NLRB Reinstates 2020 Joint Employer Rule; DOL Proposes New Rule on Independent Contractors
Yesterday, the National Labor Relations Board (NLRB) announced that it is reinstating its 2020 rule governing when a company may be considered a joint employer under federal labor law. Separately, the U.S. Department of Labor (DOL) issued a proposed rule yesterday that would make it easier for workers to be classified as independent contractors, especially for companies relying on so-called “gig” workers.
NLRB Final Joint Employer Rule
In 2020, the NLRB had adopted a rule that set a relatively high threshold for determining when an employer could be deemed a joint employer of another company’s employees. In 2023, a more employee‑friendly NLRB replaced the 2020 rule with a standard making it easier to find joint‑employer relationships. A federal court struck down the 2023 rule and the NLRB abandoned any appeal. In a final rule issued yesterday, the current NLRB affirms that it will apply the more employer-friendly standard first issued in 2020.
The rule is significant because a joint‑employer finding carries substantial potential liability. Employers found to be joint employers may be required to share collective bargaining obligations and can be held jointly responsible for labor‑law violations.
Under the reinstated final rule an employer is considered a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment. Essential terms and conditions are wages, benefits, hours of work, hiring, discharge, discipline, supervision, or direction. To qualify as a joint employer, a company must possess and actually exercise substantial direct and immediate control over at least one of these essential terms in a way that meaningfully affects the employees’ employment relationship. Joint‑employer status is determined based on the totality of relevant facts, and the burden of proof rests with the party asserting that a joint‑employer relationship exists.
DOL Proposed Rule on Independent Contractors
The DOL’s newly proposed rule on independent contractors would make it easier for workers to qualify as contractors rather than employees. Substantively, the proposal mirrors the rule the DOL adopted in early 2021 under the prior Trump administration. If finalized, it would overturn a Biden‑era policy that had made it more difficult for employers to classify workers as independent contractors. The DOL has already stopped enforcing the prior rule in favor of applying its preferred test.
The proposed rule would shift back to the structure DOL adopted in the 2021 rule, giving significantly greater weight to two “core” factors used to determine whether a worker is economically dependent on the employer:
- The nature and degree of control the worker has over the work, and
- The worker’s opportunity for profit or loss based on their own initiative or investment.
When both core factors point toward the same classification, that outcome would generally be determinative. Other factors would still be considered but given less weight. These include:
- The skill required for the work,
- The permanence of the working relationship,
- Whether the work is part of an integrated unit of production, and
- Any additional facts showing whether the worker is in business for themselves or economically dependent on the employer.
Ultimately the new test makes it simpler for an entity to establish an independent contractor relationship with its workers.
Bottom Line
A year into the new presidential administration, labor‑policy trends are shifting away from Biden‑era, employee‑friendly standards and toward the more employer‑friendly frameworks that characterized the first Trump term. Given this volatility, employers should consult legal counsel in close or complex classification situations to evaluate risk and identify the best options for managing their workforce.
Questions?
If you have questions, please contact the authors or another member of Miller Johnson’s Employment and Labor practice group.