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What HR Needs to Know About the New Joint Employer Rule

A new joint-employer rule, proposed by the National Labor Relations Board in September, will affect both franchises and businesses that use third-party contract labor – in other words, a large swath of American businesses. Chances are good that it will affect your organization as well. So what do you need to know, from an HR perspective, to help your company navigate this change?

Phillip B. Wilson of the Labor Relations Institute recently joined the HR Break Room podcast to discuss that very topic in a two-part deep dive. Let’s go over some highlights from that conversation.

Why HR should pay attention

The proposed joint employer rule would reverse the Browning-Ferris standard on what makes two businesses joint employers. Brush up on the specifics of Browning-Ferris here, but briefly: Under that standard, a joint employment relationship could exist if one entity actually exercised, or reserved the right to exercise, direct or indirect control over another entity’s employees. Both employers would be required to participate in any lawsuits or union negotiations.

Wilson noted that “almost every company has at least some risk of being considered a joint employer if you use this expansive Browning-Ferris” standard, because even “reserved control can create a joint-employment relationship.”

Browning-Ferris is still the standard in place until the proposed rule is approved, likely to occur in November – so it’s important for HR to be aware of that standard and ensure business practices don’t present your organization as a joint employer accidentally.

Under the proposed rule, however, in order to be considered a joint employer, a company would have to exert direct control on essential terms and conditions of employment for the third party’s (or franchise’s) employees. So moving forward, HR likely will be called upon to help companies avoid direct day-to-day control of another entity’s employees, because that could still indicate a joint-employer relationship under the new rule.

Your role as an HR business partner

The new joint-employer rule should let most businesses breathe easier, since it generally lowers the likelihood that your business will be considered a joint employer (plus the costly liability alongside it). Read more about the expected result of this new rule in this blog post.

Simply by being aware of the current standard, the potential for change, and the specifics of the new rule, you’re better able to help your organization avoid engaging in business practices that create the risk of being considered a joint employer. Make sure your company leadership knows this is a conversation happening at the national level, and that you are staying on top of it to keep your organization compliant.

Another way HR can add value is by keeping an eye on situations where your company exercises direct control over the day-to-day employment reality of another company’s workers – remember, this can create a joint-employment relationship according to either the old standard or new rule.

Wilson stressed that “a really important way for HR to be a good business partner… is to make sure that they are on the lookout for these potential direct control situations, and that they do what they can to help the company navigate those.”

Become the expert at your company

Learn more about the proposed new joint-employer standard – including the difference between direct and indirect control over workers, and what this means for training third-party contract workers – in the HR Break Room podcast’s two-part episode on the changing joint-employer regulation.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.