National Labor Relations Board Restores 2020 Joint Employer Standard

Late last week, the National Labor Relations Board (NLRB) issued a final revision of regulations governing the standard for determining joint employer status under the National Labor Relations Act (NLRA). A company with joint employer status under the NLRA must comply with the NLRA with respect to collective bargaining by another company’s employees.

The revision reinstates the NAHB-supported 2020 regulation, which established a test for joint employer status that conformed with decades of NLRA case law. The revision rescinds a 2023 regulation that established a broad new test significantly lowering the standard for joint employer status under the NLRA.

The NLRA obligates employers and labor organizations to bargain in good faith and refrain from certain designated unfair labor practices. Under the NLRA, more than one company can have employer duties arising from collective bargaining by the same employees where those entities jointly affect the terms and conditions of employment at issue. The standard for determining when businesses jointly affect employment terms, and therefore constitute joint employers, remained mostly consistent in case law until 2015.

For about 30 years, joint employer status required the company’s actual exercise of direct, immediate and routine control over the employment terms of a different company’s employees. In 2015, the NLRB established a new test in Browning-Ferris Industries that allowed a finding of joint employer status where a business could control the employment terms of a different company’s employees, regardless of whether the business exercises that control.

Following a change in its membership in the first Trump term, the NLRB issued a 2020 regulation restoring longstanding precedent and establishing that reserved contractual authority is not sufficient to establish joint employer status. Following another membership change during the Biden administration, the NLRB rescinded the 2020 rule and replaced it with a 2023 rule that codified a test similar to the Browning-Ferris test and included vague descriptions of new employment terms that could trigger control.

The 2023 regulation was vacated in a court ruling, Chamber of Commerce et. al. v. National Labor Relations Board, before its effective date and never took effect. The court determined the 2023 regulation “would treat virtually every business that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly, at least one of the specified ‘essential terms and conditions of employment.’”

The reinstated 2020 regulation establishes that joint employment only exists where the two employers share or co-determine the employees’ essential terms and conditions of employment, which are exclusively defined as wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction.