The Dotted Line: Preparing for the NLRB’s Joint Employer Rule

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A federal district court has delayed the new rule of the National Labor Relations Board in co-entrepreneurs, the second time the start date has been delayed.

The US Chamber of Commerce asked the US District Court for the Eastern District of Texas to block the rule. The court held a hearing on that motion on February 13 and said it will issue an opinion soon.

For now, the way the NLRB determines whether companies are joint venturers will go into effect on March 11th, instead of February 26th.

Should general contractors be deemed joint employers of an employee of a subcontractor, they could face potential litigation or other consequences for workplace violations suffered by workers. Two entities are considered co-entrepreneurs when they jointly determine the essential conditions for hiring workers. With multiple subcontractors on construction projects, there is a real possibility that GCs will be considered co-employers for workers on work they do not directly employ.

The new rule would overturn a 2020 Trump-era rule that made it easier for “genuine joint venturers to avoid finding joint venturer status” because of a higher employment threshold , according to the NLRB.

The change in many ways harks back to a 2015 version of the rule, but business groups have lamented that this week’s change: first announced in October — lack of clarity, which can expose them to litigation.

“It creates a looser rule about when two parties could end up as joint venturers,” said Dan Rosenberg, principal attorney at Chicago-based Much Shelist. “Especially in construction where there are so many parties in one place working together, especially GCs or prime contractors who have many other trades under them. It leaves them potentially legally exposed to employee claims.”

General contractors should strengthen their contracts in preparation for the new rule in order to limit their liability to subcontractor employees. Companies can plan ahead by using careful contract language and communicating clearly with project leaders to ensure they are not held liable when they have no control over an employee’s work.

The new working conditions

The New NLRB Standard for Joint Employment considers seven factors to determine whether a worker is an employee of a company, only one of which must be true. They are if the company in question is responsible for:

• Wages, benefits and other compensation.
• Working hours and schedule.
• The task of the work.
• The supervision of the work.
• Rules and work instructions on the manner and methods of work and the reasons for discipline.
• The hiring and dismissal of workers.
• Working conditions related to safety and health.

Definition of responsibilities

Defining roles and expectations for GCs and subs during the contract phase can help protect builders early on, Rosenberg said. Specifically, outlining subcontractors’ roles and noting their responsibility for the seven factors of their workers in the workplace can help build this defense.

“There’s language you could put in the contract, that as a GC you’re not responsible and have no control over hours, wages, assignment of duties, those seven factors. Put that in the subcontract and also put that there is no intention on the part of the parties to be a joint employer,” he said. “You make the courts have to look at the contract and basically decide that they’re going to ignore some language where you make it clear that that wasn’t the intention.”

Contractors should have all responsibilities “as clearly defined as possible,” said Charles A. Krugel, a Chicago-based human resources attorney and consultant, adding that they should be as clear as possible about the command and control in the documentation with subs.

However, it’s not as if there is language that could provide an escape clause that circumvents the NLRB’s rule when one of the seven factors is met, Krugel said.

Walk the talk

As with any other element of a contract, the parties must comply with the obligations they agree to perform or not to perform.

“You have to talk the talk and walk the walk,” Krugel said.

To ensure this is the case, GCs should talk to project stakeholders, such as project leaders, about the dos and don’ts of the new standard.

“I would say the most important thing you want to do is provide general direction to your subordinates and try not to control specific employees,” Rosenberg said.

This could mean ordering GC superintendents not to oversee the schedule, work, or safety conditions of a subcontracted worker. Rosenberg and Krugel pointed to this as a criticism of the NLRB’s rule change; could discourage contractors and superintendents from acting to help protect the health and safety of a worker hired by a subordinate.