November 19, 2023
By Barrie Charapp Beaty
Mahdavi Bacon Halfhill & Young, PLLC
The National Labor Relations Board (“NLRB”) issued its final rule on the standard for determining joint-employer status under the National Labor Relations Act (“Act”). The Act governs practically all private sector employers and employees, regardless of union status. This final rule becomes effective on December 26, 2023 and will be the new rule applied to all cases filed after the effective date.
Under the new standard, entities will be considered joint-employers of employees if 1) each entity has an employment relationship with the employees and 2) each entity shares or codetermines one or more of the employees’ essential terms and conditions of employment. What is considered “essential terms and conditions of employment”? Essential terms and conditions of employment are defined as:
- wages, benefits, and other compensation,
- hours of work and scheduling,
- the assignment of duties to be performed,
- the supervision of performance of those duties,
- issuing work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline,
- the tenure of employment, including hiring and termination, and
- working conditions related to the safety and health of employees.
The new rule focuses on the joint employers’ authority or ability to control essential terms and conditions of employment. It does not matter whether or not such control is actually exercised or whether any such exercise is direct or indirect. This means that even where a putative joint employer does not take any action to exercise control over any essential terms and conditions of employment, but has the ability to do so contractually reserved, then the standard has been met.
This new rule marks a distinct change from the prior rule which imposed a much higher threshold that a putative joint employer actually “possess and exercise… substantial direct and immediate control” over essential terms and conditions of employment.
While the new rule establishes a uniform joint-employer standard, it will still require a fact-specific analysis to be applied on a case-by-case basis to determine if two or more employers meet the standard. However, with the new rule’s lower threshold, it will be much easier to find joint-employer status.
The new joint-employer rule will impact dealer groups that operate under a common management company. Typically, dealer management companies are directly involved in codetermining many of the employees’ essential terms and conditions of employment such as wages, benefits, and other compensation, hirings and terminations, working conditions related to the safety and health of employees, and issuing work rules, policies and procedures.