The National Labor Relations Board (NLRB) has issued its final rule that expands the litmus test for determining when two business entities are joint employers. Unfortunately, the final rule tracks closely with the proposed rule issued last year. It opens the door to some strange business arrangements should a recent Congressional Review Act (CRA) resolution fail.
The resolution has enough support in both houses of Congress to pass. But is there enough support to override an expected veto from President Biden? Probably not. The president’s allies are rather favorable to labor unions, and there are provisions in the new rule that make labor unions very happy.
What does it all mean for your company? Only time will tell. We encourage company owners and executives to start learning about the new rule now. Once it goes into effect, there is no telling how long it will be before the NLRB begins enforcement and regulatory compliance actions.
7 Key Tests in the Rule
Under the new rule, organizations will be bound to a set of seven tests for determining joint employer status. For the record, being considered a joint employer makes an organization liable for another organization’s labor practices. Your company being a joint employer with one of your vendors would make your company liable, at least to some degree, for how your vendor treats its employees.
According to the new rule, an organization is a joint employer if it has the authority to exercise control over any of the following “essential terms and conditions of employment”:
- Wages, benefits, and other compensation.
- Hours of work and scheduling.
- The assignment of duties to be performed.
- The supervision of the performance of duties.
- Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline.
- The tenure of employment, including hiring and discharge.
- Working conditions related to the safety and health of employees.
A classic example of why this new rule is so important is rooted in the seventh test: the ability to exercise control over working conditions related to employee health and safety. Let’s say you run a construction company specializing in commercial buildings. Federal and state safety regulations mandate wearing safety equipment on the job site – equipment like hardhats and safety glasses.
You require all hardhats for all delivery personnel that bring supplies to your job sites. Even though those delivery drivers are employed by vendors, you become a joint employer with those vendors by virtue of having to enforce the hardhat rule. This is potentially a huge change for some employers.
Expect to Be at the Bargaining Table
Although the new joint employer rule imposes a variety of new restrictions on business, the most pressing of its requirements involves labor relations. Joint employers must participate in collective bargaining if any of the employees of their corresponding joint employers are unionized.
As the owner of that construction company, you are required by law to be at the bargaining table when the unionized employees of one of your vendors are ready to start negotiating the next contract. You must be at the bargaining table even if you never exercise the authority that you have over one of the seven test elements.
We say all that to say this: compliance with the joint employer rule is going to be tricky. If you are not currently working with a PEO or other HR provider that can assist you with compliance, start thinking about it now. This one could get pretty dicey if federal regulators decide to take it to the extreme.