On March 8, 2024, U.S. District Judge J. Campbell Barker of the Eastern District of Texas vacated the National Labor Relations Board (NLRB)’s 2023 Final Rule on Joint Employer Status, which was scheduled to go into effect on March 11, 2024.
KingSpry’s Employment Law Chair, Avery E. Smith, Esq., previously reviewed the NLRB’s 2023 Final Rule, which established a new standard for determining joint employer status. Below, Attorney Smith details the District Judge’s decision to vacate the 2023 Final Rule.
History
On October 26, 2023, the NLRB released its final rule (the “2023 Rule”), setting forth its revised standard for joint employer status. The 2023 Rule was expected to repeal and replace the NLRB’s 2020 Rule and permit broader evidence to be considered when determining joint-employer status.
The 2023 Rule was scheduled to take effect on March 11, 2024, after U.S. District Judge J. Campbell Barker stayed the initial effective date of December 26, 2023.
In November of 2023, the Chamber of Commerce of the United States of America (the “Chamber”) and a coalition of business groups sued the NLRB for its 2023 Rule. According to the Chamber, had the 2023 Rule went into effect, it would have had far-reaching consequences for all businesses.
Why Was the 2023 Rule Vacated?
The U.S. District Judge J. Campbell Barker determined that the 2023 Rule was unlawfully broad, because an entity could be deemed a joint employer simply by having the right to exercise indirect control over one (1) essential term of employment.
According to Judge Barker, the 2023 Rule “would treat virtually every entity that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly…essential terms and conditions of employment.”
The NLRB’s Chair, Lauren McFerran, referred to the Court’s decision as a “disappointing setback.” However, the fate of the 2023 Rule may change, as the NLRB is expected to appeal the decision.
What is a Joint Employer?
A joint employer is an individual or entity who is jointly and severally liable with another employer for an employee’s wages. Joint employer status creates a “primary” and “secondary” employer relationship, under which the primary employer is responsible for the secondary employer’s liabilities. Joint employers each bargain over particular essential terms and conditions of employment.
What Does this Mean?
The NLRB’s 2023 Rule will not go into effect in March, 2024.
For now, the NLRB’s 2020 Rule stands, which considers an employer a joint employer only when it exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employees. Additionally, the 2020 Rule provides that wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction are “essential terms and conditions of employment.”
Moving Forward
Although the 2023 Rule did not take effect nor change employment standards, it is recommended that employers review their agreements with other entities to determine whether joint employer status exists pursuant to the 2020 Rule.
