The fate of the National Labor Relations Board’s (NLRB) controversial joint employer rule remains uncertain after facing legal challenges in court and opposition from Congress.

The rule aimed to broaden the standard for determining when two entities are considered joint employers under the National Labor Relations Act (NLRA), making it easier to find joint employment relationships.

Court challenges

In March 2024, just days before the rule was set to take effect, the U.S. District Court for the Eastern District of Texas struck down the rule. The court found that it was unlawfully broad and arbitrary and capricious, as it would treat virtually any entity that contracts for labor as a joint employer. The decision reinstated the narrower 2020 joint employer test, which requires actual exercise of substantial direct control over essential employment terms.

On May 7, 2024, the NLRB appealed to the 5th U.S. Circuit Court of Appeals. That appeal leaves the door open for the NLRB to potentially revive the expanded joint employer standard, if successful.

Congressional opposition

In addition to the legal battle, the proposed rule faced pushback from Congress. Both the House and Senate passed resolutions under the Congressional Review Act to block the rule’s implementation. However, President Joe Biden vetoed the resolution, stating it was needed to prevent companies from avoiding liability by manipulating their corporate structures. A subsequent attempt by the House to override the veto fell short of the required two-thirds majority.

Implications for employers

While the 2020 joint employer test currently remains in effect due to the U.S. District Court’s decision, the ongoing litigation and failed congressional challenge mean that employers are not fully in the clear. If the NLRB ultimately prevails on appeal, or successfully reissues a revised rule, more businesses could be subject to joint employer status and the accompanying bargaining obligations and potential liabilities under the NLRA.

To mitigate joint employer risks in the face of this uncertainty, businesses should carefully review contracts and business arrangements with franchisees, subcontractors, and staffing agencies.

Strategies may include:

Minimizing contractual provisions that reserve indirect control over another entity’s workers.
Focusing on brand standards rather than individual worker standards during inspections and reporting.
Training supervisors on proper interactions with contracted entities’ workers.

The joint employer saga continues, and leaders should continue to watch for developments. In the meantime, employers can take the steps above to better position themselves to avoid unintended joint employment findings, regardless of the ultimate fate of the NLRB’s rule.