Dodgertown, USA – In a significant legal victory for American businesses, a federal judge on Friday evening overturned the National Labor Relations Board’s (NLRB) “joint employer” rule that was set to take effect that day. The rule would have modified the standard used to determine joint-employer status and revoked a previous 2020 version of the rule that was perceived to be more favorable for employers.
US District Judge J. Campbell Barker from the Eastern District of Texas declared in his final judgment that the new rule “would be contrary to law” and that rescinding the 2020 standard would be “arbitrary and capricious.”
The US Chamber of Commerce, which led the lawsuit against the rule resulting in the decision, lauded the ruling as a victory for American businesses, including franchises, contractors, employers, and workers. US Chamber of Commerce President and CEO Suzanne P. Clark stated that the ruling would prevent businesses from facing new liabilities related to workplaces they do not control and workers they do not employ.
On the other hand, NLRB Chairman Lauren McFerran expressed disappointment over the District Court’s decision but emphasized that it is not the final word on their efforts to return the joint-employer standard to common law principles endorsed by other courts. The NLRB is currently reviewing the decision and contemplating its next steps in this case.
The NLRB had introduced the final rule in October 2023 after proposing a rule in September 2022 and receiving over 13,000 comments. Senior living and care industry representatives had concerns about the new rule being much broader and more vague than the previous rule, increasing the risk for employers who contract with service providers and affecting franchise operators and others.
The NLRB’s new standard considers an entity as a joint employer if it shares or co-determines essential terms and conditions of employment with an employment relationship with the employees, even if they don’t exercise direct or indirect control. In contrast, the 2020 rule required substantial direct and immediate control over essential terms and conditions of employment, which the NLRB claims had no foundation in common law.
The rule faced opposition from senior living and other business-related groups, with associations such as the American Seniors Housing Association urging Congress to support a Congressional Review Act resolution nullifying the rule. Republican senators on the Senate Special Committee on Aging also expressed concerns about the rule’s negative impact on senior living arrangements.
Despite the opposition, 22 Democratic senators expressed support for the rule, considering it good policy that aligns with the intent behind the National Labor Relations Act.
The decision to overturn the NLRB’s joint employer rule marks a significant development in the ongoing battle between employers and workers’ rights advocates. The future of joint-employer standards and their impact on American businesses will likely continue to be a contentious issue moving forward.