Employment Law Report
New Joint Employer Rule Effective December 26 2023
By: Julie Laemmle Watts
The National Labor Relations Board (NLRB) released a new joint employer rule. Under the new rule, which takes effect on December 26, 2023, two (2) entities are considered joint employers if they either share or co-determine one or more of an employee’s essential terms and conditions of employment, even if one of the employers possesses only indirect or contractually reserved control. The extent of the indirect control necessary to create a joint employer relationship is unclear under the rule. Further, the list of what is deemed an “essential term and condition of employment” has broadened from the prior rule to include wages, benefits, and other compensation; hours of work and scheduling; the assignment of duties to be performed; the supervision of the performance of duties; work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; the tenure of employment, including hiring and discharge; and working conditions related to the safety and health of employees.
The new rule is replacing the April 2020 rule under which the extent of control did matter, as an employer could be a joint employer if it had direct and immediate control over the essential terms and conditions of employment, such as wages, benefits, hours, hiring, discharge, discipline, supervision, and direction.
Businesses and lawmakers alike have expressed opposition to the new rule, with lawyers opining that it would be challenged in court right away. One main concern is that the new rule threatens a host of relationships that are not intended to create joint employments and allows businesses to be held liable for workers they do not employ at workplaces they do not own or control. Not only will employers utilizing staffing agencies or contract employees be greatly impacted, but the franchise business model will also suffer, as franchisees usually handle hiring, termination, work schedules, and pay decisions while franchisors do not. The new rule also significantly impacts collective bargaining, as a joint employer must bargain collectively with employee representatives with respect to any term or condition of employment that it controls or is able to control, even for non-essential terms or conditions of employment.
The new rule will be applied prospectively, with the old rule applying to cases filed before the December 26, 2023 effective date of the new rule.
Employers with questions should consult their Wyatt, Tarrant & Combs labor and employment counsel.