Joint-Employer Rule Changes Effective December 26, 2023

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The current National Labor Relations Board (NLRB) has rescinded and replaced the “Joint-Employer” standard that was promulgated by a prior NLB board in April of 2020.

According to the rationale of thecurrent NLRB, the problem with the 2020 rule was that it “made it easier for actual joint-employers to avoid a finding of joint-employer status because it set a higher threshold of ‘substantial direct and immediate control’ over essential terms or conditions of employment, which has no foundation in common law”.

The “common law” principle they were referring to has to do with the common understanding of the word “Agency”, and the logic of the potential responsibility one has when acting as an agent for another. So, if a staffing company (an agency) hires an employee for a client and sends him to work in that client’s factory, the client and the agency become joint-employers and share in the compliance responsibility for their “joint employee’s” safety, etc.

Without such a joint responsibility, the agency and the client could neglect informing a contracted employee of some hazard of the job by assuming that it was the responsibility of the other to make the employee aware of the situation, and even to provide specific instructions on how to avoid the hazard.

Actually, the definition of the“joint employer” status, where each party could be held jointly and severally responsible for compliance issues, only began in 2013 when OSHA began the Temporary Worker Initiative (TWI). We wrote about this in a blog article dated October 2nd, 2019 titled “Six Critical Compliance Issues for Staffing companies” (See item 1 on OSHA).

Details of the New Rule

Key to understanding the determination of a joint employer status is the control over one or more of the “Essential terms and conditions” of a worker’s employment. The new rule lists seven of these “Essential terms and conditions”

  1. Wages and other compensation
  2. Hours of work and scheduling
  3. Assignment of duties
  4. Supervision
  5. Work rules and directions
  6. Tenure of employment
  7. Working conditions related to safety and health.

Unlike the 2020 rule, the “control” need not be “direct” or “substantial” and the new rule spells out the inclusion of both “reserved control” and “indirect control” to be considered in determination of the joint-employer status.

“Reserved control” would be a situation where an entity has the authority to control certain terms and conditions of employment but “has not yet exercised such control”. This type of “authority for control”, even though it has yet to be exercised, still qualifies a person or entity to be considered a “joint-employer”.

“Indirect control” is simply a situation where “Any person acting as an agent for an employer exercises control either directly or indirectly”. Here again, the common law principle of “agency” serves to validate the new rule.

It is interesting to note that the change that the NLRB made to the 2020 standard, which required “direct and substantial”control, did not come about by court action (although there was a lawsuit challenging the 2020 rule) but simply by its own rule making authority.

Usually, and according to the Administrative Procedures Act (Section on “standard for judicial review”), the rules made by federal agencies to implement congressional legislation are not subject to judicial review except when there is considerable evidence that the rule was “arbitrary or capricious”, an abuse of discretion, or it went beyond the intention or clear meaning of the congressional legislation.

In this case, I believe there was considerable criticism of the 2020 rule by members of congress and many others, including a lawsuit. In many of these cases, the controversary is not adjudicated by a court, but settled by an agreement with the agency when the criticism has significant value, and they propose a revised rule that “rescinds and replaces” the older rule.

My guess would be that in this case, and many others, this would happen more frequently after a change in political administrations. In the NLRB file history in this case, there is a record of at least one letter in 2018 from several members of the Senate (all of one political party) concerned about the then proposed 2020 rule which is now rescinded and replaced. The response to that 2018 letter is just one of 18 news stories released by the NLRB on this subject.

As always, Please Stay Safe and pray for Ukraine. (Israel and Gaza too!)