A New Standard: How the Revised Joint Employer Standard Is Redefining Business Responsibilities

The landscape of employment law is continually evolving to reflect the changes in workforce and business practices. One of the most pivotal updates has been the National Labor Relations Board’s (NLRB) recent overhaul of the Joint Employer Standard, intended to go into effect in February 2024. While the ruling has come under some scrutiny and has been vacated by a federal judge for the U.S. Eastern District of Texas for being too expansive, it is important for businesses to continue taking steps to prepare for the ruling to be enforced. 

Clarity In Complexity  

Historically, determining joint-employer status has been pivotal in assessing responsibilities and liabilities concerning labor rights and obligations. Under the old framework, entities were only considered joint employers if they had direct and significant control over the same employees. This standard was often critiqued for not reflecting the complexity of modern business relationships.

The NLRB’s updated rule broadens the definition of joint employment to include indirect influence and a more minor degree of control over employment terms. Essentially, companies that have the ability to affect terms and conditions of employment—even if that influence is not exercised—can now be considered joint employers.

This expanded scope means that more businesses might find themselves classified as joint employers, significantly affecting industries like construction, hospitality, and franchising. Increased unionization efforts might arise as employees can more easily connect larger networks of affiliated businesses in their negotiations and disputes. Additionally, the risk of litigation could climb as the criteria for employer liability widens.

The New Standard

Under the new ruling, two or more entities may be considered joint employers if they both have the authority to control at least one essential term of employment, even if they fail to exercise them. In its final rule, the NLRB cited seven “essential” terms and conditions of employment:

1. Wages, benefits, and other compensation

2. Hours of work and scheduling

3. The assignment of duties to be performed

4. The supervision of the performance of duties

5. Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline

6. The tenure of employment, including hiring and discharge

7. Working conditions related to the safety and health of employees

Hypothetical Scenario: A National Franchise Brand 

The ruling will have a greater impact on certain industries, such as retail, staffing agencies, temporary employment agencies, and franchises. Consider a franchisor who provides training materials, operational guidelines, and best practices for a franchisee but does not directly hire or manage workers at the franchise location. Under the previous standard, the franchisor was not likely to be considered a joint employer. However, under the new rule, if the franchisor has influence over wages, working hours, or operational policies, they may now share joint responsibility with the franchisee for employment decisions.

In this case, an employee could file a claim against both entities for a workplace violation despite the franchisor having no direct control over the franchisee’s employees. This type of scenario underscores the importance of reassessing your contractual relationships and operational oversight to determine if your business is at risk of being considered a joint employer.

Take a Proactive Stance

The NLRB’s revised Joint Employer Standard marks a significant shift in the regulatory environment, carrying profound implications for business operations and worker rights. As the boundaries of employer responsibility expand, staying informed and prepared is more crucial than ever.

Whether you’re a franchisor, general contractor, or business that relies on staffing agencies, consulting with an experienced employment attorney can provide guidance tailored to your specific situation. As always, our firm is here to help you navigate these changes with confidence to ensure your business is prepared for the evolving labor landscape.