Yesterday, the NLRB published a proposed rule designed to rescind and replace the Trump-era rule used to determine whether two companies are joint employers under the NLRA. Under the rule adopted during the Trump Administration, an employer can be a joint employer with another entity if it has substantial direct and immediate control over the essential terms and conditions of employment of the other entity’s workers.

The proposed new rule sets forth a much broader test whereby an employer is a joint employer of particular employees if the employer has a relationship with those employees under established common-law agency principles, and the employer shares or codetermines those matters governing at least one of the employees’ essential terms and conditions of employment (e.g., wages, benefits, hours of work, etc.). Under the proposed rule, “share or codetermine” means an employer possesses the authority to control (whether directly, indirectly, or both), or exercises the power to control (whether directly, indirectly, or both), one or more of the employee’s essential terms and conditions of employment. Thus, a party asserting a joint-employment relationship may establish joint-employer status with evidence of indirect and reserved forms of control, such as a contractual reservation of rights, so long as those forms of control bear on employees’ essential terms and conditions of employment.

The proposed rule increases the risks of joint employer status for many employers. If two entities are joint employers under the NLRA, both must bargain with the union that represents the jointly employed workers; both are potentially liable for unfair labor practices committed by the other; and both are subject to union picketing or other economic pressure if there is a labor dispute.

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