Companies will need to be aware of the classification and control of their contractors’ workers.
In September, the National Labor Relations Board published a notice of proposed rulemaking, requesting public comment on a proposal to expand the Board’s definition of “joint employer” that would require more companies to comply with the Board’s labor and collective bargaining rules. Under this new rule, companies would need to be more aware of the classification of their contractors’ workers.
The proposal would expand a Trump-era definition of “joint employer.”
At stake in this rulemaking is how the Board will decide whether a company participates enough in the terms of work for another company’s employee to be considered a “joint employer” subject to the National Labor Relations Act. In 2020, the Board promulgated a rule that limited the definition of “joint employer” (and thus application of the NLRA’s collective bargaining and unfair practices obligations) to only those companies who “share or codetermine the employees’ essential terms and conditions of employment.” See 29 C.F.R. § 103.40(a). To meet this standard, the would-be joint employer “must possess and exercise” control “over one or more essential terms or conditions” of the employees’ work. See id. (emphasis added).
Thus, under the 2020 (and current) rule, a “joint employer” must actually exercise its ability to control essential terms of the employee’s work. The rule also provides an exhaustive list of “essential terms and conditions of employment”: “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.” See 29 C.F.R. § 103.40(b).
The NLRB would include companies who have the authority to control an employee’s terms of work, even if the company never exercises that authority.
The proposed rule expands the definition by including companies who possess the authority to control employment terms but do not actually exercise that authority. The new rule establishes that evidence that a company has “authority to control” or “exercises the power to control” an employee’s terms of work is relevant to the joint employer determination. 87 Fed. Reg. 54,646 (emphasis added). Thus, companies that do not actually exercise control over terms of work could be considered joint employers under the NLRA. Moreover, the new rule expands the universe of potential “essential” terms of employment. Now, the list of terms is nonexclusive; courts could consider other terms, beyond those provided in the rule, to be “essential.”
The new rule should make wary businesses who contract with other companies who employ independent contractors, such as transportation companies who hire motor carriers.
To avoid joint employer status under the new rule, businesses will have to be wary of the employment status of the workers for the companies they contract with. For example, this proposal could affect transportation companies who contract with carriers, bringing them, perhaps unknowingly, within the NLRA as joint employers. For instance, if Company A (a 3PL, broker, freight forwarder, or motor carrier) contracts with a Carrier B who uses employee drivers, and the terms of that contract give Company A the right to control Carrier B’s drivers, Company A could be an NLRA joint employer of Carrier B’s drivers. To avoid unintentional joint employer status, Company A has a couple of options. First it could ensure that the terms of its contracts with carriers are clear and give Company A less authority to control the carrier’s drivers than would trigger the joint employer rule.
Second, Company A may also want to ensure that the carrier they hire properly classifies its drivers as independent operators or employee drivers. Merely because the carrier purports to utilize independent contractors (which are wholly outside the scope of the NLRA and the question of “joint employer”) does not mean the drivers are not actually employees under the law. There has been an increase in classification lawsuits by independent truck drivers arguing that they are really employees because the carrier retained significant control over the drivers’ operations. Moreover, some states, such as California, have adopted statutes and rules that presume workers are employees unless specific circumstances are present, increasing the chance the drivers become classified as employees. In these cases, a company’s potential joint employer status may unexpectedly become an issue under the proposed rule.
For more information about the proposed rule change or driver classification, contact firstname.lastname@example.org