Construction Law Blog

On February 22, 2024, a federal judge in Texas issued a ruling delaying the implementation of the National Labor Relations Board’s new rule on joint employers. The rule—which will now be effective March 11, 2024—expands the current standard for determining joint-employer status. This expansion means that more employers will likely be subject to responsibilities and liabilities associated with workers who were not previously considered their employees.

The rule, which was originally supposed to take effect on December 26, 2023, instructs that a company is a joint employer of another company’s employees if the two companies share or codetermine the employees’ “essential terms and conditions of employment.” The rule provides a list of the essential terms and conditions, which include pay, hours of work, scheduling, work assignments, and supervision. Direct or indirect responsibility for any one of these essential terms and conditions can result in joint-employer status.

The expanded rule is expected to result in more joint-employer findings, particularly in industries that rely on contract services. For example, general contractors who rely on staffing agencies, or who have subcontractors on their project sites, may very well be considered joint employers of workers on the job that they do not directly employ. It is not unusual for a GC to coordinate the work of multiple trades a job site, but this relationship leaves the GC legally exposed to claims from its subcontractors’ employees.

Notably, the NLRB’s rule defines joint employment under the NLRA, but other agencies (DOL, EEOC) may apply different standards to determine joint employer status. In other words, the test varies by agency.

While the status of the rule remains in flux, general contractors should review their contracts to minimize joint employer exposure. Language that clearly defines the role of the GC and that limits its responsibility for another entity’s employees will be key. However, even if the contract is clear that the parties have no intention of being joint employers, GCs must ensure that the control that they actually exercise in practice aligns with the delineation of responsibilities set forth in the contract. On the job site, GCs should provide general direction to their subcontractors, but avoid dictating the “essential terms and conditions of employment” for a subcontractor’s workers.

If you have questions about the final rule or how it may impact your business, please contact a member of the Hirschler employment law group.