National Labor Relations Board Proposes New Joint Employer Definition

3 min

On September 6, 2022, the National Labor Relations Board (NLRB) released a Notice of Proposed Rulemaking, which proposed a change to the standard for determining joint employer status under the National Labor Relations Act (NLRA)—a proposed change that results from the shift to an NLRB with a Democratic majority. A finding of joint employer status implicates a host of issues for affected employers, including the requirement that a joint employer must bargain with a union representing joint employees, potential liability for acts committed by the joint employer, and picketing by joint employees that might otherwise be illegal under the NLRA.

On February 25, 2020, the NLRB promulgated a final rule which provided that an employer will be considered a joint employer only if it “exercises substantial direct and immediate control over the employees’ essential terms and conditions of employment in a manner that is not limited and routine.” These “essential terms” are expressly limited to wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

Under the proposed rule, two or more employers would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment,” such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules. Noticeably, the proposed rule explicitly provides that this is a non-exhaustive list, meaning the Board might consider other facts it finds relevant. Importantly, the rule defines “share or codetermine” as to “possess the authority to control (whether directly, indirectly, or both) or to exercise the power to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” Thus, the key difference under the new rule is that there only needs to be a showing of the authority to control, rather than the actual exercise of that control. Overall, this proposed rule seeks to return the issue of joint employer status to its pre-2020 interpretation and leaves the impression that the NLRB will be quick to find joint employer status.

Members of the public may submit comments on this proposed rule to the NLRB on or before November 7, 2022, and reply comments must be received by the Board by November 21, 2022. The Board will consider these comments before issuing a final rule thereafter.

Employers wishing to avoid a joint employer finding should review the relationships and practices between the relevant entities. This practice may be more difficult than in the past couple of years, given the non-exhaustive list of items that may constitute “essential terms” under the proposed rule, and employers would be wise to consider any link between the entities as relevant to a potential determination on the issue. We will continue to monitor the status of this proposed rule and its potential effects. If your organization has any questions about joint employer status, or how to best structure its entities to avoid such a finding, please contact the authors of this alert or any other attorney in Venable’s Labor and Employment Group.