Regulations on the Radar

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  3. NLRB Issues Anticipated Final Rule on Joint Employer Status

The National Labor Relations Board (NLRB) has issued a new final rule on defining what constitutes a “joint employer.” This rule overturns the 2020 standard that required clear proof of “direct and immediate control” over an employee’s essential work terms to establish a joint employer status.

The updated rule broadens the criteria for joint employer status. Now, a joint employer relationship can be determined if an employer has the authority—directly, indirectly, or both—to control or actually exercise control over important aspects of employment. This includes, but is not limited to, wages, benefits, work hours, scheduling, job duties, supervision, work rules, and health and safety conditions.

In practical terms, this means that a worker could be considered an employee of multiple entities at the same time, even if those entities are not directly connected. Both employers in a joint-employer relationship would be required to negotiate with unions and could be held liable for certain labor issues.

This rule has significant implications, especially for the franchise industry. It suggests that even if a company does not actively control a worker, or significantly impact their daily job, they could still be seen as an employer. For example, if a franchise agreement includes requirements for brand consistency that influence employment conditions, the franchisor might be deemed a joint employer alongside the franchisee.

This update has garnered criticism from a variety of groups for its potential implications on liability and business operations. Organizations are arguing for a clearer and more consistent standard to avoid confusion and litigation, suggesting that only substantial and significant control should define a joint employer to provide certainty to organizations and HR professionals regarding their legal responsibilities.

IRONWOOD will continue to provide updates on this story as it evolves.