What's Happening?
The National Labor Relations Board (NLRB) has reinstated the 2020 joint-employer rule after a federal court vacated the 2023 rule. This decision affects private employers in California, particularly those using staffing agencies, subcontractors, and franchise
models. The 2020 rule requires substantial direct and immediate control over essential employment terms for joint-employer status, limiting liability for businesses. The 2023 rule, which allowed for indirect control to suffice, was blocked by a lawsuit from the U.S. Chamber of Commerce and other business groups. The NLRB's joint-employer standard has fluctuated over the years, creating uncertainty for employers.
Why It's Important?
The reinstatement of the 2020 rule is significant for California businesses as it reduces the risk of being classified as joint employers, which can lead to obligations such as collective bargaining and liability for unfair labor practices. This is particularly relevant for industries with multiemployer pension funds, where joint-employer status can result in substantial financial exposure. The decision provides temporary relief but highlights the ongoing volatility in labor regulations, which can impact business operations and financial planning.
What's Next?
The joint-employer standard remains unstable, with potential changes possible through appellate court decisions, new NLRB rules, or congressional legislation. Employers are advised to review contracts and operational controls to mitigate risks. The situation may evolve with future political changes, particularly with a new administration in 2028, which could influence federal labor policies.
