On February 26, 2020, the National Labor Relations Board (NLRB) officially published its new Joint Employer Rule, marking a shift in the landscape of federal labor law. With this fresh regulation, the responsibility bar has been lowered to an unforeseen level, quite possibly resulting in corporations being declared jointly accountable for another company’s unfair labor practices or collective bargaining obligations under the National Labor Relations Act (NLRA) [Amundsen Davis LLC].
This test for joint employer status can, in many cases, create the potential for de facto liability. The key requirements delineated in the rule revolve around two conditions: whether the organization has substantial direct and immediate control over the essential terms and conditions of employment of another company’s employees, and whether it is in a position to assert such control. An organization’s potential ability to control or its sparingly exercised reserve control would not be sufficient reasons for determining joint employer status.
The backdrop to this change is the scrutiny under which franchisors find themselves regarding their liability for the actions of their franchisees. While this move might seem to reignite questions regarding the clear line between franchisors and franchisees, it also takes a cautious step back, focusing on the central question of control. This will certainly serve as a litmus test in determining whether businesses should bear responsibility for labor law infractions committed by companies they operate alongside.
In the coming months, legal professionals should anticipate potential litigation. Notwithstanding the fact that the new regulation brings with it more clarity, it is important to bear in mind that the complexity of the employment scenarios we encounter today is not entirely addressed by regulatory frameworks. The practical implications of the legislation, with its focus on the direct and immediate control over terms of employment, require careful planning and action by employers. As part of preemptive strategy, businesses should proactively assess their relationships with other entities in order to mitigate potential risk of joint liability.