On July 19, 2024, the National Labor Relations Board (NLRB) filed an unopposed motion voluntarily dismissing a pending appeal before the United States Court of Appeals for the Fifth Circuit, which sought to reverse a March 8, 2024 decision by Judge J. Campbell Barker of the United States District Court for the Eastern District of Texas that vacated the NLRB’s attempt to substantially change the joint-employer standard applicable to all employers.
As we discussed in a previous First Alert ("District Court Vacates NLRB’s Joint Employer Rule," March 21, 2024), the NLRB issued a Final Rule rescinding and replacing the 2020 Trump-era employer-friendly joint-employer standard. Thereafter, the U.S. Chamber of Commerce filed a lawsuit challenging the new rule. On February 26, 2024, the district court issued a stay and later ruled against the implementation of the final rule. In May of this year, the NLRB filed an appeal of the district court’s decision. Two other lawsuits involving the joint-employer doctrine previously were also filed in the D.C. District Court but have been stayed and placed in abeyance by the Courts for the time being.
In its Notice of Voluntary Dismissal, the NLRB maintained that the 2023 rule meets the procedural and substantive requirements of both the Administrative Procedure Act and the National Labor Relations Act, despite the district court’s ruling to the contrary on both fronts. The NLRB indicated that it preferred to dismiss its appeal pending its further consideration of “the issues in the district court’s opinion in the first instance,” and noted that there were several rulemaking petitions on its current docket regarding the joint-employer issue, presumably allowing the Board to address the same issues at a later time.
It remains to be seen whether the NLRB’s dismissal here will affect the other cases currently on hold in D.C. In any event, employers now will be subject to the 2020 rule. Under this rule, an employer will be deemed a joint employer under the National Labor Relations Act, and thus subject to possible bargaining obligations and unfair labor practices, only if it exercised “substantial direct and immediate control” over the essential terms and conditions of another entity’s employees. In contrast, the 2023 Biden-rule would allow an employer to be considered a joint employer if it shared or codetermined an employee’s essential terms and conditions of employment. A showing of “reserve or
indirect control,” as opposed to direct control, would be sufficient to establish joint-employer status under the 2023 rule.
Given the NLRB’s comments in its Notice to Dismiss, it may elect to engage in rulemaking on this issue at a later date, perhaps fashioning a rule to address the district court’s opinion in vacating the 2023 rule. Alternatively, the Board could address the joint-employer doctrine again by way of a decision in a case brought before the Board, which is more typically how the NLRB historically has changed its rules and standards. For now, employers remain subject to the 2020 rule but should remain vigilant as to any further developments on this issue critical to the use of contract or temporary employees, and as to the franchisor/franchisee relationship.
Calfee’s Labor & Employment attorneys are available to answer any questions as we continue to monitor developments from the NLRB impacting our clients’ workforces.
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