by JPeters | July 29, 2024 12:47 pm
For now, the 2020 rule enacted during the Trump administration remains in effect
On July 19, 2024, the National Labor Relations Board[1] (NLRB or the Board) withdrew its pending appeal of the February 26, 2024 decision[2] by a federal district court judge in Texas, which had blocked the Board’s broadened joint employer rule from taking effect. In the Notice of Voluntary Dismissal[3], the Board stated that it believes the 2023 rule[4] “meets the procedural and substantive requirements of the Administrative Procedure Act[5] and the National Labor Relations Act[6].” Still, it decided to “further consider the issues in the district court’s opinion” and noted several rulemaking petitions on its docket that involved joint employer issues. The district court had said that the 2023 final rule did not comply with the provisions of these acts.
So, for the foreseeable future, at least, the Board’s voluntary dismissal will make the district court’s decision final, and the NLRB’s 2023 rule will not go into effect.
What Rule is in Effect Now?
The rule now in effect[7] was enacted late in the Trump administration, in 2020. It 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.
To establish that an entity shares the essential terms and conditions of employment with another employer’s employees, that entity must “possess and exercise such substantial direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matter relating to the employment relationship with those employees.”
One of the Board’s current concerns with the 2020 rule is that it could shield a large franchisor like McDonald’s from being the joint employer of most employees because its franchisee directly employs most employees.
To address this concern, the NLRB’s 2023 rule 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[8]) initiatives.
What Happens Now?
The NLRB is expected to proceed with more rulemaking activity, incorporating the rationale of the recent district court. The wording of the voluntary dismissal suggests another appeal in the future. In the meantime, the Board will undoubtedly revert to its approach before the 2020 rule and address the joint employer issue on a case-by-case basis.
If you have any questions about this evolving regulatory issue or any other matter affecting your business, don’t hesitate to contact Orr & Reno for assistance.
Steven L. Winer[9] and Lindsay E. Nadeau[10]
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