Thursday, October 26, 2023: US NLRB Unveiled Final, Union-Friendly Joint Employer Rule
New Standard Will Bring More Employees Under NLRA Coverage
Dissenting Member Kaplan Said New Rule “Misapprehends Common-Law Agency Principles”
Running a couple of months behind schedule, the U.S. National Labor Relations Board (“NLRB”) announced its Final Rule to establish a new, broader standard to determine whether two or more employers are joint employers of particular employees within the meaning of the National Labor Relations Act (“NLRA”). The day after its announcement, the NLRB officially published the Final Rule in the Federal Register.
Under the new standard, an entity may be considered a joint employer of another employer’s employees if the two “share or codetermine” ONLY one or more of the employees’ “essential terms and conditions of employment.” This expanded, employee-friendly standard will cover more entities, and thus, force more organizations to recognize workers as “employees.”
The Final Rule rescinds and replaces the NLRB’s previous Rule, published on February 26, 2020, that took effect on April 27, 2020. (See our stories on the previous Rule here and here.)
The effective date of the new rule is December 26, 2023. It will apply to NLRB cases filed on and after the effective date.
How Are “Essential Terms and Conditions of Employment” Defined?
Under the new rule, “essential terms and conditions of employment” are defined exclusively as: (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.
What is the Definition of “Share or Codetermine”?
The Final Rule defines “share or codetermine” to mean that an employer possesses “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.”
NLRB Rule Separate from DOL Rule
In a “Fact Sheet” on its new Rule, the NLRB explained that:
“The Board’s final rule is completely separate from the [U.S. Department of Labor’s (“DOL”)] rule. The Board and DOL independently set joint-employer standards, consistent with their different governing statutes. The Board’s rule is thus grounded in the NLRA and longstanding common-law principles. By contrast, the DOL applies an economic-realities test to interpret “employer” for the purposes of the Federal Labor Standards Act. The Board does not use the economic-realities test.”
We discussed the DOL’s Wage and Hour Division’s Rule defining a joint employer to determine liability for wage-hour violations under the Fair Labor Standards Act in our story here.
How We Got Here
On September 7, 2022, the NLRB published its Notice of Proposed Rulemaking (“NPRM”). For more details on the NPRM, see our story here. After an extension, the period for initial comments and reply comments ended on December 21, 2022, with roughly 13,000 comments submitted. The Board details its response to those comments in the preamble to the Final Rule here.
The Spring 2023 Regulatory Agenda listed August 2023 as the target date for publication of this Final Rule. On October 2, 2023, the NLRB told a federal court in the District of Columbia that it planned to issue the Final Rule by the end of the month. (See our story here for more details). We discussed this litigation, the NPRM, and the convoluted recent history of the NLRB’s effort to issue a Joint Employer Rule in our story here.
Changes from the Proposed Rule
In the preamble to the Final Rule, the NLRB summarized the changes in the Final Rule compared to its NPRM. The Board notes that it “modified the proposed rule (1) to clarify the definition of ‘essential terms and conditions of employment,’ (2) to identify the types of control that are necessary to establish joint-employer status and the types that are irrelevant to the joint-employer inquiry, and (3) to describe the bargaining obligations of joint employers.”
Sole GOP Member’s Opposition
Democratic Board Members David Prouty and Gwynne Wilcox joined Chair Lauren McFerran in issuing the Final Rule. The Board’s lone Republican, Marvin Kaplan dissented. According to Kaplan:
“[T]he majority’s final rule effects an unprecedented and unwarranted expansion of the Board’s joint-employer doctrine. The majority misapprehends common-law agency principles in holding that those principles compel the Board to rescind its 2020 Rule […] and replace it with a joint-employer standard not seen anywhere else in the law. My colleagues dispense with any requirement that a company has actually exercised any control whatsoever (much less substantial control) over the essential terms and conditions of another company’s employees.”
Congressional Opposition & Support
The OMB classified this Final Rule as a major rule subject to Congressional review. Wasting no time, U.S. Senators Bill Cassidy, M.D. (R-LA), ranking member of the Senate Health, Education, Labor, and Pensions (“HELP”) Committee, and Joe Manchin (D-WV) announced on Thursday their plan to introduce a Congressional Review Act resolution to overturn the Final Rule. The Senators asserted that the Final Rule “forces liability on companies for another business’ employees even if they do not directly oversee them.”
Former HELP Committee Chair and current Senate Appropriations Committee Chair Patty Murray (D-WA) expressed a different view. She said the new standard “provide[s] guidance to make sure corporations don’t try to dodge” their “important responsibility” to collectively bargain with workers.
In her statement opposing the Final Rule, House Education and the Workforce Committee (“EWC”) Chair Virginia Foxx (R-NC) claimed that it “dissuades millions of businesses from working with one another.” The new standard also “muddies the water for businesses trying to abide by this administration’s mess of out-of-touch mandates,” according to Foxx.
The EWC Chair’s take was in stark contrast to that of EWC Ranking Member Bobby Scott (D-VA), who characterized the Final Rule as a measure that “makes clear that low-road employers can no longer hide behind intermediaries to evade their responsibilities to workers.”