March 11, 2024Client Alert

Federal District Court Strikes Down National Labor Relations Board Joint Employer Rule

On March 8, 2024, Judge J. Campbell Barker of the Eastern District of Texas, issued an order vacating the National Labor Relations Board (NLRB) 2023 joint employer rule. This applies nationwide. As detailed in our earlier alert, the NLRB was set to implement its final rule on December 26, 2023. However, the regulation was postponed with an effective date of March 11, 2024.

The federal court’s order takes issue with the seemingly broad impact of the NLRB’s 2023 joint employer rule. Judge Barker reasoned that under the 2023 rule, “if an entity exercises or has the power to exercise control (even indirect control) over at least one essential term, the entity is an employer, jointly with workers’ undisputed employer.” Therefore, “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.’”

Additionally, the order found the NLRB’s reason for rescinding the 2020 joint employer rule was arbitrary and capricious. Now, the 2020 joint employer rule remains law. This is a welcome reprieve to employers, as the 2020 joint employer rule is considered more employer friendly.

NLRB Chairman Lauren McFerran stated that the NLRB is “reviewing the decision and actively considering next steps in this case.” The NLRB can appeal this decision to the Fifth Circuit Court of Appeals.  The federal court’s rebuke of the NLRB is not unexpected and is another in a growing line of cases where the courts are limiting the NLRB’s attempted pro-union and pro-employee decision-making.  If you have any questions about how this ruling impacts your business, please contact your Michael Best team.

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