By Jacqueline Hopkins

Last Thursday, the National Labor Relations Board (NLRB) issued a final rule on Joint Employers that expands the factors used to determine joint employer status.  This final rule could create employer relationships (and liability) in unexpected circumstances.

What is a joint employer, you ask? Under the new rule, two or more companies may be considered joint employers over a group of employees if the companies exercise some control or authority, either directly or indirectly, over the employees’ essential terms and conditions of employment. Essential terms include wages, benefits, hours of work, scheduling, assignments, supervision of duties, work rules and directions, tenure of employment, and health and safety conditions.  

Under the old rule, a company was considered a joint employer only if there was a clear showing that the company exercised direct and immediate control over a group of employees. Now, an entity only needs to have control over one or more essential terms, even if they choose not to exercise it. 

Why is this important to you?  The rule has potential implications for, among others, staffing companies and those employers that use them. If, for example, a staffing agency hires, negotiates an hourly rate, and trains employees and then provides those employees to a manufacturing company. The manufacturer supervises all the work, controls the shifts and duties, and disciplines the employee both the staffing company and the manufacturing company may be considered employers — joint employers — under the new rule. As a second example, a janitorial company provides workers to clean a department store on a weekly basis. If, at the store’s direction, the janitorial company agrees to terminate one of the staffing company’s employees for poor performance, the store is indirectly exercising authority to terminate, and the two companies may be considered joint employers.

So what does that mean to me Loutel?  If both companies are the employer – they can be jointly and severally liable for the other company’s violations – from safety and discrimination to wage/hour claims. So, a wage and hour audit by the DOL may bring in both companies as potentially liable.  What that means to an employee, is that they can seek redress from one or both companies.

How can I protect my company?  Companies should review their contracts and remove any terms that explicitly grant or imply control over the conditions of other companies’ employees. It is also wise to be aware of current practices that may not be specifically authorized in a contract, but that nevertheless still suggest control of an essential employment term or condition. Companies that use staffing agencies should make sure that major decisions – like hiring, firing and discipline – are ultimately authorized and executed by the staffing agencies.  Clear contracts that delineate authority and responsibility are necessary. 

OK, I am now panicking, what should I do?  If you have concerns about this new rule and would like our help in assessing your company’s current practices and evaluating potential risks, please contact us.