NLRB's Proposed Joint Employment Rule Could Raise Liability Risks

Author: Robert S. Teachout, Brightmine Legal Editor

September 8, 2022

Employers may be facing new liability risks under the latest rule proposed by the National Labor Relations Board (NLRB). An employer can be deemed a joint employer if it has indirect and unexercised control over the employment terms and conditions of an employee who is shared with another employer under the proposed rule, which returns to the joint employment standard first set in the Board's 2015 Browning-Ferris Industries decision.

The proposed rule states that two or more employers will be considered joint employers if they share or codetermine the essential terms and conditions of employment, including but not limited to:

  • Wages, benefits, and other compensation;
  • Hours of work and scheduling;
  • Hiring and discharge; discipline;
  • Workplace health and safety;
  • Supervision;
  • Assignment of work; and
  • Work rules and directions governing the manner, means or methods of work performance.

The proposed rule states that when reviewing whether an employer meets the joint-employment standard, the NLRB will make the determination based on common-law agency principles. It then further clarifies the expansive approach the Board will use, stating that:

  • Possessing the authority to control is sufficient to establish status as a joint employer, regardless of whether control is exercised.
  • Exercising the power to control indirectly is sufficient to establish status as a joint employer, regardless of whether the power is exercised directly.
  • Control exercised through an intermediary person or entity is sufficient to establish status as a joint employer.

Thus, the Board proposes to consider evidence of both direct and indirect control over essential terms and conditions of employment, whether reserved or active, when analyzing joint-employer status.

The determination of joint employment status by the NLRB has been a contentious issue for the past seven years. In Browning-Ferris Industries, a Democratic-majority Board revised the joint-employment standard to no longer require that an employer exercise direct control of working conditions, and to consider the existence of indirect and reserved control. When a Republican majority took control of the Board, it sought to narrow Browning-Ferris, but had to withdraw the attempt following an ethics controversy. Then the Trump-appointed Board issued a rule in 2020 holding that indirect control alone may not establish joint employer liability.

If approved, the proposed rule will overturn the 2020 rule and could create legal exposure for organizations that operate under a franchise business model, including fast-food operations such as McDonalds, hotel chains such as Marriot and convenience stores such as7-Eleven. Comments on the proposed rule are due on or before November 7, with replies to other comments due by November 21.