The National Labor Relations Board ("NLRB") issued its 2023 rule to determine joint employer status entitled "Standard for Determining Employer Status" on October 26, 2023 (the "2023 rule"). This topic was previously covered in Butler Snow's workplace blog "The Definition of Joint-Employer Significantly Expanded by NLRB's Newly Established Standard." The 2023 rule provided that an entity may be considered a joint employer of a group of employees if each entity has an "employment relationship" with the employees and "shares or codetermines" one or more of the employees' essential terms and conditions of employment. The 2023 rule essentially stated that any entity that exercised control (indirect, direct, or both), shared or codetermined essential terms and conditions of employment would be found as a joint employer.
Eastern District of Texas Vacates the 2023 Rule
On March 8, 2024, U.S. District Judge J. Campbell Barker of the Eastern District of Texas vacated the NLRB's 2023 rule defining joint employment and preserved the NLRB's 2020 rule in the lawsuit of Chamber of Commerce et. al. v. National Labor Relations Board, et. al., No. 6:23-cv-00553 (E.D. Texas, Mar. 8, 2024). In vacating the 2023 rule, Judge Barker held that (1) the 2023 rule did not conform to standard common law limits in determining the joint employer relationship; and (2) the NLRB's recission of the 2020 rule was "arbitrary and capricious within the meaning of the [Administrative Procedure Act] case law."1 In addition, the Court found that in relation to indirect control, the 2023 rule was overbroad in that 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, at least one of the specified "essential terms and conditions of employment."2
The Current Rule
As a result of Judge Barker's decision, the NLRB's 2020 rule (the "Current Rule") is the operative rule in respect to joint employer relationships. The Current Rule effectively raised the standard for multiple companies to qualify as "joint employers." The Current Rule provides that an entity is a "joint employer of a separate employer's employees only if the two employers share or codetermine the employees' essential terms and conditions of employment.3 To meet this test as to another employer's employees, the second employer must possess and exercise direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees."4 Further, the Current Rule specifies that indirect or reserved control can be considered but are not by themselves, sufficient to show joint-employer status.5 As compared to the 2023 Rule, the Current Rule narrows the group of employers which can be classified as a "joint employer" when working with third party employers.
The Current Rule defines eight different "essential terms and conditions of employment" which hinge on determining whether an employer is a joint employer. These terms and conditions are:
- Wages
- Benefits
- Hours of Work
- Hiring
- Discharge
- Discipline
- Supervision
- Direction6
Employers who have any questions related to their status as a "joint employer" under the Current Rule should contact Butler Snow's Labor & Employment group for assistance. Employers should take solace in knowing that under the Current Rule, it is more difficult for them to classified as a "joint employer."
What's Next?
The NLRB will likely appeal Judge Barker's decision to the United States Court of Appeals for the 5th Circuit. However, for now, the 2020 "Current Rule" is in effect. Butler Snow will update its Workplace Blog if there are any changes as the result of an appeal.
Footnotes
1. Chamber of Commerce et. al. v. National Labor Relations Board, et. al., No. 6:23-cv-00553 (E.D. Texas, Mar. 8, 2024).
2. Id. at 25.
3. 29 C.F.R. § 103.40(a) (2020).
4. Id.
5. The 2023 rule provided that indirect or reserved control standing alone is sufficient to show joint-employer status.
6. 29 C.F.R. § 103.40(b) (2020).
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