National Labor Relations Board Issues Modification to Proposed Rule

November 22, 2023

In late October, the National Labor Relations Board (NLRB) issued an explanation and justification for the modification of its rule regarding Joint Employer Status of employees of second entities. Within this explanation, the NLRD clarified three (3) major points including; (1) the definition of “essential terms and conditions of employment”, (2) the type of control necessary to establish joint-employer status, and (3) establishing the bargaining obligations of entities found to be joint employers.

Under the soon-to-be previous rule as conceived in 2020, an entity could only be considered a joint employer if it actually exercised “substantial direct and immediate control” regarding essential terms and conditions of another company’s employees. The new rule will change this language to include an “unexercised right to control the essential terms and conditions of employment” as sufficient to establish joint employer status. Under this ruling, essential terms and conditions of employment will include: (1) wages, benefits and other compensation; (2) hours of work and scheduling; (3) assignment of duties to be performed; (4) supervision of the performance of duties; (5) work rules and directions governing manner, means, and methods of performance of duties and the grounds for discipline; (6) tenure of employment, including hiring and discharge; and (7) working conditions related to the safety and health of employees.

The presence of a singular factor related to essential terms and conditions will be sufficient to establish joint employer status. Additionally, direct or indirect control through an intermediary may also establish this joint employer status. Consequently, potential liability through entities such as second tier subcontractors may be created as a result.

There are also certain actions which have been excluded from the category of evidence showing joint control. Actions such as requiring compliance with the law in a contract or incorporating regulatory requirements into a contract will not constitute exercising or reserving control. For example, as the NLRB recognizes the particular nature of the construction industry, it has determined that it will not treat a general contractor as the joint employer of a subcontractor’s employees solely because the general contractor has overall responsibility for the overseeing of operations on the jobsite. Unless the general contractor possesses or exercises control over particular employee’s essential terms and conditions, such a relationship will not be presumed.

Under the new rule, joint employers have a broad duty to bargain collectively with the representative of the joint employees regarding any term or condition of employment that has the authority to control or exercises the power to control. This includes terms or conditions not listed as a part of the seven (7) essential terms or conditions of employment under the new rule. This new rule shall not require a joint employer to bargain over any term and condition that does not possess the authority to control or exercise the power to control employees.

In preparation for the new rule, employers should take care to review their relevant agreements, as the NLRB has indicated that contractual boilerplate and fine print language that gives a company the authority to control the manner, means, terms, and conditions by which work is performed will be evidence of joint employer status even if the company has not exercised such authority.

The new rule is scheduled to take effect on December 26, 2023, and will apply to all cases filed after the date. The NLRB has stated that the prior rule exceeded the Board’s authority, making it presumptively invalid. As a consequence, should the new rule be invalidated by courts, the old rule will still be ineffective, and the NLRB will revert to the test that existed prior to the old rule.

For more information regarding the new National Labor Relations Board rule, please reach out to a qualified attorney at Rock Fusco & Connelly.