NLRB Appeals Decision Blocking Its Joint Employer Rule

The National Labor Relations Board (NLRB) on May 7 filed a notice of appeal of a Texas federal district court decision blocking the agency’s joint employer rule.  We’ve gathered articles on the news from SHRM Online and other outlets.

District Court Decision

A federal district court in Texas blocked the rule on March 8, deciding that the new joint employer rule is too broad and violates federal labor law. The rule was found to be invalid because it would treat some companies as the employers of contract or franchise workers, even when those companies lacked any meaningful control over their working conditions.

The rule “would treat virtually every entity that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly ... essential terms and conditions of employment,” the court wrote.

But in a message to Congress regarding his veto of a resolution to overturn the rule, President Joe Biden said the blocked rule “would prevent companies from evading their bargaining obligations or liability when they control a worker’s working conditions—even if they reserve such control or exercise it indirectly through a subcontractor or other intermediary.”

Even under the 2020 standard that applied prior to the effective date of the now-blocked 2024 rule, employers may want to consider the risk that they can still be found to be a joint employer if they exercise substantial direct and immediate control over essential terms and conditions of employment.

(Reuters, Ogletree Deakins, Nation’s Restaurant News, and SHRM Online)

Resolution to Overturn Rule Vetoed

Biden vetoed a congressional resolution to overturn the NLRB’s joint employer rule on May 3.

It is unlikely that the Senate and House of Representatives could muster a two-thirds majority vote to overcome the veto. The resolution passed the House by a 206-177 vote on Jan. 12 and cleared the Senate by a 50-48 vote on April 10. SHRM had urged Biden not to veto the measure.

There has been significant opposition from stakeholders to the NLRB’s joint employer rule “due to the lack of clarity and consistency regarding the criteria for establishing a joint employment relationship,” said Emily M. Dickens, SHRM chief of staff, head of government affairs, and corporate secretary. She noted that SHRM is concerned with the broad drafting of the rule, which creates a joint employer relationship through indirect or reserved control over a third party by organizations.

(SHRM Online)

Rule Would Have Created More Employer Liability

The blocked rule lowers the bar for whether two companies are joint employers—employers that share obligations to negotiate with unions as well as joint liability for labor violations.

(Bloomberg Law)

Jurisdictional Dispute

With the litigation over the joint employer rule being appealed to the 5th U.S. Circuit Court of Appeals, the NLRB may try to get the case moved to the D.C. Circuit, where a separate challenge is pending. The Service Employees International Union challenged the rule— arguing it should be broader—at about the same time the U.S. Chamber of Commerce filed its lawsuit in Texas, opening up a jurisdictional dispute about the proper venue for litigation.

(Bloomberg Government)

Preparing for a Revived Joint Employer Rule

Franchisors can do some simple things to start protecting and preparing their businesses for the possibility of a revived and expanded joint employer rule. Those steps include, according to Alex MacDonald at Littler in Washington, D.C., reviewing all contracts with vendors and franchisees for indirect or reserved control specifications, such as:

• Direct training requirements.
• Right to exclude workers.
• Background check requirements.
• Minimum qualifications.
• Specific staffing and coverage level requirements.

(Entrepreneur)