A federal district court in Texas struck down the National Labor Relation Board’s (NLRB or the Board) new joint employer rule that was set to take effect March 11th. However, this may not be the end of the road for the NLRB’s new joint employer rule.
The NLRB’s new joint employer rule expanded the conditions and types of control over terms of employment that trigger a finding of a joint employer relationship. The NLRB outlined seven factors of “essential” employment conditions considered when determining the existence of a joint employer relationship. The factors are:
(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.
The NLRB’s new joint employer rule was set to displace a relatively recent Trump-era regulation (hereinafter, 2020 rule). The 2020 rule required “substantial direct and immediate” control over the most important elements of a worker’s job. Some of these elements included discipline, hiring, and firing decisions.
The NLRB’s new rule made it much easier to support a finding of a joint employer relationship. Under the new rule, additional factors of employment, more than just the most important elements, are considered as affecting the employer-employee relationship. Also, the new rule accounts for indirect and unexercised control over the terms of employment—in contrast to the 2020 rule, which only considered “substantial direction and immediate” control—when determining the existence of a joint employer relationship.
Change never comes without pushback, and the NLRB’s new joint employer rule is no exception. Critics of the rule are concerned about application to companies who possess indirect or unexercised control over merely a single aspect of workers terms of employment. They argue long-established business-to-business relationships, franchisors, and general contractors will be disrupted by the new rule.
Just two days before the NLRB’s new rule was set to take effect, a federal judge in Texas ruled the new rule was unlawfully broad. The judge explained the new rule would encompass “virtually every entity that contracts for labor as a joint employer” because these contracts almost always have terms that affect the “essential terms and conditions of employment.” The ruling vacated the NLRB’s new rule, effectively reinstating the 2020 rule.
But, the Texas court’s ruling is not necessarily the end of the line for the NLRB’s new joint employer rule. The NLRB could appeal the District Court’s ruling to the Fifth Circuit Court of Appeals. Alternatively, the NLRB could undertake a new round of notice-and-comment rulemaking. Considering that the first round of the notice-and-comment rulemaking process began in the middle of 2022, this is probably an option the NLRB would rather avoid due to time concerns.
Or, the NLRB could opt to apply the “doctrine of nonacquiescence.” The doctrine pertains when the Board decides to apply its labor law standards after a federal court has struck them down. It comes from the idea that the NLRB is responsible for setting national labor policy under the National Labor Relations Act, unless the Supreme Court says otherwise. If the Board were to apply this doctrine, it would use the new joint employer rule everywhere outside of the Eastern District of Texas (the U.S. District Court where the new joint employer rule was held unlawfully broad). Applying the doctrine of nonacquiescence would be rather novel, and somewhat risky because the Board could be held in contempt of court for going against court orders.
Several companies now eagerly await the NLRB’s decision on how it will proceed. Other new joint employer rule legal challenges will undoubtably be affected by the path the Board choses.
Written by Christina Charikofsky. Christina is a legal intern at Kollman & Saucier and a second-year student at the University of Baltimore School of Law.