NLRB Abandons 2023 Joint Employer Rule

The National Labor Relations Board (NLRB) will no longer try to resuscitate its 2023 joint employer rule—a rule that a federal district court struck down earlier this year. We’ve gathered articles on the news from SHRM Online and other outlets.

Dismissal of Challenge Sought

The NLRB on July 19 filed a motion with the 5th U.S. Circuit Court of Appeals, seeking dismissal of its challenge of the district court ruling. The NLRB said the board believes the rule is lawful but wants “to consider options for addressing the outstanding joint employer matters before it.”

The board may try to return to case adjudication as the method for setting the test for joint employment. That’s how the board handled the joint employment test until 2020, when the board issued a regulation. That rule said that one company can be considered the employer of another firm’s employees only if it exercises direct and immediate control over the most important aspects of a worker’s job.

(Bloomberg Government)

District Court Decision

A federal district court in Texas blocked the 2023 rule on March 8, deciding it was 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.

Congress passed a resolution to overturn the rule, which President Joe Biden vetoed on May 3. In a message to Congress, Biden said the blocked rule “would prevent companies from evading their bargaining obligations or liability when they control a worker’s working conditions—even if they reserve such control or exercise it indirectly through a subcontractor or other intermediary.”

Even under the 2020 standard, which continues to be the rule in effect, employers may want to consider the risk that they can still be found to be a joint employer if they exercise substantial direct and immediate control over essential terms and conditions of employment. SHRM supports the 2020 joint employer rule.

(Reuters, Ogletree Deakins, Nation’s Restaurant News, and SHRM Online)

SHRM Urged Biden Not to Veto Resolution to Overturn Rule

There has been significant opposition from stakeholders to the NLRB’s 2023 joint employer rule “due to the lack of clarity and consistency regarding the criteria for establishing a joint employment relationship,” said Emily M. Dickens, SHRM chief of staff, head of government affairs, and corporate secretary. She noted that SHRM was concerned with the broad drafting of the rule, which created a joint employer relationship through indirect or reserved control over a third party by organizations.

(SHRM Online)