NLRB Joint Employer Rule Proposal Expands Liability Risks
The National Labor Relations Board’s proposed joint employer rule could have a significant impact on the ability for small businesses to provide services to larger companies.
The proposed rule, The Standard for Determining Joint Employer Status (87 Fed. Reg. 54641), makes larger companies and franchisors responsible and liable for the employment practices of their franchisees, suppliers, vendors, contractors, and subcontractors.
The proposal expands the definition of “joint employers,” determining an employer is a joint employer of another’s employees if such control is contractually reserved but not actually exercised.
In other words, if there is potential that the employer can dictate the working conditions, a joint employment relationship has been established
Under current law, an employer is considered a “joint employer” of a franchisee, supplier, vendor, contractor or subcontractor only if they exercise “direct and immediate control of the essential terms and conditions of employment for the same group of employees.”
The joint employer standard has been one of the most contested topics addressed by the NLRB, with its interpretation shifting every few years based on the board’s political composition.
The breadth of the proposed rule will negatively impact employers, subjecting them to potential liability as a result of virtually any third-party contractual relationship.
For example, an employer faces liability for temporary employees provided by a staffing agency solely by dictating to the employee requirements over schedules or performance standards.
The rule will also have the hardest impact on small businesses.
Larger employers will respond to the rule by bringing more services in-house, causing economic harm to smaller third party businesses.
The U.S. Small Business Administration Office of Advocacy has submitted comments opposing the rule on behalf of the business community.
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