Clark Hill 2024 Automotive & Manufacturing Industry Outlook: Labor & Employment

The NLRB’s New Rule on Joint Employers: Best Practices for Automotive & Manufacturing Employers to Limit Liability

It is widely known that automotive and manufacturing employers routinely supplement their workforce with temporary workers employed by staffing companies. As Clark Hill attorney David Cessante explains, “One of the primary reasons behind this approach is that it allows companies to more easily adjust their workforce in response to the ebbs and flows of business that so often plague employers in the automotive and manufacturing industries. While this added flexibility serves a legitimate need, it often comes with a false sense of security that the company does not bear employment-related liability in connection with the temporary workers.”  This sense of security is particularly false given the current National Labor Relations Board’s (“Board”) rulemaking around joint employment.

The “joint employer” concept has been with us for some time, but the definition has swung wildly in the last few years. For example, in 2015 the Board issued its decision in Browning-Ferris Industries of California, Inc. That decision departed from prior caselaw by establishing that reserved control was sufficient to establish a joint-employer relationship. Then, in February 2020, the Board announced a regulation that moved away from Browning-Ferris, clarifying that an entity needed to have substantial direct and immediate control over defined core features of employment to be a joint employer.

On October 26, 2023, the Board released a final rule that once again redefined and expanded the concept of joint employment.  As a result, the Board also increased the potential liabilities and obligations faced by employers.

Under the new rule, a joint-employer relationship exists where two or more entities share or “codetermine” essential terms and conditions of employment, including:

1. Wages, benefits, and other compensation;
2. Hours of work and scheduling;
3. The assignment of duties to be performed;
4. The supervision of the performance of duties;
5. Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
6. The tenure of employment, including hiring and discharge; and
7. Working conditions related to the safety and health of employees.

Importantly, the new rule completely abandons the substantial direct and immediate control element of the 2020 regulation. Joint employment is established if there is merely the ability to control, directly or indirectly, those terms of employment, even if it is not exercised. The new rule does not clarify the degree of ability to control that is needed to meet this threshold.

Further complicating matters, the Board’s new rule states that a joint employer has the obligation to bargain over “any term and condition of employment that it possesses the authority to control or exercises the power to control” (even if those terms are not essential terms of employment). However, an entity does not have an obligation to bargain over terms and conditions that it does not have authority to control.  For example, assume that a manufacturer is found to be the joint employer of temporary employees supplied by a staffing company because the manufacturer controls hours of work, scheduling, and supervision of the temporary employees.  Under the Board rule, the manufacturer would have a bargaining obligation on those issues, but not on others it did not control such as wages, benefits, and compensation.

The rule was originally set to take effect on December 26, 2023, but the Board itself extended the effective date until February 26, 2024.  The U.S. Chamber of Commerce and other industry groups challenged the rule in federal court in Texas.  As a result, on February 22, 2024, U.S. District Judge J. Campbell Barker stayed the effective date of the rule until March 11, 2024.  That case remains on-going.  Unless and until something happens that derails or further delays the new rule, manufacturers should prepare for its implementation.[1]

Given the current stance of this Board, there is no failsafe solution to prevent a joint employer finding; however, taking the following steps will certainly reduce the likelihood of being deemed a joint employer:

1. Carefully review agreements and relationships with other entities, particularly in cases of leased employees, shared service agreements, or where the employees of vendors are regularly present in the facility.
2. Where possible, agreements should be revised to eliminate codetermination wherever possible and, to address the third-party provider’s responsibilities with respect to the 7 terms and conditions of employment the Board focuses on in the new rule.
3. Make sure your agreements contain representations and warranties from the third-party providers that they will comply with all laws with respect to its employees.
4. Insist that agreements require indemnification from third-party providers in the event the Board (or any other tribunal or agency) finds a joint employer relationship and/or in the event the third-party provider fails to meet its obligations under the agreement. Remember, all contracts are negotiable.
5. Review reporting arrangements, work processes, and complaint procedures; and, where needed, clarify through policy to shift responsibility to the third-party provider.  Clarify the process through which concerns with a leased/temporary employee can be addressed with a supervisor or official from third-party provider.
6. Conduct managerial training to ensure managers are not exercising (or reserving) direct or indirect control over the essential terms of employment of another entity’s employees. Areas such as scheduling, assignment of work, evaluation, accommodation requests, worker complaints, and discipline should get special focus.
7. Companies who rely on a significant number of leased/temporary employees to provide services should consider requiring the employer of the leased/temporary employees to have a supervisor on site.

Clark Hill attorneys are prepared to work with automotive and manufacturing employers to navigate the challenges posed by this new regulation. For more information, feel free to reach out to any member of Clark Hill’s Automotive & Manufacturing Labor & Employment Task Force, or the Clark Hill attorney with whom you regularly work.

[1] Even in the event of a further delay, the Board has telegraphed how it will broadly interpret the concept of joint employment when faced with an unfair labor practice charge.  We would still encourage employers to consider the suggested recommendations.

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