Over the last decade, the National Labor Relations Board (NLRB) has a pattern of overruling itself in how it determines whether an entity can be considered a joint employer of a worker and, thus, be subject to National Labor Relations Act (NLRA) claims from the worker. On October 26, 2023, the NLRB continued this cycle of change, issuing a final rule that establishes a broad joint-employer test that will make more entities joint employers of workers than previous tests.
Updated 3/12/24: After the joint-employer rule start date was extended twice, a federal judge in Texas has now overturned the rule.
The Never-Ending Joint-Employer Saga
Looking at how the NLRB’s five-person board is formed may give insight into why the NLRB would consistently reverse its own legal standard. Each board member has a five-year term with the terms offset so that one member terms out each year. The current President, with Senate consent, appoints new members. So, after the first three years of a President’s term, they can guarantee a board made up of a majority members favorable to their administration’s policy priorities. This has played out in dramatic fashion with the joint-employer rule.
In 2015, the NLRB, comprised of a majority of members appointed by President Obama, issued a decision in Browning-Ferris Industries of California that broadly expanded which entities may be considered employers, even when the entity has the right to control the terms and conditions of the worker’s employment but doesn’t exercise this right. Browning-Ferris upended decades of precedent where an entity could only be a joint employer if it had direct and immediate control over the working conditions.
In 2020, the NLRB — now made up of President Trump’s appointees — issued a final regulation that reversed Browning-Ferris and returned the joint-employer standard to a test as to whether both employers share or codetermine the worker’s essential terms and conditions of employment which include wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction, and if each employer possesses and exercises substantial direct and immediate control over these terms and conditions.
Not to be deterred by its own rulemaking, the NLRB — now made of up of President Biden’s appointees — has overruled its final 2020 regulation and has returned the joint-employer test to the standard that is rooted in the Browning-Ferris decision.
The New NLRA Joint-Employer Test
This new joint-employer test — effective December 26, 2023 — will examine whether an entity simply has the ability to exercise control over several terms and conditions of the worker’s employment, including:
- 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 the grounds for discipline;
- The tenure of employment, including hiring and discharge; and
- Working conditions related to the safety and health of employees.
Unlike the final 2020 regulation, an employer does not need to exercise direct control over any of these terms to be found as a joint employer of a worker but, instead, just whether that employer has the authority to control these terms. As with all joint-employer tests, whether an entity is a joint employer of a worker will be determined on a case-by-case basis dependent upon the case facts.
To assist with understanding the new regulation, the NLRB released this employer fact sheet.
The NLRA Affects Employers Regardless of Unionization
Many employers make the understandable mistake of disregarding the NLRA when making employment decisions because their workforce is not unionized. However, the NLRA doesn’t only apply to unionized employers but to any employer involved in interstate commerce — except airlines, railroads, agricultural operations and government entities which are governed by other federal or state laws (i.e., the Railway Labor Act or the California Agricultural Labor Relations Act.) In other words, if an employer does anything across state lines, such as buying or selling goods or services, they’re covered by the NLRA.
The primary NLRA function is to protect an employee’s right to join together to improve their wages and working conditions, regardless of unionization. This means that employers can commit NLRA violations if their employment policies and practices infringe upon or interfere with these rights. As previously reported, we saw this play out this year with the impactful NLRB decision in Stericycle, Inc. that has upended employer handbook policies.
As a result of this new rule, more entities than before will be found to be joint employers of workers and, thus, have greater exposure to NLRA claims regardless of unionization. Employers who have contractual rights to exercise control over groups of workers that the employer does not directly employ should consult with legal counsel as to how these contractual rights may impact them under the NLRA.
Matthew J. Roberts, Associate General Counsel, Labor and Employment
CalChamber members can read more about Joint-Employer Liability in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.
