The NLRB’s Proposed Joint Employer Rule – A Directly, Indirectly, Would’ve, Could’ve, Even-if-You-Don’t-Actually Kind of Test for Joint Employment

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Last Tuesday, the National Labor Relations Board (NLRB) published an anticipated Proposed Rule on joint employer status. The Proposed Rule, which is designed to apply for all purposes under the National Labor Relations Act (NLRA), including both union representation and unfair labor practice contexts, is important to businesses that rely on labor supplied by a third party, including contractors, temporary agencies and employee leasing agencies, as well as to franchise relationships. If adopted, the Proposed Rule could especially impact industries such as healthcare, food service and suppliers.

The Proposed Rule states that “common-law agency principles” will govern whether two employers jointly employ a worker or group of workers. Unfortunately, this provides little clarity or guidance to businesses. The remainder of the rule suggests that almost any shared labor arrangement may now be construed as joint employment. Some of the highlights of the Proposed Rule:

  • Entities will be considered joint employers if they “share or codetermine” matters governing the workers’ “essential terms and conditions of employment.”
  • “Sharing or codetermining” is defined as directly or indirectly exercising control over, or having the authority to control (even if not exercised), one or more terms and conditions of employment.
  • “Terms and conditions of employment” are defined expansively to include, but is not limited to, “wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.”

What Does This Mean for Employers?

The text of the Proposed Rule is very broad and appears designed to capture most third-party labor arrangements, opening up companies to union organizing by or unfair labor practice charges from workers thought to be employed by third parties. The Proposed Rule suggests that companies using third-party labor should examine not only their actual day-to-day control over any aspect of the third party’s employees, but also the underlying contractual language that governs their relationships with the third parties. For example, under a strict reading of the Proposed Rule, any contractual language that provides for, or suggests, the direct or indirect ability to determine work hours, scheduling, placement, safety, assignments, or work rules for the third party’s employees, even if not actually exercised, could result in a finding of joint employment. Removing every such element of potential control may not be practical, feasible or even advisable (for example, it may be necessary for maintaining a safe workplace to retain the authority to remove a contractor’s employee who engages in unsafe work behavior or violates the employer’s rules). However, even in such circumstances, companies should review their contractual arrangements with an eye toward risk allocation or indemnification in connection with such retained authority.

The Proposed Rule is probably a signal of what to expect from other agencies under the current administration. If this Proposed Rule becomes the Final Rule, it may also influence some courts’ interpretations of joint employment in other contexts, such as anti-discrimination and wrongful discharge laws.  This could impact the “common-law agency principles” that DOL offers as the basis for the Proposed Rule.

The Proposed Rule is open for public comment and is not final. If your company uses third-party labor, you should submit a comment. While it is unlikely that the current NLRB’s final rule will deviate significantly from the Proposed Rule, you never know unless you try.