NLRB’s Joint Employer Rule Overturned

A federal judge in Texas vacated the National Labor Relations Board’s controversial new joint employer rule March 8.

The rule, which made larger companies and franchisors responsible and liable for the employment practices of their franchisees, suppliers, vendors, contractors, and subcontractors, was due to take effect March 11.

Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas called the rule “contrary to law,” adding that it was “arbitrary and capricious.”

In his decision, he noted that by establishing an array of new conditions to determine whether a company meets the standard of a joint employer, the NRLB’s rule exceeds “the bounds of the common law.”

The joint employer rule would also “likely promote labor strife, rather than peace, by forcing an underdefined category of entities to take a seat at a bargaining table,” Barker added.

“[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,” he noted.

‘Major Win’

U.S. Chamber of Commerce president and CEO Suzanne Clark praised the ruling, calling it “a major win for employers and workers who don’t want their business decisions micromanaged by the NLRB.”

“It will prevent businesses from facing new liabilities related to workplaces they don’t control, and workers they don’t actually employ,” she said in a statement.

The U.S. Chamber and a coalition of business organizations filed suit last November to block the rule.

U.S. Chamber CEO Suzanne Clark called the ruling “a major win for employers and workers.”

Employer groups called the new standard “catastrophic” when it was released in October.

The rule rescinded the previous standard adopted in 2020, which allowed that an employer could be a joint employer of another entity if it had direct and immediate control over the essential terms and conditions of employment.

The joint employer standard has been one of the most contested topics addressed by the NLRB, with its interpretation shifting every few years based on the board’s political composition.