UPDATED: New Joint Employer Rule Delayed; State Court Pushes Effective Date

RECENT UPDATES: For updates on the status of this rule, click here. On February 22, a Texas district court effectively delayed the effective date of the National Labor Relations Board’s (NLRB’s) 2023 joint employer rule. The final rule was to go into effect on February 26th, 2024. However, the state court ruling pushed the effective date to March 11th, 2024. This is the second time that the effective date changed. Earlier, the NLRB made the joint employer rule effective on December 26th, 2023. Markedly, the 2023 joint employer rule rescinds the 2020 final rule. According to the NLRB, the previous rule set a higher threshold and included joint employment descriptions contrary to the statute and Congressional intent. This made it easier for actual joint employers to avoid joint employer status. The new final rule follows recent employee-friendly decisions from the current NLRB. In September 2023, the NLRB expanded protected concerted activity and other Section 7 protections due to two rulings.

Background and Rescission of the Previous Rule

In March 2020, the NLRB’s previous final rule provided updated guidance for determining joint employer status in specific situations. Specifically, the rule applied when an employee performed work for their employer that simultaneously benefited another individual or entity. Additionally, the rule included guidance on identifying factors that would not be relevant when determining joint employer status. The 2020 final rule stated that a putative joint employer must “possess and exercise . . . substantial direct and immediate control” over essential terms and conditions of employment. Notably, the rule failed to consider any Department of Labor (DOL) joint employment guidance issued before 2017. The NLRB noted that the rule’s stipulations had no foundation in common law. Given that, the NLRB rescinded the prior 2020 final rule.

New Joint Employer Final Rule

In adopting the latest joint employer final rule, the NLRB states that the new final rule more faithfully grounds the joint employer standard in established common law principles. In particular, the final rule considers a possible joint employer’s authority to control essential terms and conditions of employment:

• whether or not it exercises that control; and
• regardless of whether such control is direct or indirect.

Overall, the rule establishes that an entity may be a joint employer of a group of employees if each entity meets two criteria. Firstly, the entity has an employment relationship with the employees. Secondly, they share or codetermine one or more of the employees’ essential terms and conditions of employment. These terms and conditions of employment include the following:

• wages, benefits, and other compensation;
• work hours and scheduling;
• ability to assign duties;
• responsibility to supervise duties;
• work rules and directions governing the manner, means, and methods to perform duties, as well as discipline;
• the ability to hire and discharge employees; and
• control of working conditions related to workplace safety hazards.

Reason for the Enforcement Delay

As has been noted, a judge with the U.S. District Court for the Eastern District of Texas issued a stay order on the regulation. This order pushes back the effective date to 14 days after February 26. Accordingly, the new effective date is March 11th, 2024. According to Bloomberg Law, the judge is considering a lawsuit by the U.S. Chamber of Commerce and a coalition of business groups to block the rule permanently. The judge is also “weighing the NLRB’s argument that direct review of the measure belongs in a federal appellate court.” Subsequently, the judge’s ruling should occur before March 11.

Employer Takeaways

In conclusion, the 2023 joint employer rule guides parties regarding their rights and responsibilities under an established joint employer status. Additionally, employers may access further guidance on the final rule through the NLRB’s fact sheet. At the present time, the 2023 final rule is effective March 11th, 2024. Indeed, this date may change based on the Texas district court decision. However, the NLRB will, as of now, apply the new rule to cases filed after that effective date.