Over the past decade or so, there’s been much effort by the government to expand the scope of who may be deemed a joint employer. Those efforts have been to make contractors and their subcontractors, franchisors and their franchisees, and staffing agencies and their clients, joint employers. If they are joint employers, then one may be liable for the employment law wrongs of the other, and one may even have to engage in collective bargaining with respect to employees on the other joint employer’s payroll. Major efforts in this regard were made during the Obama Administration, all of which were rolled back during the Trump Administration.
Déjà vu all over again!
On October 26, 2023, the National Labor Relations Board rolled out a new rule that virtually adopts the standards adopted by the Board during the Obama Administration. The rule’s effective date is February 26, 2024.
Under this new joint employer rule, any entity that shares or codetermines workers’ essential terms and conditions of employment with another entity, e.g., the subcontractor, franchisee, or temporary worker staffing agency, is a joint employer. Specifically, if the entity has a say on any of the following items, whether directly or indirectly and whether actually exercised or just has the potential to do so, is a joint employer under the National Labor Relations Act:
- 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 grounds for discipline;
- The tenure of employment, including hiring and discharge; and
- Working conditions related to the safety and health of employees.
Importantly and critically, and departing from otherwise long-standing Board precedent, an entity’s unexercised or indirect control over any of the above factors will be considered sufficient to satisfy the newly defined joint employer status.
Any entity meeting the above standards will be held jointly liable for any unfair labor practices incurred by the other, more readily identifiable, employer. In addition, the joint employer will be obligated to bargain over any of the elements described above on which has the authority or potential authority to control.
The Board has published a Fact Sheet elaborating on the above.
What does this mean?
Avoiding joint employer status will become extremely difficult, particularly since most contracting entities and franchisors have some standards they expect of their contractors and franchisees. The same may hold true for the relationship between staffing agencies and their clients. Drafting agreements establishing independent contractor status as in the past will no longer suffice to avoid becoming a joint employer.
The rule exposes contracting entities to liability for acts they may have had little or no involvement in, and it could pull those entities into multiple and conflicting bargaining tables. Contracting entities will become embroiled in negotiating multiple union contracts with subcontractors, some of whom are competitors. It also can make both joint employers targets of strikes and picket lines. Also, joint employers may have to post notices in their respective workplaces of violations of the Act by either employer.
Litigation challenging the new rule is likely. In the meantime, the framework for using contractors and temporary workers, as well as many franchise arrangements, has changed. Considering the Board’s aggressive initiatives targeting its view of joint employers and, in general, non-unionized employers, the Board is expected to fervently use this new doctrine to target employers who have historically not had to worry about their contractors’ union issues. If you contract services, engage temporary workers, or are a franchisor, BEWARE!
For more information or guidance regarding how to respond to this dramatic development, contact the authors of this alert or any other member of Dykema’s Labor and Employment Law Practice Group.