In October 2023, the National Labor Relations Board (NLRB) issued its new Final Rule addressing and expanding the proper standard for determining joint employment status under the National Labor Relations Act (NLRA). This was an important rule governing questions like:

1. When can employees from a temporary staffing agency be included in the same bargaining unit as regular employees?
2. When can employees for two franchisees be considered as part of the same bargaining unit?

The Final Rule adopted in October made it much easier for the NLRB to find joint employment. Under the highly controversial standard set forth in the new Final Rule, two entities may be considered joint employers of a group of employees if each entity has the ability to share or codetermine one or more of the employees’ essential terms and conditions of employment, which are defined exclusively as:

1. Wages, benefits, and other compensation;
2. Hours of work and scheduling;
3. The assignment of duties to be performed;
4. The supervision of the performance of duties;
5. Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
6. The tenure of employment, including hiring and discharge; and
7. Working conditions related to the safety and health of employees.

By allowing for a finding of joint employment based merely on a finding that two entities share control over one of these seven terms and conditions of employment, joint employment will not be difficult to find in many situations. This Final Rule replaced the prior Trump NLRB joint employment standard that required that a company be found to have exercised “substantial direct and immediate control” over the most important elements of the worker’s job to be considered a joint employer.  

The New Final Rule issued last October was scheduled to become effective today. However, last Friday night, Judge J. Campbell Barker, United States District Judge for the Eastern District of Texas, appointed by President Trump in 2019, issued his summary judgment opinion in a case filed by the United States Chamber of Commerce striking down the Final Rule.  

Judge Barker found that the Final Rule “would treat virtually every entity that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly . . . essential terms and conditions of employment.” While the Texas district court fell short of holding that the Final Rule was arbitrary and capricious, it held that the Final Rule failed to “resolve ambiguities in a way making the rule more predictable than common law adjudication.  . . .[and] will likely promote labor strife rather than peace by forcing an underdefined category of entities to take a seat at a bargaining table and negotiate over a multitude of influences that may otherwise be presented (and resolved) only through the invisible hand of the marketplace.” Judge Barker found that the Final Rule is unlawful due to its “sweep beyond common law limits” and issued an injunction prohibiting the NLRB from enforcing it.  

This is a big victory for employers, as many were fearful of the confusion and management challenges of dealing with organizing drives involving joint employers and the complexity of multi-employer bargaining that would likely ensue with such a broad definition of joint employment.  

However, the fight on this issue is far from over. Most practitioners, including this author, expect the NLRB to appeal Judge Barker’s decision to the Fifth Circuit Court of Appeal. Of course, appeals like this typically take at least a year.  

In the interim, unions and employers can continue to rely on the existing NLRB joint employment standard, which requires that multiple employers actually exercise direct and immediate control of the essential terms and conditions of employment (wages, benefits, hours, hiring, discipline, firing, supervision) before joint employment can be established. In addition, employers that use temporary labor or staffing firms, staffing agencies, and franchisors should all analyze their practices and review their agreements to look at how they currently address control over terms and conditions of employment, and consider whether to modify their practices and/or renegotiate their agreements, to put themselves in the best position of avoiding being labeled as a “joint employer.”