Labor Board Issues Joint-Employer Status Proposed Rule

The proposal seeks to expand the legal standard for determining whether a worker is employed by multiple employers at the same time.

September 08, 2022

ALEXANDRIA, Va.—The National Labor Relations Board (NLRB) is proposing a new rule that addresses joint-employer status under the National Labor Relations Act. The proposed rule says that two or more employers would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment,” the NLRB said in a statement.

The proposed rule is meant to rescind and replace the joint-employer rule that took effect on April 27, 2020, which said that a worker could only claim to be employed by a company that held “substantial, direct and immediate control” over his or her employment.

The proposed rule would make it easier for workers to claim employment by two employers at the same time, reports the Wall Street Journal, and it could lead to employee claims against businesses that rely on franchisees, contractors or staffing firms.

If a company has the authority “whether directly, indirectly or both” to control one or more of a long list of an employee’s essential terms and conditions of employment including, but not limited to wages, hiring or work requirements, they could be counted as an employer.  The proposal goes even a step further by stating that a company must merely possess such authority even if it is not exercised to potentially be considered a joint employer. 

“That raises the possibility that a company that hires a contractor to run a cafeteria or clean the office could be considered a joint employer of the contractors’ workers. Or it could mean that a fast-food or hotel chain requiring workers to cook food or clean rooms a certain way could be considered an employer even if those workers are hired and paid by franchisees,” writes the Journal.

“In an economy where employment relationships are increasingly complex, the Board must ensure that its legal rules for deciding which employers should engage in collective bargaining serve the goals of the National Labor Relations Act,” said NLRB Chairman Lauren McFerran in the statement. “Part of that task is providing a clear standard for defining joint employment that is consistent with controlling law. Unfortunately, the Board's joint employer standard has been subject to a great deal of uncertainty and litigation in recent years. Rulemaking on this issue allows for valuable input from members of the public that will help the Board in its effort to bring clarity and certainty to these significant questions.”

If contractors violate labor laws under the National Labor Relations Act, companies who hire them could be responsible, and they could be forced to negotiate with unions representing their contractors’ employees, according to the Journal.

“Contracting as a whole could face legal jeopardy in the context of this rule,” Glenn Spencer, senior vice president of employment policy at the U.S. Chamber of Commerce, told the Journal. “It could involve people who are contracting out for services like janitorial, landscaping and groundskeeping or security services. There’s a whole range of things that businesses contract out for and to which by necessity they will exercise some degree of control.”

According to Michael Layman, senior vice president for government relations at the International Franchise Association, the proposed rules could hurt small businesses. He told the Journal that if large chains are going to be held liable for the actions of their franchisees, they might start to limit how many franchise licenses they sell, preferring to own and operate their own stores instead.

The NLRB is accepting comments until November 7, 2022. NACS is reviewing the impact of the rule on the convenience retailing industry and plans to comment by the deadline.

Visit the NACS Joint Employer topics page for more background on the issue.

The 2022 NACS Show, October 1-4 in Las Vegas, features two HR specific education sessions: Make Your Employer Brand Stand Out and Winning the War for Talent, plus two government relations sessions: Upcoming Elections and What They Mean for Convenience and What the New Tobacco Signage Requirements Mean for Retailers. Register today!