Federal judge strikes down NLRB’s joint employer rule

Tyler, TX — A federal judge in Texas has vacated the National Labor Relations Board’s joint employer rule, but NLRB Chair Lauren McFerran says the decision is “not the last word.”

Judge J. Campbell Barker’s March 8 ruling from the U.S. District Court for the Eastern District of Texas states the NLRB 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, at least one of the specified ‘essential terms and conditions of employment.’”

McFerran responded in a March 9 statement: “The District Court’s decision to vacate the board’s rule is a disappointing setback, but is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts. The agency is reviewing the decision and actively considering next steps in this case.”

Barker had paused the joint employer rule on Feb. 22, nine days after a hearing with the U.S. Chamber of Commerce and other business groups.

NLRB’s joint employer rule originally was set to go into effect Feb. 26.

In the final rule published Oct. 27, NLRB changed – for the second time in less than four years – its definition of a “joint employer.” The agency overturned a 2020 rule to return to a previous definition of a joint employer: when two or more entities “share or codetermine” one or more of an employee’s essential terms and conditions of employment. Those “essential terms and conditions” include responsibility for worker safety and health. Others:

• Wages, benefits and other compensation
• Hours of work and scheduling
• Assignment of duties to be performed
• Supervision of the performance of duties
• Work rules and directions governing the manner, means and methods of the performance of duties and the grounds for discipline
• Tenure of employment, including hiring and discharge

“The 2023 rule more faithfully grounds the joint-employer standard in established common law agency principles,” NLRB stated in a press release when publishing the final rule. “In particular, the 2023 rule considers the alleged joint employers’ authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect.

“The common law clearly recognizes that reserved control and indirect control are relevant to the analysis. By contrast, the 2020 rule made it easier for actual joint employers to avoid a finding of joint-employer status because it set a higher threshold of ‘substantial direct and immediate control’ over essential terms of conditions of employment, which has no foundation in common law.”