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November 3, 2023
JOINT EMPLOYER RULE BLOCKED: On March 8, 2024, a federal judge in Texas blocked the National Labor Relations Board (NLRB) proposed joint employer rule, which was scheduled to become effective on March 11, 2024. The court concluded that nearly every entity that contracts for labor would be considered a joint employer under the NLRB’s proposed rule because nearly every such contract contains terms that impact at least one essential term or condition of employment. Thus, the court held that the proposed rule was arbitrary and capricious because it failed to achieve the purpose that justified the rulemaking – i.e., to establish a “definite, readily available standard” to “assist employers and labor organizations in complying with the [National Labor Relations] Act.”
YET ANOTHER UPDATE: On Thursday, February 22, 2024, a Texas federal judge delayed – until March 11, 2024 – the effective date of the National Labor Relations Board rule change addressing joint employer status. The delay stems from the court’s consideration of a bid by a business coalition to block the rule. The coalition claims that the rule exceeds the powers of the Board and that it violates federal norms for rulemaking. U.S. Chamber of Commerce et al. v. NLRB, No. 6:23-cv-00553 (E.D. Tex).
ANOTHER UPDATE: The NLRB’s Joint Employer Rule is facing challenge under the Congressional Review Act (CRA). On January 12, 2024, the House of Representatives voted 206 to 176 to block the Rule. The CRA resolution now awaits a Senate vote. If it passes in the Senate, the resolution will go to President Joe Biden. The President likely will veto the resolution. If he signs it, the NLRB’s Rule will be negated. We will continue to monitor this issue and update this article.
UPDATE: On November 16, 2023, the National Labor Relations Board extended the effective date of its joint-employer standard FROM December 26, 2023 TO February 26, 2024, to facilitate the resolution of legal challenges to the standard. The new standard will apply only to cases filed after the effective date.
On October 27, 2023, the National Labor Relations Board (NLRB) published a Final Rule addressing a new standard for determining joint-employer status.
What was the old standard?
The Final Rule rescinds the NLRB’s rule from 2020. Establishing a joint-employer relationship under the 2020 rule required proof of the exercise of “direct and immediate control” over the “essential terms and conditions” of employment.
What is the new standard?
Under the Final Rule, a joint-employer relationship can be established if the employer possesses the authority to control, or exercises the power to control, one or more of the employee’s essential terms and conditions of employment, regardless of whether the employer exercises such control and regardless of the manner in which it exercises such control.
What are “essential terms and conditions” of employment?
The Final Rule defines “essential terms and conditions” of employment as:
What is the impact of being deemed a joint employer?
“Joint employers” exist when more than one entity exercises control over a worker such that each entity has formed an employment relationship with that worker. The National Labor Relations Act (NLRA) requires joint employers to bargain with the union that represents the jointly-employed workers, and each joint employer may be liable for unfair labor practices.
What industries will the Final Rule impact most?
The Final Rule likely will impact franchises, temporary agencies, and staffing firms most. However, regardless of the business model, the relationship with workers and the authority to control one or more essential terms and conditions of employment drives the Final Rule’s analysis.
Does the Final Rule trump the Department of Labor’s rule regarding joint employers?
No. The NLRB’s final rule is separate from the rule of the Department of Labor (DOL). The NLRB and the DOL independently set joint-employer standards, consistent with the statutes that they enforce. The NLRB’s rule is grounded in the NLRA and common law principles. The DOL uses an economic-realities test to interpret “employer” for the purposes of the Fair Labor Standards Act.
When is the Final Rule effective?
The Final Rule will take effect on December 26, 2023 and will apply only to cases filed after that date.
*Special thanks to Ava Petrellese, our Paralegal, for her contributions to this article.
This newsletter is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
