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NLRB Issues Final Rule on Joint-Employer Status; Revision to Effective Date

November 27, 2023

In October, the National Labor Relations Board (NLRB) issued a final rule revising the joint-employer standard under the National Labor Relations Act (Act). This new rule replaced the 2020 final rule established by the previous Board, effective April 27, 2020. The updated regulation introduces a fresh criterion for determining when two employers are joint employers of specific employees as defined by the Act.

Essentially, the 2023 rule states that, according to the Act, multiple entities can be considered joint employers of a group of employees if each entity has an employment relationship with those employees and if they collectively influence or determine one or more essential terms and conditions of employment.

The 2023 rule aligns more closely with established common-law agency principles. It assesses the alleged joint employers’ authority to control essential employment terms and conditions, regardless of whether such control is actively exercised and irrespective of whether the exercise of control is direct or indirect. This rule recognizes the relevance of reserved and indirect control, consistent with common-law principles.

In contrast, the 2020 rule 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 employment terms of conditions, which lacks a foundation in common law.

However, the Board has recently prolonged the implementation date of its updated rule outlining the criteria for determining joint-employer status until February 26, 2024. This extension aims to allow for the resolution of legal challenges associated with the rule. Importantly, the revised standard will only be applicable to cases initiated after the rule takes effect.