The National Labor Relations Board (Board) has issued a new Final Rule affecting joint employment under the National Labor Relations Act (NLRA). The new rule rescinds the prior Rule enacted in 2020 and puts forth a new test expanding the circumstances under which an employer is deemed a ‘joint employer.’

Although the NLRA is silent as to the definition of “joint employer,” the Board (and the courts) have traditionally applied common-law agency principles to determine whether a joint employer relationship exists. Under the new Final Rule, an entity may be considered a joint employer of another employer’s employees if the two share or codetermine the employees’ essential terms and conditions of employment.

To “share or codetermine those matters governing employees’ essential terms and conditions of employment” means that an employer must 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.

The new Final Rule was announced on October 26, 2023, and makes the following changes:

• The Standard: Determinative weight in deciding whether a joint employer relationship exists is given to the existence of a putative joint employer’s authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect, such as through an intermediary.
• Definition of “Essential Terms and Conditions of Employment:” The new Final Rule’s modified definition provides an exhaustive list of seven categories of terms or conditions of employment considered “essential” for the purposes of the joint-employer inquiry. These are: (1) wages, benefits, and other compensation; (2) hours of work and scheduling; (3) the assignment of duties to be performed; (4) the supervision of the performance of duties; (5) work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; (6) the tenure of employment, including hiring and discharge; and (7) working conditions related to the safety and health of employees.
• Collective Bargaining Obligations: A joint employer must bargain collectively with represented employees regarding any term or condition of employment that it has the authority to control or exercises the power to control (regardless of whether that term or condition is deemed to be an essential term or condition of employment under the Rule).

What Does It All Mean?

The new determinative standard – together with the seven specific essential terms and conditions of employment – is all encompassing, casting a broad net over nearly every aspect of the employment relationship.

The new Final Rule goes into effect December 26, 2023. As such, before the end of the year employers should begin reviewing third-party contracts to determine if contract terms should be modified considering the expanded definition of joint employer and the essential terms and conditions outlined above. Key to such a review is remaining mindful of the fact that regardless of the business relationship, the Board will look beyond contractual terms in its analysis of the putative employer’s relationship with the employees in question. In other words, all facts related to the employer/employee relationship will be examined and considered.

Employers should also keep in mind that the NLRA joint-employer rule is not the same rule applied by the U.S. Department of Labor for purposes of the Federal Labor Standards Act.

View the National Labor Relations Board Fact Sheet for additional information.