Federal Texas Judge Blocks Enactment of the Joint Employer Rule
Mar 22, 2024The 2020 rule remains in place, for now, as the case moves through the courts.
On March 8, 2024, Judge J. Campbell Barker of the United States District Court for the Eastern District of Texas vacated the National Labor Relations Board’s (NLRB) new standard for determining when employers are “joint employers.” The United States Chamber of Commerce, the American Hotel and Lodging Association, the International Franchise Association, the National Retail Federation, and other business groups had joined forces to sue the NLRB and block the enactment of the new standard, which was scheduled to take effect on March 11. In his ruling, Barker said the new rule was “contrary to law” and “arbitrary and capricious.”
What is a joint employer?
It depends on who you ask. At the NLRB, the definition of “joint employer” seems to vary with the board’s composition when discussing the concept.
The current rule, enacted late in the Trump administration, in 2020, says that to be considered a joint employer, two entities must have “substantial direct and immediate control” over the fundamental conditions of employment, which are:
- wages and benefits,
- hours and scheduling,
- the assignment of duties,
- work rules, and
- hiring.
The proposed new rule — the one just struck down in a Texas federal court — would have expanded the definition of “joint employer” to include any company with the ability to control — directly or indirectly – at least one of the fundamental conditions of employment. This broadening of the standard for when two employers can be considered joint employers — and thus potentially liable for one another’s alleged unfair labor practices — also made it easier for union organizers to include a “joint employer” in organizing activities and election petition (RM petition) initiatives.
The 2020 rule, in contrast, shields a company like McDonald’s from being the joint employer of most of its employees because most of its employees are directly employed by a franchise.
What now?
Judge Barker’s decision to vacate the 2023 proposed new rule and reinstate the 2020 rule also has the effect of negating the NLRB’s decision—should the vacating of the 2023 proposed rule be upheld—to revert to a case-by-case analysis of the “joint employer” situation, which was how such decisions were made before 2020.
Because of its importance, the NLRB is expected to appeal this federal district court decision.
“The District Court’s decision to vacate the Board’s rule is a disappointing setback, but is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts,” said Lauren McFerran, the chair of the NLRB, in a statement released on March 9, 2024.
For now, the 2020 rule remains in place, and we can expect significant further debate as this issue moves through the courts in the months ahead. In the meantime, if you have any questions about this evolving regulatory drama or any other issue affecting your business, don’t hesitate to contact Orr & Reno for assistance.
