July 25, 2024 | Category: Legislative Updates, NLRB | Tags: ,

On Friday, July 19th, the National Labor Relations Board (NLRB) voluntarily dismissed its appeal of the 5th Circuit’s ruling from the District Court in Texas. The NLRB had been appealing the original District Court’s decision, which vacated the NLRB’s joint employer rule issued a year prior. This ruling had reversed the NLRB’s previous standard, which allowed two business entities (such as franchises, staffing firms, and construction contractors) that “indirectly” control or supervise employees via labor law policies or procedures to be considered joint employers.

Consequently, this made it easier for an employee of a franchise to include both the franchisee and the franchisor in lawsuits alleging violations of employment laws. The NLRB, in its filing, stated, “the Board would like the opportunity to further consider the issues identified in the district court’s opinion in the first instance.”

What are the Implications of this Decision on Employers?

For now, this decision means that the 2023 standard has been abandoned, and employers should adhere to the existing 2020 joint employer standard until further notice. This does not mean the joint employer law was vacated.

Instead, an employee suing a franchisee and a franchisor needs to demonstrate that both the franchisee and franchisor were sharing control and supervision of the employee’s activities, unlike the 2023 NLRB ruling, which required showing direct influence or control of an employee by two or more business entities.

Background on the NLRB Joint Employer Rule

The NLRB originally issued its proposed final rule in October 2023, which would have made it easier for companies to be considered joint employers. Under this proposed final rule, companies could be considered joint employers if they had the authority to control essential terms and conditions of employment, regardless of whether such control was exercised directly or indirectly. However, on March 8, 2024, a Texas court vacated the rule, finding it overly broad. The NLRB challenged this vacating of its rule but withdrew its appeal on July 19th.

Future Prospects after NLRB Withdrawal

While the NLRB has withdrawn its appeal, it is expected to update the vacated standard with a new final rule that will replace the existing one. This new rule will likely support employees claiming joint employment but will be designed to withstand appeals or reversals more effectively than the 2023 rule. In its withdrawal, the NLRB indicated its continued support for the legality of its final rule and is considering options to address outstanding issues. Therefore, future litigation on the enforceability of this rule is possible.

NAE will Keep You Up to Date

Nevada Association of Employers will continue to monitor this situation and provide updates on any new joint employer rule as necessary. For now, employers should follow the 2020 joint employer standard. If you have any questions regarding joint employment, please contact our HR Hotline.

To read more about this, view our past articles: