Senate Approves Repeal of NLRB Joint Employer Rule

The U.S. Senate on April 10 narrowly approved repealing a National Labor Relations Board (NLRB) joint employer rule making it easier for employers that contract employees from other companies to be deemed a joint employer.

The House of Representatives also had voted to repeal the rule, but President Joe Biden is expected to veto the repeal. The rule was blocked March 8 by a district court judge in Texas.

SHRM supports the repeal and advocates for a return to the 2021 rule that stated only businesses with direct and immediate control over employees’ working conditions are joint employers.

“SHRM strongly urges President Biden to sign the Congressional Review Act and overturn the National Labor Relations Board’s final rule on determining joint employer status,” said Emily M. Dickens, SHRM chief of staff, head of public affairs and corporate secretary. “There has been significant opposition from stakeholders due to the lack of clarity and consistency regarding the criteria for establishing a joint employment relationship.”

She also noted that SHRM is concerned with the broad drafting of the rule, creating a joint employer relationship through “indirect or reserved” control over a third party by organizations.

We’ve gathered articles on the news from SHRM Online and other outlets.

Senate Action

The Senate, which is controlled by Democrats, passed the resolution to repeal the rule in a 50-48 vote. Critics of the rule have said it would be improper to force companies to the bargaining table when they have little control over working conditions. Groups representing franchise businesses have also said the rule could upend the franchise model.

(Reuters)

House Action

The U.S. House of Representatives voted 206-177 on Jan. 12 to pass the resolution to overturn the joint employer rule.

The final rule states that two entities are considered joint employers if they share or co-determine the employees’ essential terms and conditions of employment, such as pay, benefits, scheduling, hiring, discharge and discipline. The previous standard implicated joint employers only when they had direct and immediate control over working conditions, but the new standard applies even when there’s indirect or unexercised control. Joint employers must participate in collective bargaining if employees for one of the organizations are represented by a union.

(SHRM Online)

District Court Decision

Before a district court judge in Texas blocked the rule on March 8, it was slated to take effect March 11. The court decided that the new joint employer rule is too broad and violates federal labor law. The rule was found to be invalid because it would treat some companies as the employers of contract or franchise workers even when those companies lacked any meaningful control over their working conditions.

The 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 court wrote.

(Reuters via Yahoo! Finance and SHRM Online)

New Standard Replaced ‘Direct Control’ Rule

The NLRB released the new final rule in October 2023 to replace an older rule that took effect on April 27, 2020. Under that rule, an employer could be a joint employer of another entity if it had direct and immediate control over the essential terms and conditions of employment, such as wages, benefits, work hours, hiring, discharge, discipline, supervision and direction.

SHRM advocated for the NLRB to create legal scaffolding that supports that a joint employer relationship is established when there is sufficient relevant evidence to show regular and continuous control—not sporadic, isolated, or de minimis control.

(SHRM Online)

Effective Date Had Been Delayed

Prior to striking down the new rule, the court had delayed its effective date two weeks, pushing it from Feb. 26 to March 11.

(SHRM Online and Reuters)