Over the last decade, there has been a significant amount of litigation over how to determine if multiple companies are joint employers of a workforce. Joint employer status can create significant liability issues for the secondary employer in areas such as wages and safety matters. The rules governing that determination may be about to change.
Defining ‘Joint Employer’
On September 7, 2022, the National Labor Relations Board (NLRB) announced a notice of proposed rulemaking that would replace the 2020 guidance for assessing joint employment status.
The issue in many of the previously contested cases has been how joint employment is defined, especially in the area of indirect control—in other words, control of employees that isn’t clearly specified by a secondary authority.
The proposed rules reestablish a strong indirect control component, so long as the control “bears on employees’ essential terms and conditions of employment.” This intentionally broadens the application of the rule to multiple employers.
As the NLRB notes, proposed Section 103.40(c) specifically addresses essential terms. For example, it defines “codetermination” as possessing “the authority to control (whether directly, indirectly, or both), or to exercise the power to control (whether directly, indirectly, or both), one or more of the employees’ essential terms and conditions of employment.” This eliminates prior requirements that employers demonstrate “substantial direct and immediate control.”
Defining ‘Essential Terms and Conditions’
In general, the NLRB is attempting to define what has traditionally proven to be a slippery concept—“essential terms and conditions.” That phrase now includes not only such things as wages, benefits, and compensation but also a broad range of work, scheduling, discipline, health and safety, supervision, assignment, work roles, and other areas.
Given the broad definitional category, this is likely to put most employers in a position of indirect control. That is particularly true given the inclusion of workplace health and safety, work hours, and general assignments in this definition. The NLRB affirmatively states it intends to take a “broad, inclusive approach.”
The proposal further narrows the grouping of items that are “immaterial to the existence of an employment relationship.” In other words, essential terms and conditions of employment will be limited to things such as routine components of the contract, generalized caps on costs, or project-based goals.
Big Picture
You will need to pay careful attention to how you manage temporary workers and contracts to avoid additional liability issues. You also will need to look carefully at contracts to ensure clear delegation of responsibilities as well as proper indemnification (compensation for losses) if your subcontractor doesn’t calculate overtime properly or addresses a sexual harassment claim. This also may affect the cost of employment practices liability insurance (EPLI) policies.
The comment period for this proposed notice of rulemaking closes on November 7, 2022. The documentation can be found at www.federalregister.gov or www.NLRB.gov.
Jo Ellen Whitney is an attorney with Dentons Davis Brown in Des Moines. You can reach her at joellen.whitney@dentons.com.