On October 27, 2023, the National Labor Relations Board (the “Board”) issued its final rule (“2023 Final Rule”) on joint employment. The rule becomes effective on December 26, 2023, and raises concerns for staffing agencies and their clients, franchisors/franchisees, and contractors/subcontractors.

As written, the rule states that two or more employers may be considered “joint employers” if “the employers share or codetermine those matters governing employees’ essential terms and conditions of employment.” Broadly speaking, the 2023 Final Rule may find a joint employment relationship if an entity can control one of seven essential terms and conditions of employment, even if that control is never actually exercised. Those seven areas include:

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.

The above factors are not determinative of whether a joint employment status exists. The Board will still conduct a fact-specific analysis for each case to determine whether two or more employers meet the standard.

The 2023 Final Rule overturns a prior rule from 2020, which found joint employment only where the employer possessed and exercised “substantial direct and immediate control” over one or more essential terms/conditions of employment. Under the 2020 version of the rule, parties asserting joint employment relationship faced a heightened burden under the National Labor Relations Act.

Employers in industries that often utilize other types of contractual relationships (e.g., staffing agencies, contractors, etc.) for staffing purposes should evaluate the terms of their contracts or agreements and should assess how workplace rules and policies are applied to these individuals. Spilman’s labor and employment team has extensive experience advising employers on these issues and would be happy to help you navigate the 2023 Final Rule and its impact on your business.