NLRB Eases Rules for Joint Employers, Impact on Labor Law and Unions

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In a significant development, the National Labor Relations Board (NLRB) has recently announced a new final rule that will have far-reaching implications for companies, particularly in joint employment. This new rule, issued by the NLRB’s Democratic majority, marks a departure from the regulations established by an all-Republican board just four years ago. The previous code had significantly raised the threshold for firms to be classified as joint employers, reflecting a shift from the traditional practice of shaping labor law through case-specific rulings.

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Evolution of Joint Employment Criteria

The issue of joint employment criteria, whether established through regulatory guidelines or case law, has been a subject of intense debate over the past decade. This debate is particularly significant for franchisors and companies relying on labor provided by staffing agencies and other business-to-business arrangements. These parties stand to be most affected by the NLRB’s new rule.

  

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Impact on Franchising Industry

An illustrative example of the implications of this rule can be found in the franchising industry. Consider a national fast-food giant with independently owned franchise locations. According to the new NLRB rule, if it is determined that both the franchisor and the independent franchise jointly employ unionized workers, the franchisor may be compelled to engage in negotiations with the relevant unions. This change could have substantial ramifications for franchise operations.

Expanding the Definition of Joint Employers

The crux of the newly minted rule is its expansion of the factors that can trigger a joint employer classification. In the past, joint employment was primarily determined by one business exerting direct and immediate control over the most critical aspects of a worker’s job. However, the revised test now takes into account indirect and unexercised control.

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Factors Considered under the New Rule

Under the updated rule, even if a company exercises control over another company’s workers through an intermediary or has contractual authority over employment terms, regardless of whether that authority is ever put into practice, it would still be considered evidence of a joint employer relationship. This shift in perspective broadens the scope of joint employment, encompassing a more comprehensive range of employment relationships.

The implications of this rule change are profound, affecting a wide array of industries and businesses that rely on contracted or franchised labor. As the NLRB continues to adapt its approach to labor law, companies must carefully assess their employment relationships and the potential implications of being classified as joint employers. The ramifications of this decision on labor law and union negotiations are expected to be closely monitored and debated in the coming months and years.

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