Rulemaking Whiplash: Will The NLRB’s New Joint Employer Standard Withstand Legal Challenges?

by | Nov 27, 2023 | Courts, DOL, Labor Relations Ink, Labor Relations Insight, Legal, NLRB, SEIU, Union Organizing, Unions

The NLRB’s new(est) magic trick hopes to dramatically increase the number of businesses qualifying as joint employers, so the Board should have expected opposition to the final rule on joint employer status initially set for Dec. 26. 

Pushback is happening: The U.S. Chamber of Commerce and several business advocacy groups formed an industry coalition and sued to overturn the new rule while alleging that it “act[s] arbitrarily and capriciously in violation of the Administrative Procedure Act.” The coalition argued that a previous version of an expanded joint employer rule cost businesses billions in one year and led to “376,000 lost job opportunities.“

Quick recap: To trigger a joint employment finding under the new rule, only one of many “essential terms and conditions of employment” needs to be shared by two businesses. To emphasize how broad this standard would be, the actual control of these terms doesn’t matter. The businesses need only share the mere ability to control one of many conditions, including work rules, hiring, compensation, scheduling, and so on. 

To further heighten the absurdity, businesses could be held jointly liable for labor violations affecting workers they don’t even employ. Umbrella corporations could also be forced to bargain with a union that successfully organized a single franchise location

This would burden the food service industry, some hoteliers, retailers like Amazon (which uses some contracted drivers), healthcare providers (including senior-living facilities), and any business that hires temp workers or eases into the gig economy.

Jurisdiction might be everything: The industry coalition sued in a Texas federal court, where Trump-appointed judges are more amenable to a business perspective, and that’s undoubtedly why the NLRB requested that the case be transferred to the D.C. Circuit Court of Appeals. There, the Board would have a better chance of prevailing due to a complicated history that involves that court favoring an expanded definition.

If you’ve got whiplash, you’re not alone: There has been a lot of back and forth with the definition of “joint employer” over the past decade.  Businesses prefer a less wild-and-crazy standard that requires “substantial direct and immediate control” over employment terms.

How are unions responding to the newest rule? The SEIU, which also petitioned for the case to be reviewed in the D.C. Circuit, wants the NLRB to go even further to “expand the essential job terms that a company could control to be classified as a joint employer.” Hmm.

Sorting out this mess: The NLRB has nudged the newest rule’s effective date to Feb. 26, 2024, while litigation is ongoing. Additionally, several GOP lawmakers and Democratic Sen. Joe Manchin introduced a resolution to overturn the new rule, although Biden would surely veto the measure.

Hang tight: Employers understandably worry that the new rule will harm businesses. This is especially true for franchisees, who frequently adhere to only branding requirements and handle all employment terms independently. If umbrella corporations fear increased liability and step in to take over those terms, franchisees will lose the right to run their business.

All of this is happening, of course, to further the Biden agenda of easing the path to unionization in any way possible. Still, litigation will soon progress over the new rule, and hopefully, more clarification will arrive.

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