Joint Employer

Employees at Williams Sonoma warehouses

The issue

Both the Labor Department and the National Labor Relations Board issued new regulations in 2020 clarifying what constitutes a “joint employer” and reversing a broad definition adopted during the Obama Administration that exposed businesses to a wide range of claims over labor disputes involving subcontractors and franchisees.

NRF welcomed the new regulations, saying they provide “much-needed legal certainty” that eliminates confusion regarding standard business relationships and protects employers from liability and litigation. Nonetheless, the Labor Department version has been challenged in court and legislation has been introduced in Congress that would codify the Obama standards as part of a larger pro-union, anti-employer labor law package known as the PRO Act. NRF is working to defeat that legislation

Why it matters to retailers

The joint employer issue is important to retailers because they regularly contract with third-party businesses to provide a variety of services in areas including information technology, distribution centers, shipping and facilities maintenance, among others. The significant changes to the standard under the previous administration created great uncertainty and opened retailers up to potential claims.

NRF advocates for appropriate joint employer rules

Professional woman pointing at computer for colleague

Under an NLRB ruling during the Obama administration and regulations issued by DOL shortly thereafter, a company could be considered a joint employer even if it had only indirect control or unexercised potential control over employees, overturning standards that had been in place more for decades. The new regulations issued in 2020 restore certainty by emphasizing the actual exercise of control and adopting a four-part test that was set in a 1983 court case. Under the new rules, a company can be considered a joint employer only if it actively exercises the power to hire and fire the employees in question, supervises and controls their work schedules and conditions of employment, determines their rate and method of payment and maintains the employees’ employment records.

a guy is shown loading boxes from a dock into a truck

NRF supported the new regulations, saying there had been “substantial confusion” about the joint employer standard due to numerous entities issuing decisions and guidance that conflicted with one another and ignored precedent. NRF said a “patchwork of various, conflicting and expansive standards and interpretations” had left employers unsure of and unable to assess their exposure to joint employer liability