On October 26, 2023, the National Labor Relations Board (NLRB) issued a final rule about the standard for determining joint-employer status under the National Labor Relations Act (NLRA). Under the final rule, an entity qualifies as a joint employer if each entity has an employee-employer relationship with the employees and they share or jointly determine one or more of the employees' essential terms and conditions of employment. These essential terms and conditions of employment include the following:

  • 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; and
  • Working conditions related to the safety and health of employees.

This final rule rescinds the 2020 final rule that the NLRB issued. Under the previous rule, entities were joint employers only if they had direct and immediate control over working conditions. Now even indirect or unexercised control can meet the joint employer standard. If entities are joint employers, then both employers must participate in collective bargaining if employees for one of the entities are unionized.

House Votes to Overturn NLRB Final Rule

On January 12, 2024, the U.S. House of Representatives voted 206 – 177 to pass a Congressional Review Act (CRA) to overturn the NLRB's new joint-employer rule. Republican legislators claim that the final rule endangers the franchise business model by increasing liability and creating legal uncertainty for small businesses. This uncertainty, they argue, leads to higher operational costs and fewer jobs for workers.

The CRA now moves to the Senate for a vote. President Joe Biden has vowed to veto the CRA even if the Senate passes it. According to the Biden administration, the final rule strengthens the right of workers to collective bargaining over fair wages and working conditions with every company.

Federal Court Stays Implementation of NLRB Final Rule

A coalition of business groups, including the U.S. Chamber of Commerce, sued the NLRB, alleging that the new joint employer rule is unlawful. These groups argue that the rule will exponentially expand businesses' liability for workers they do not employ and workplaces they do not manage. They also claim that the rule will cause a massive disruption to industries relying on temporary and contract labor.

Following a hearing, a federal judge recently issued a stay of the NLRB's implementation of the final rule, moving its effective date from February 26, 2024, to March 11, 2024. During the hearing, the judge expressed concerns about how the rule might complicate collective bargaining by involving several employers in negotiations with one union.

The case is U.S. Chamber of Commerce v. National Labor Relations Board, U.S. District Court for the Eastern District of Texas, No. 6:23-cv-00553.

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