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October 30, 2023

NLRB Finalizes More Expansive Joint Employer Rule

As Construction Dive eeported, on October 26 the National Labor Relations Board (NLRB) issued its final rule altering the standard for determining joint employer status under the National Labor Relations Act (NLRA).

The rule, which replaces the 2020 regulation issued by the Trump administration, represents a drastic expansion to joint employer status for purposes of the NLRA. As such, it will entangle franchise businesses, subcontractors, and other companies, including many small businesses, in labor disputes even if they have minimal or indirect control over the working conditions of another business’s employees and even if that control is never exercised. The revised rule also could mean a business may be dragged into collective bargaining with another company’s workers.

The NLRB has provided a fact sheet explaining the new rule. Click hereo access that document.

Specifically, the NLRB’s revised final rule explicitly states that either possessing the authority to control one or more essential terms and conditions of employment (regardless of whether control is exercised) or exercising the power to control indirectly one or more essential terms and conditions of employment (regardless of whether the power is exercised directly) is sufficient to establish that an organization qualifies as a joint employer. These provisions mean that either indirect or reserved control may stand alone as basis for the finding of a joint employer relationship, and that the existence of either — without regard to the extent of the reserved or indirect control — indicates joint employer status.

The Coalition for Democratic Workplace (CDW), which MSCI is a member of, has opposed this new standard. In fact, the CDW had submitted comments to the NLRB that argued, the rule “purports to be grounded in common law agency principles, but instead presents an ill- defined standard for joint employer liability that sinks to the level of an arbitrary and capricious agency action.”

The NLRB’s new rule is likely to be challenged in federal court. Stay tuned to Connecting the Dots as this story develops.

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