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The National Labor Relations Board (NLRB) issued a final rule formally reinstating the 2020 standard for determining joint-employer status. This move follows a period of significant regulatory flux and effectively raises the bar for when two separate entities are deemed to "jointly employ" a workforce. While the NLRB has been applying this tighter standard since a 2023 rule was struck down by the U.S. District Court for the Eastern District of Texas in Chamber of Commerce of the United States of America et al., v. National Labor Relations Board et al., this week's action formally updates the Code of Federal Regulations. For companies utilizing staffing agencies, subcontractors or franchise models, this return to a "direct and immediate" control test provides a more predictable, albeit potentially temporary, legal framework.
The "Direct and Immediate" Threshold
The reinstated rule states that a company is only a joint employer if it exercises "substantial direct and immediate" control over the essential terms and conditions of another company's employees.
Under this standard, the following are typically insufficient to establish joint employment:
- Indirect Influence: Merely affecting terms and conditions through an intermediary.
- Reserved Authority: Possessing a contractual right to exercise control that is never actually put into practice.
- Limited or Routine Control: Oversight that is sporadic or limited to the basic objectives of a business contract.
Why This Matters: Liability and Bargaining
If your company is found to be a joint employer, this designation may carry heavy legal consequences, including:
- Shared Liability: You may be held liable for the other entity's unfair labor practices (ULPs).
- Bargaining Obligations: You may be required to sit at the bargaining table and negotiate with a union representing the secondary employer's workers.
- Exposure to Civil Litigation: Claims that your company violated various federal and state non-discrimination and/or leave of absence laws in civil litigation filed by employees who are not directly employed by you.
Looking Ahead: A Looming Challenge
The stability of this rule remains under threat. The Service Employees International Union (SEIU) currently has a challenge pending in the US District Court for the District of Columbia Circuit. If the union prevails, the NLRB could be forced to revert to the 2015 Browning-Ferris standard, which allows for a finding of joint employment based only on indirect or reserved control.
Strategic Recommendations
Given this recent, and positive, change to the NLRB's view of what constitutes joint employment, it is recommended that employers:
- Audit Service Contracts: Review agreements with staffing providers to ensure that "reserved control" clauses do not inadvertently trigger future liability if the standard shifts again.
- Train On-Site Management: Ensure that supervisors interacting with contract workers understand the boundaries of "direct and immediate" control to avoid creating an accidental joint-employment relationship.
- Monitor the SEIU Appeal: The outcome of the pending litigation will dictate whether this "employer-friendly" window remains open.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
