NLRB Issues Proposed Rule on Joint Employment

The long-awaited proposed rule from the National Labor Relations Board (NLRB) addressing joint employment was published on September 6, 2022.  The rule proposes to rescind the Trump-era 2020 final NLRB rule.  The new rule rejects the Trump-era rule provisions requiring: (1) that a putative joint employer "actually" exercise control; (2) that such control be "direct and immediate;" and (3) that such control not be "limited and routine."  

The terms of the new proposed rule address joint employer status by defining the terms "share or co-determine those matters governing employees' essential terms and conditions of employment" to mean "for an employer 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."  Section 103.40(b).  The new tests would make it appropriate to give determinative weight to the existence of a putative joint employer's authority to control the essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any exercise of such control is direct or indirect, such as through an intermediary.  For example, evidence that a putative joint employer communicates work assignments and directives to another entity's managers or exercises its ongoing oversight to ensure that job tasks are performed properly may demonstrate the type of indirect control over essential terms and conditions of employment that is necessary to establish a joint-employer relationship.

Editor's Note - Comments regarding the proposed rule must be received by the NLRB long before November 7, 2022.  Hints in the proposed rule suggest changes that employers should consider making in their contractual arrangements to avoid joint employment status.  For example, comments in the proposed rule suggest that a worker is not an employee of an entity where the contract provided the "company reserves and holds no control over [worker] in the doing of such work other than as to the results to be accomplished."  Other comments indicate that contractual terms limited to "dictating the results of a contracted service," and aim "to control or protect [the employer's] own property," or to "set the objective, basic ground rules, and expectations for a third-party contractor" would generally not be relevant to the inquiry.  In addition, the comments agree that "routine components of a company-to-company contract," like a "very generalized cap on contract costs," or an "advanced description of the task to be performed under the contract," are generally not material to the existence of an employment relationship under common-law agency principles.

The proposed rule is carefully drafted as a legal attack is likely.  It is designed not only to rescind the Trump-era joint employment rule, but also to greatly expand circumstances in which joint employment status will be found by the NLRB.  Joint employment status is often litigated in subcontractor situations and in franchisor-franchisee relationships, where the union attempts to expand the parties responsible for bargaining and monetary damages to include other entities to whom the primary employer has a close relationship.

This article is part of our October 2022 Newsletter.

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