New England Biz Law Update
A Texas federal judge has vacated the National Labor Relations Board’s (NLRB) controversial joint employer rule.
The rule, which would have made it more likely for two entities to be deemed joint employers, was set to take effect on March 11, 2024.
The ruling came in response to a lawsuit filed by a coalition of industry associations, led by the U.S. Chamber of Commerce.
Background
Two businesses are considered to be joint employers if they share or co-determine essential terms and conditions of employment, including compensation, scheduling, duty assignment, supervision, or safety.
In October 2023, the NLRB issued a final rule expanding the standard under which one company could be considered a joint employer of another. Specifically, under the now-vacated rule, a joint employer relationship would have existed not only where a company directly exercised control over another company’s workforce, but also when its control was indirect or even reserved, even if not actually exercised.
Joint employer status can have significant implications for businesses. A joint employer may be required to bargain with a union representing a joint employer’s workforce. Moreover, one joint employer can be held liable for unfair labor practices committed by the other.
The business community was quick to challenge the rule, indicating it could impose joint-and-several liability on a wide range of businesses, including industries with longstanding contracting and franchising practices, private equity firms, and joint ventures. As such, businesses could potentially be held liable for the decisions of entities over whom they had little to no actual control.
The ruling
In his decision, Judge J. Campbell Barker held that the NLRB’s new rule was unlawfully overbroad, stating that it “would treat virtually every entity that contracts for labor as a joint employer because every contract for third-party labor has terms that impact, at least indirectly … ‘essential terms and conditions of employment.’”
