{"id":9927,"date":"2026-03-02T16:27:45","date_gmt":"2026-03-02T16:27:45","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/court-strikes-down-the-nlrbs-new-expansive-joint-employer-rule\/"},"modified":"2026-03-04T10:09:50","modified_gmt":"2026-03-04T10:09:50","slug":"court-strikes-down-the-nlrbs-new-expansive-joint-employer-rule","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/court-strikes-down-the-nlrbs-new-expansive-joint-employer-rule\/","title":{"rendered":"Court Strikes Down the NLRB\u2019s New Expansive Joint Employer Rule"},"content":{"rendered":"
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July 23, 2024 Update.<\/strong> On July 19, 2024, the National Labor Relations Board voluntarily dismissed its appeal of the U.S. District Court for the Eastern District of Texas\u2019 March 8, 2024 order vacating the Board\u2019s final joint employer rule. The Board stated that it \u201cremains of the opinion that its 2023 Rule meets the procedural and substantive requirements of the Administrative Procedure Act and the National Labor Relations Act. Given the litigation posture of the Rule, however, the Board would like the opportunity to further consider the issues identified in the district court\u2019s opinion in the first instance.\u201d \u00a0The voluntary dismissal of the appeal means the 2023 joint employer rule will not proceed at this time.<\/p>\n

Summary<\/h3>\n

Shortly prior to its going into effect, a federal court struck down the Final Rule issued by the National Labor Relations Board (\u201cNLRB\u201d) in October 2023 (\u201c2023 Rule\u201d) that made it much easier for the NLRB to find joint employment under the National Labor Relations Act (\u201cNLRA\u201d).\u00a0 As a result of this decision, the more restrictive Rule issued by the NLRB during the Trump administration (\u201c2020 Rule\u201d) remains the NLRB\u2019s operative joint-employer standard.\u00a0 Under the 2020 Rule, a joint employer must exercise \u201csubstantial and immediate control\u201d over the employee\u2019s essential terms and conditions of employment to be considered a joint employer.<\/p>\n

The Joint-Employment Standard in Flux<\/h3>\n

The recent court decision is the latest in a long-running saga concerning the NLRB\u2019s position on the joint-employment standard.<\/p>\n

In its 2015 decision in Browning-Ferris Industries of California<\/em>, the NLRB abandoned long-standing common-law precedent, holding that a joint-employer relationship may be found merely based on the putative joint employer\u2019s right to control terms and conditions of employment, irrespective of whether such control is directly exercised or exercised at all. Our memorandum on that decision can be found here.\u00a0 The NLRB then sought to reverse this standard in December 2017 and return to the original, long-standing test that required exercise of \u201cdirect and immediate\u201d control over the terms and conditions of employment.\u00a0 The December 2017 decision was reversed in February 2018 due to an ethics controversy.\u00a0 Our post on the reversal can be found here.<\/p>\n

In February 2020, the NLRB promulgated the 2020 Rule, under which an employer will be deemed a joint employer under the NLRA only when the employer \u201cpossess[es] and exercise[s] such substantial direct and immediate control\u201d over one or more essential terms or conditions of employment of another employer\u2019s employees. Our post on the 2020 Rule can be found here.\u00a0<\/p>\n

Then, in September 2022, during the Biden administration, the NLRB released a Notice of Proposed Rulemaking that would rescind and replace the 2020 Rule.\u00a0 Under the proposed rule, entities would be deemed joint employers if they \u201cshare or codetermine\u201d essential terms or conditions of employment, even if one of the employers exercises only \u201cindirect\u201d control (\u201c2022 Proposed Rule\u201d). Our post on the 2022 Proposed Rule can be found here.<\/p>\n

The 2023 Rule<\/h3>\n

On October 27, 2023, the NLRB issued its final 2023 Rule.\u00a0 Under the 2023 Rule, \u201ca common-law employer of particular employees shares or codetermines those matters governing employees\u2019 essential terms and conditions of employment if the employer possesses the authority to control (whether directly, indirectly, or both) or exercises the power to control (whether directly, indirectly, or both) one or more of the employees\u2019 essential terms and conditions of employment, regardless of whether the employer exercises such control or the manner in which such control is exercised.\u201d<\/p>\n

The 2023 Rule contains an exhaustive list of categories of terms and conditions of employment that will be considered \u201cessential\u201d for purposes of the joint-employer standard.\u00a0 The \u201cessential terms and conditions of employment\u201d are defined exclusively as:\u00a0 (1)\u00a0wages, benefits, and other compensation; (2)\u00a0hours of work and scheduling; (3)\u00a0the assignment of duties to be performed; (4)\u00a0the supervision of the performance of duties; (5)\u00a0work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; (6)\u00a0the tenure of employment, including hiring and discharge; and (7)\u00a0working conditions related to the safety and health of employees.<\/p>\n

The 2023 Rule states that it \u201cincorporates the common law\u2019s broad focus on all of the incidents of the relationship in examining whether an entity is a common-law employer of particular employees and narrows the focus of the Board\u2019s inquiry to essential terms and conditions of employment in the context of the specific rights and obligations provided by the plain language of .\u00a0.\u00a0. the Act.\u201d<\/p>\n

U.S. Chamber of Commerce\u00a0<\/em><\/strong>v.\u00a0NLRB<\/em><\/strong><\/h3>\n

On November 16, 2023, the NLRB announced it would delay the effectiveness of the 2023 Rule from December 26, 2023 to February 26, 2024 in light of pending legal challenges.<\/p>\n

One such challenge was filed by the U.S. Chamber of Commerce and a coalition of business groups in the U.S. District Court for the Eastern District of Texas.\u00a0 The Court further postponed the 2023 Rule\u2019s effective date to March 11, 2024.\u00a0 On March 8, 2024, Judge J. Campbell Barker granted the plaintiffs\u2019 motion for summary judgment and invalidated the 2023 Rule in a 31-page opinion. Judge Barker held that the 2023 Rule was contrary to law as it exceeded common-law principles of joint-employer status, and that the NLRB\u2019s decision to rescind its 2020 Rule was arbitrary and capricious.\u00a0 The Court noted that the 2023 Rule \u201cwould 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, at least one of the specified \u2018essential terms and conditions of employment.\u2019\u201d This ruling effectively restores the 2020 Rule.<\/p>\n

NLRB Chairman Lauren McFerran released a statement shortly after the ruling, indicating \u201c[t]he District Court\u2019s decision to vacate the Board\u2019s rule is a disappointing setback, but it is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts.\u201d\u00a0According to McFerran, the NLRB \u201cis reviewing the decision and actively considering next steps in this case,\u201d including whether to appeal the decision or to attempt to issue a new rule.<\/p>\n<\/p><\/div>\n\n\n

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