February 26, 2024

NLRB Joint Employer Rule Is Now In Effect

The National Labor Relations Board’s (NLRB) final joint employer rule is now the law of the land in the United States. As Connecting the Dots reported late last year, this new regulation alters the standard for determining joint employer status under the National Labor Relations Act (NLRA).

The updated policy, which replaces a 2020 Trump administration rule, greatly expands joint employer status under the NLRA. As such, it could entangle franchise businesses, subcontractors, and other firms, including many small businesses, in labor disputes even if those organizations 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 that is available here.

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.”

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