For the last several years, Employers Council has been following closely the developments of the National Labor Relations Board’s (NLRB’s) joint-employer rulemaking efforts. On July 19, 2024, the saga took a surprising turn as the NLRB announced its decision to withdraw its appeal against a United States District Court of Texas judge’s ruling that invalidated its joint-employer 2023 final rule.
Originally issued on October 26, 2023, the final rule would have significantly expanded the legal test for determining whether two organizations jointly employ the same workers. The 2023 rule would have changed the joint-employer standard from the Trump-led NLRB’s 2020 final rule, which required that a business have substantial direct and immediate control over a group of workers to be considered a joint employer, to only requiring that a business indirectly reserve the right to control a group of workers over any working conditions, even if it was never exercised.
The 2023 final rule, however, faced legal challenges and controversy since its inception. As chronicled earlier this year, a United States District Court of Texas judge struck down the 2023 final rule as overly broad. The NLRB appealed the decision to the United States Fifth Circuit Court of Appeals.
The NLRB, however, has now abandoned its appeal over the 2023 rule. The decision is likely based on the Supreme Court’s recent decision in Loper Bright that overturned the long-standing Chevron doctrine that had given government agencies wide latitude to issue rules, such as the joint-employer standard.
In its filing, the Board stated the following: “The Board remains of the opinion that its 2023 Rule meets the procedural and substantive requirements of the Administrative Procedure Act and the National Labor Relations Act. Given the litigation posture of the Rule, however, the Board would like the opportunity to further consider the issues identified in the district court’s opinion in the first instance.”
Notably, the NLRB’s filing cites two other pending lawsuits involving joint-employer issues and notes that the Board is “keenly interested in receiving wisdom from multiple courts to help resolve the complex matters” involving rulemaking. The NLRB, therefore, is likely waiting to see how these courts interpret the Board’s rulemaking authority before revisiting its joint-employer rule.
Takeaway for Employers
In the meantime, what does this mean for employers? The standard reverts back to the 2020 final rule requiring a business to actually exercise substantial direct and immediate control over the terms and conditions of employment for a group of employees to be considered a joint employer of another business.
As the joint-employer saga continues, it remains to be seen whether the NLRB will engage in further rulemaking or if future NLRB decisions in individual cases will modify how the 2020 final rule is interpreted. For more information regarding joint-employer considerations, please reach out to Employers Council.
Drew Hintze is an attorney for Employers Council.