Policy Backgrounders

NLRB Issues Final Joint Employer Rule

November 21, 2023

The National Labor Relations Board (NLRB) issued its final rule on determining joint employer status, largely reverting to its expanded pre-2020 interpretation, to ensure that businesses respect their bargaining obligations if they effectively control workers’ critical terms of employment.

• The rule could dramatically expand the number of businesses classified as joint employers, expanding the definition to include businesses with “indirect” control over employment terms and conditions, including companies that have authority over control but do not exercise it.
• The new rule adds a seventh essential employment term on “working conditions related to health and safety,” which in practice will cover all businesses with safety rules that cover workers under vendor and contracting arrangements. Legal experts note the changes could dramatically expand the number of businesses classified as joint employers, potentially having the most significant impact on franchisors, construction firms, and companies relying on staffing agencies.
• Businesses that are labelled as joint employers are obligated to participate in collective bargaining and may face strikes.
• The rule faces legal challenges ahead of its February 2024 effective date, with industry arguing that the rule disrupts franchise models and models relying on vendor or contractor employees. Legal challenges are likely to focus on whether the rule is impermissibly vague and whether the NLRB exceeded its authority in adopting the rule. Separately, Congressional Republicans are also challenging the rule.