A federal judge has vacated a “joint employers” rule from the National Labor Relations Board (NLRB), determining that it would be “contrary to law,” as well as “arbitrary and capricious.” The ruling restores a 2020 regulation that makes it easier for employers with ties to franchisees or contract workers to escape liability under the National Labor Relations Act.

U.S. District Judge J. Campbell Barker in Tyler, Texas, deemed the rule invalid because it “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,” Reuters reported.

The NLRB’s Rule

The rule, issued by the NLRB in October, specified that a business could be considered a joint employer of a group of employees if it and another business have employment relationships with the employees and share or codetermine one or more of the employees’ essential terms and conditions of employment. These included:

  • wages, benefits and other compensation
  • hours of work and scheduling
  • assignment of duties
  • supervision and performance of duties
  • work rules and directions governing the manner, means and methods of performance, as well as grounds for discipline
  • tenure of employment
  • working conditions related to safety and health of employees

“The NLRB’s rule could involve promo’s independent contractors, because sometimes those independent contractor firms have their own employees,” says Maurice Norris, PPAI’s public affairs manager. “This rule mostly involves the franchise model and I also think there are implications for companies in our industry who have multiple affiliates for the same reason.”

Next Steps

Barker had previously ordered the rule’s effective date to be pushed back to March 11 after the NLRB had already delayed its effective date until February following a lawsuit from the U.S. Chamber of Commerce and a coalition of business groups challenging the rule.

“This ruling is a major win for employers and workers who don’t want their business decisions micromanaged by the NLRB,” says Suzanne P. Clark, president and CEO of the U.S. Chamber of Commerce. “It will prevent businesses from facing new liabilities related to workplaces they don’t control and workers they don’t actually employ. The U.S. Chamber will continue to fight back against the NLRB and its campaign to promote unionization at all costs.”

However, the NLRB has hinted that it will appeal the judge’s decision.

“The District Court’s decision to vacate the NLRB’s rule is a disappointing setback, but isn’t the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts,” says NLRB Chairman Lauren McFerran. “The agency is reviewing the decision and actively considering next steps in this case.”

Joint-Employer Status

Under the National Labor Relations Act (NLRA), any company found to be a joint employer may be held liable for the unfair labor practices of their co-employers.

As a result, “companies not only need to account for their own compliance with the NLRA, they must also attempt to ensure compliance by any company with whom they are determined to be a joint employer,” according to The National Law Review.

Now that the NLRB’s new rule has been vacated, joint-employer status will continue to be determined under the rule adopted in 2020

  • That rule states that an employer will be considered a joint employer only when it exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employees.