NLRB Delays Joint Employer Rule Implementation
Because of several legal challenges, the National Labor Relations Board (NLRB) has extended the effective date of its new joint employer regulation.
Instead of taking effect on December 26, 2023, the rule will now go into effect on February 26, 2024.
As a reminder and as Connecting the Dots reported at the time, on October 26 the NLRB issued this final rule, which alters the standard for determining joint employer status under the National Labor Relations Act (NLRA). The updated rule, which replaces the 2020 regulation issued by the Trump administration, represents a drastic expansion to joint employer status for purposes of the NLRA. As such, it is likely to entangle franchise businesses, subcontractors, and other companies, including many small businesses, in labor disputes even if they have minimal or indirect control over the working conditions of another business’s employees and even if that control is never exercised.
The revised rule also could mean a business may be dragged into collective bargaining with another company’s workers. The NLRB has provided a fact sheet explaining the new rule. Click here to access that document.
Specifically, the NLRB’s revised final rule explicitly states that either possessing the authority to control one or more essential terms and conditions of employment (regardless of whether control is exercised) or exercising the power to control indirectly one or more essential terms and conditions of employment (regardless of whether the power is exercised directly) is sufficient to establish that an organization qualifies as a joint employer. These provisions mean that either indirect or reserved control may stand alone as basis for the finding of a joint employer relationship, and that the existence of either — without regard to the extent of the reserved or indirect control — indicates joint employer status.
The Coalition for Democratic Workplace (CDW), which MSCI is a member of, has opposed this new standard. In fact, the CDW had submitted comments to the NLRB that argued the rule “purports to be grounded in common law agency principles, but instead presents an ill-defined standard for joint employer liability that sinks to the level of an arbitrary and capricious agency action.”
As lawyers at Kelly Drye have explained, there currently are two legal challenges to the rule and one from Congress.
The Service Employees International Union wants to further expand the scope of the rule and has sued in court to do so while the U.S. Chamber of Commerce and a coalition of business groups have filed a suit in the Eastern District of Texas asking that court to block the rule. Additionally, a bipartisan group of lawmakers have introduced a resolution seeking to eliminate the new rule under the Congressional Review Act.
Read more about those challenges and the Biden administration’s updated joint employer regulation here.