Monday, October 30, 2023

NLRB publishes (yet another) new joint employment rule

If at first (or second, or third…) you don't succeed, try, try again. That certainly seems to be the NLRB's mantra as it relates to its joint employment rule.

Joint employment is when one employer is responsible for the legal sins of another because of a commonality of employees. Under the standard newly announced by the NLRB, an entity may be considered a joint employer of a group of employees if each entity has an employment relationship with the employees and they share or codetermine one or more of the employees' following terms and conditions of employment:
  1. wages, benefits, and other compensation;
  2. hours of work and scheduling;
  3. the assignment of duties to be performed;
  4. the supervision of the performance of duties;
  5. work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
  6. the tenure of employment, including hiring and discharge; and
  7. working conditions related to the safety and health of employees.

Critically, according to the NLRB, direct, indirect, or reserved control will suffice.

Further, a finding of joint employment will not just result in one employer being liable for unfair labor practices committed by the other; it will also require both employers to sit at the bargaining table to bargain a collective bargaining agreement with the employees' labor union.

The NLRB seems to suggest that this new rule is at least neutral in its impact on small businesses. To the contrary, this new rule is devastating for small businesses, particularly franchisees. If franchisors are now equal under the NLRA with their franchisees, then we will see the end of franchises as a viable business model.

If I'm McDonald's Corp., for example, and I'm going to be liable for the sins of my franchisees just because I've reserved some indirect control in my franchise agreement, I'm giving serious thought as to whether franchises still make sense as a business model. I'd rather own the restaurants, directly employ the labor, and appropriately manage risk. This result, however, will put franchisees (all of which are small business owners) out of business. How would this be a good result for anyone?

This change has nothing to do with clarity or certainty for businesses. Instead, it's all about maximizing the ability and opportunity for employees to recover damages from employers and for labor unions to organize, period.