Texas Court Strikes Down NLRB’s Latest Joint Employer Rule
As most employers are aware, last year the National Labor Relations Board (NLRB or “the Board”) published its final rule on joint employer status (the “Final Rule”). The Final Rule focuses on shared control, including indirect and reserved control, and makes it much easier for businesses to be deemed joint employers who have joint responsibility for collective bargaining obligations and labor law violations. The Final Rule, which was originally scheduled to take effect on December 26, 2023, has been stayed twice since its publication — first by the NLRB, which extended the original implementation date to February 26, 2024, and then by the Eastern District of Texas, which ordered implementation to be stayed until March 11, 2024, pending the outcome of litigation over the legality of the Final Rule.
On March 8, 2024, the Eastern District of Texas issued its much-anticipated decision and vacated the Final Rule on grounds that (i) it is overbroad to the extent that joint employment status would have been based on indirect or reserved control alone, and (ii) the Rule’s rescission of the prior joint employment rule was arbitrary and capricious under the Administrative Procedures Act. In vacating the Final Rule, the court also restored the NLRB’s prior 2020 rule on joint employment, which required that two entities exercise “substantial direct and immediate control” over essential terms and conditions of employment in order to be deemed joint employers.
At present, the NLRB has indicated that it is reviewing the court’s decision and considering next steps. Regardless of whether the Board decides to immediately appeal the court’s decision or wait to see how other challenges to the Final Rule are resolved, it’s a safe bet that this is not the last we’ve heard from the NLRB on joint employment.
