Over six months have passed since the NLRB unveiled a final rule aimed at dramatically increasing the number of businesses that qualify as joint employers. The new rule would require only that two employers must share the mere ability to control “essential terms” within the workplace. In contrast, currently, these employers need “substantial direct and immediate control” to fit the definition. Will the new rule come to fruition? Let’s talk it out.
The key dangers of the new rule: (1) Increasing companies’ liability to workers who they do not employ during labor disputes and allegations of labor law violations; (3) Requiring an employer to bargain with a union that doesn’t even represent its workers; (3) Easing the path to unionization.
The impact would be felt throughout countless industries – including food service, healthcare, hospitality, retail, and construction – and perhaps render franchise models extinct by increasing liability for umbrella companies. In short, this could create such significant risk for employers that an untold number of job losses would be expected.
This wouldn’t be the first time that the joint employer definition has flip-flopped, but that detail doesn’t lessen the consequences to companies if the new rule is upheld and the fight against the rule is ongoing.
Currently, here is where the process stands on the legal front:
- The new final rule was initially set to take effect last December. That got pushed to Spring 2024 pending litigation that still isn’t resolved;
- The U.S. Chamber of Commerce swiftly sued to overturn the new rule, alleging that it “act[s] arbitrarily and capriciously in violation of the Administrative Procedure Act”;
- In March, a Texas federal judge agreed with the Chamber and blocked the rule, and the NLRB appealed the ruling to the 5th U.S. Circuit Court of Appeals;
- Additionally, Congress passed a joint resolution to overturn the final rule. Then Biden vetoed the measure, and the U.S. House failed to override the veto;
- And now we are waiting on the 5th Circuit’s decision.
Something to keep in mind: Last week, the Supreme Court overturned the Chevron doctrine, which could affect every federal agency, even the NLRB (and here’s what that means). We are also monitoring the high court’s SEC v. Jarkesy ruling, which previews how challenges against the NLRB’s constitutionality might go in the future. Either or both of these developments could potentially weaken the NLRB’s powers.
Are any union shenanigans ongoing? Oh yes. Some unions argue that there should be no joint employment rule, period. Namely, the SEIU and AFL-CIO want the current version of the rule to be rescinded but also to abandon the new final rule. In effect, they want arising issues to be solved through litigation “on a case-by-case basis.” That surely would not go well for employers, considering the court system is overburdened enough.
What can employers do while waiting? It’s worth evaluating how this new rule would impact specific businesses in cases of potential joint employment. Sadly, it’s not hard to imagine that an infinite number of business relationships will cease to exist as companies determine what joint-employment risks they are comfortable taking in the future.
