Client Alert March 15, 2024 April Y. Li

NLRB’s New Rule on Joint Employer Status Vacated by Federal Judge

On March 8, 2024, in a lawsuit filed by the U.S. Chamber of Commerce and industry associations, a federal judge in Texas vacated the new joint employer rule issued by the National Labor Relations Board (“NLRB”) in 2023 and preserved the 2020 rule.

The National Labor Relations Act (“NLRA”) grants employees the right to unionize and requires employers to collectively bargain with unions representing their employees.  “Joint employer status” can be found when two entities jointly determine the terms and conditions of the employment.  Entities with “joint employer status” can be held liable for each other’s unfair labor practices.  Further, both entities have the obligation to bargain with unions representing their shared employees.

The 2020 joint employer rule issued by the NLRB requires that an entity must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment to be treated as a joint employer.  Essential terms and conditions of employment include wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

The NLRB’s 2023 joint employer rule, which was set to take effect March 11, 2024, expanded the types of control that could trigger a joint employer finding.  Under the new rule, joint employer status could be established if an entity possessed the direct or indirect authority to control at least one essential term of employment, regardless of whether such control was exercised.  The NLRB contended that its 2023 rule properly reflected the common law principles that were in effect prior to the 2020 rule.

On March 8th, Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas vacated the 2023 rule and restored the 2020 rule, holding that the new rules were overbroad.  In response, the NLRB announced that it is still considering next steps and will continue to make efforts to return the joint employer standard to the pre-2020 rule common law principles.

Mika Meyers’ attorneys will continue to monitor developments in this matter and will provide an update if any new rules or case developments are announced. Employers with questions regarding joint employer status or compliance with the NLRA should contact Nikole Canute, Nate Wolf, Scott Dwyer, Dominic Clolinger, Kathryn Stegink, or April Li as soon as practicable.

Let’s start a partnership worth keeping.