Judge’s decision not the end for NLRB’s joint employer efforts, attorneys say

The National Labor Relations Board has options as it decides how to move forward with revising joint employer regulations under the National Labor Relations Act, according to attorneys who spoke to HR Dive.

NLRB’s latest joint employer final rule had been set to take effect March 11 before it was vacated by a federal judge of the U.S. District Court for the Eastern District of Texas days earlier. The court held that the rule was “arbitrary and capricious” in its removal of the prior 2020 joint employer rule, promulgated during the Trump administration.

At press time, the Board has not yet signaled a clear response to the decision. In a March 9 press release, NLRB Chairman Lauren McFerran said that the ruling “is a disappointing setback, but 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.” McFerran added that NLRB is reviewing the decision and “actively considering next steps in this case.”

However, it is “pretty clear” that the Board — under the leadership of McFerran and General Counsel Jennifer Abruzzo — will continue to pursue joint employer issues, said Steve Swirsky, member of the firm at Epstein Becker Green.

Swirsky added that “there’s a very high likelihood” NLRB will appeal the Texas ruling in the near future. And in the meantime, he said it is likely that the agency will conduct additional joint employer rulemaking.

“Don’t treat this as the final word by any means,” Swirsky said with respect to how employers should approach the situation. “Recognize that the board and general counsel appear to be committed to a much broader standard of determining joint employer status.”

Status of final rule

NLRB’s final rule, originally published in October 2023, sought to clarify that an entity may be considered a joint employer of another entity’s employees if the two share or codetermine essential terms and conditions of employment. The rule also specified that joint employers may possess or exercise direct or indirect control over one or more of those terms.

It’s been nearly a decade since the Board — under the Obama administration in 2015 — handed down its decision in Browning-Ferris Industries. That decision articulated the joint employer framework under which the Board would consider reserved authority to control employment terms and conditions as relevant to a joint employer inquiry, even if that authority is not exercised.

Years of litigation and political shifts later, a Republican majority issued the 2020 rule to overturn Browning-Ferris. This updated NLRB’s joint employer standard to hold that an entity’s control must be direct and immediate. Then, less than two years after the 2020 presidential election, the Board again issued a proposed rule to essentially return to the Browning-Ferris standard.

The Texas decision “emphasizes the uncertainty from a legal and policy aspect of the joint employer standard,” said Stacey Chiu, senior associate at Michelman & Robinson. “For our clients asking about it, unfortunately we’re sort of in a holding pattern.”

Chiu said there have been concerns especially among clients that may not necessarily currently have a joint employer relationship with a given set of workers but that could be affected by the 2023 rule. “We definitely saw this with our retail and staffing clients,” Chiu said, adding that the same is true for some of those operating within a franchisor-franchisee relationship or contractor model.

“Just because there has been a lot of uncertainty doesn’t mean this isn’t a very important issue that could have a large impact on [employers’] operations or businesses,” she continued. “It’s really important to keep an eye on this issue so that they’re not caught on the wrong side of compliance when a final decision is made.”

Back to a case-based approach?

One of NLRB’s options could be to engage in rulemaking that would essentially nullify the 2020 rule, Swirsky said, which would allow the agency to revisit joint employer issues via case-based decisions; “That’s one of the things I would anticipate.”

It’s the same approach that the Obama-era Board took in Browning-Ferris, but it depends on the general counsel to present the Board with a case that allows the majority to articulate its point of view on joint employer standards. It would also be an approach that is easier for future Boards to reject, a key point to remember given the upcoming 2024 presidential election, Swirsky said.

In the meantime, he added that employers will need to recognize the current Board’s commitment to a broader standard for determining joint employer status. In turn, organizations may need to think about the structure of their relationships with other firms and establish a set of facts that allow them to defend the position that they are not exercising control.

“Whatever you had as your playbook a year ago or earlier, it’s no different,” Swirsky said. “You can’t sit and wait. You need to be proactive.”