Regulatory Update: NLRB's Expansion of Joint Employer Status Could Impact Workplace Safety

The National Labor Relations Board (NLRB) intends to turn the clock back to the Obama era by re-establishing that earlier board’s joint employer standard, which could open up large franchise operations like McDonald’s to nationwide union organizing campaigns.

The board aims to accomplish this through a notice of proposed rulemaking that it published on Sept. 7—immediately following the Labor Day holiday. If, as is expected, it eventually will be adopted in its present form, the rule would remove the joint employer standard adopted by the Republican majority Trump era board in 2020 and reinstate one that had been issued in 2015 by a Democrat majority board.

The proposed rule was approved by the NLRB’s three current Democrat members. The two Republican board members dissented, calling the proposal to revisit the 2020 rule premature because the board has yet to apply that standard in any reported case. They also said the proposal is a “fuzzier standard with no bright lines [that] would make it difficult for the board to distinguish between arm’s-length contracting parties and genuine joint employers.”

The joint employment framework is used to determine whether more than one entity controls the wage terms and working conditions of certain employees. If that is found to be the case, for example, a franchisor like McDonald’s can be ordered to negotiate with a union under the terms of the National Labor Relations Act (NLRA) instead of the union having to target the individual franchises one by one.

Joint employer status is most commonly found to exist between labor staffing firms and the corporate clients who are using their services, as well as in franchise/franchisor relationships. It also exists in some other forms of law and regulation regarding these kinds of business relationships. For example, the Occupational Safety and Health Administration (OSHA) and state occupational safety agencies have found staffing firm clients to be jointly responsible for maintenance of the safety training and supervision of their staffing agency employees.

The new proposed rule states that “two or more employers of the same particular employees are joint employers of those employees if the employers share or codetermine those matters governing employees’ essential terms and conditions of employment.” The board majority also insists the proposed rule is consistent with the joint employment frameworks endorsed earlier by the U.S. Supreme Court and several federal Courts of Appeal in previous decisions regarding the issue.

The rule holds that exercising or merely reserving/possessing the right to directly or indirectly control workers’ essential terms and conditions of employment is sufficient to establish a joint employer relationship, note attorneys with the law firm of Sheppard Mullin Richter & Hampton.

The rule proposal states that essential terms and conditions of employment “generally include, but are 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.”

The Sheppard Mullin attorneys explain, “When ultimately adopted, the new rules requiring only the right to control employees and broadening the list of essential terms and conditions of employment will present a major issue for temporary staffing companies, companies that contract out labor and franchised businesses, among others.”

Attorneys Michael Lebowich, Joshua Fox and Ethan Picone of the law firm of Proskauer Rose stress it is important to keep in mind that if the rule becomes final, it will expand the definition of “essential terms and conditions of employment” by including workplace health and safety, assignments, and work rules and directions governing the manner, means or methods of work performance.

Importantly, this new list is also specifically not exhaustive or limiting, they emphasized. “It will greatly expand the potential for labor litigation for employers that have relationships with staffing agencies, are part of a franchise model, or even use outside organizations to handle certain aspects of their employees’ working conditions, such as payroll companies.”