-anticipated Notice of Proposed Rulemaking that would lessen the burden in proving that two companies jointly employ workers under the National Labor Relations Act (NLRA). This proposed standard, in effect, would increase the scope of joint employment relationships to include indirect and unexercised control over the essential terms and conditions of a job. In contrast, the prior standard — adopted in April 2020 by a Republican-majority Board — required that an employer have direct and immediate control over these essential terms and conditions. Moreover, the putative joint employer had to actually exercise that control. Before that, in 2015, a Democrat-majority Board issued a decision holding that a company need only hold indirect control over the terms and conditions of employment to be considered a joint employer.

This hot-potato issue has real effect, particularly for companies that rely on contracting entities such as staffing agencies for employment needs. Indeed, because joint employers shoulder liability for unfair labor practices, share responsibility for bargaining with a union, and are subject to economic pressures if there is a labor dispute, companies must pay close attention to the contours of the proposed test. Specifically, business entities should assess whether current arrangements allow for their indirect and unexercised control over essential terms and conditions of a job, which include, but are not limited to, 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, or methods of work performance. Even if this control is reserved and never acted upon, should the Board ultimately adopt this proposed rule, companies may be found to be joint employers who are subject to the requirements of the NLRA. 

NLRB Chairman Lauren McFerran and Board Members Gwynne A. Wilcox and David M. Prouty — both of whom were nominated by President Biden — proposed the new standard, which generally tracks Biden-era labor policy. Though comments on the proposed rule are open until November 7, 2022, the Board is expected to quickly finalize and enforce the rule after this period closes. In the meantime, companies should evaluate their level of control — even if it is indirect or unexercised — over the essential terms and conditions of workers’ employment. Companies should also evaluate their agreements with staffing agencies to determine if there is any potential liability. If you have any questions about how the proposed joint-employer rule may affect your business, please contact an attorney on the Faegre Drinker labor management relations team.

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