On September 6, 2022, the National Labor Relations Board (“NLRB” or “Board”) issued a much anticipated proposed rule that would broaden the circumstances under which two companies may be held responsible for labor law violations and union bargaining obligations under federal labor law. The rule has the potential to create labor law obligations and liability for companies that contract with staffing agencies to supply their labor, as well as franchisors.
Two companies are joint employers if they “share or codetermine” employees’ essential terms and conditions of employment (i.e., 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). Under the proposed rule, a company may “share or codetermine” terms and conditions of employment by merely reserving the right to control these terms, regardless of whether it exercises that right. Likewise, a company may “share or codetermine” terms and conditions of employment where it exercises even indirect control over such terms, such as through an intermediary or other entity.
The proposed rule is a significant departure from a 2020 rule, issued by a then-Republican controlled Board, which required a putative joint employer to “possess and exercise substantial direct and immediate control over essential terms and conditions of employment.” The Board’s two Republican members, who sat on the Board when it issued the 2020 Rule, dissented in the notice of proposed rulemaking.
The Board will receive public comments on the proposed rule until November 7, 2022. Miles & Stockbridge labor attorneys will continue to monitor developments regarding the Board’s joint employer standard.
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