Businesses, legislators challenge NLRB’s joint employer rule

A controversial new regulation expanding the concept of “joint employment” under federal labor law is set to take effect in February, potentially making it easier for Americans to unionize. However, the measure has sparked backlash from the business community and some legislators.

Released in late October by the National Labor Relations Board (NLRB), the rule broadens the criteria for designating affiliated companies as joint employers of certain workers.

The rule effectively expands the number of companies that would be required to participate in labor negotiations. For example, it could require a construction subcontractor to negotiate with union workers employed by a general contractor. Or it might require a franchisor to bargain with workers, even when restaurants are owned and run by franchisees.

Supporters say the updated standard correctly holds corporations accountable. But critics argue it saddles small business owners with unnecessary legal risk and liability.

With implementation just weeks away, the rule faces court challenges as well as a Congressional Review Act resolution seeking to overturn it. U.S. Reps. John James (R-MI), Virginia Foxx (R-NC), and Speaker Mike Johnson (R-LA), joined U.S. Sens. Bill Cassidy (R-LA), Joe Manchin (D-WV), and Mitch McConnell (R-KY) to introduce the resolution. Analysts say this effort will almost certainly face a veto, and an override is unlikely.

However, shortly after the Congressional action, the U.S. Chamber of Commerce and a coalition of business groups filed suit in Texas, alleging that the rule is overbroad and arbitrary and therefore unlawful.

The NLRB’s final rule establishes a broad standard for joint employment under which one company can be considered a joint employer of another not only where it directly exercises control over another company’s workforce, but also when its control is indirect or even reserved, even if not actually exercised.

Twenty-two Democratic lawmakers supported the rule, writing a letter to the NLRB and arguing it correctly interprets the National Labor Relations Act.

If upheld, the rule means companies that indirectly control working conditions could have new legal obligations, like participating in collective bargaining. Companies may need to review business relationships and worksite practices and write new contract terms to avoid joint employer status.