Tuesday, May 21, 2024

Federal Court Overturns NLRB Rule Expanding ‘Joint Employer’ Criteria, Impacting Millions of Workers

A Texas federal judge has stopped a proposed rule from the National Labor Relations Board (NLRB) in its tracks. 

This rule would have expanded the circumstances under which two businesses could be designated as “joint employers,” potentially changing the landscape for labor negotiations across the country. 

The decision constitutes a significant blow to the NLRB’s efforts to facilitate the unionization of workers nationwide.

The Blocked Rule

Federal Court
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The disputed rule in question was set to establish new stipulations for when and how two companies might fall under the designation of “joint employers” during labor negotiations. 

Its implementation would have been a significant deviation from the current rule—established by an overwhelmingly Republican board in 2020—which notably excludes large corporations like McDonald’s from qualifying as joint employers because their workers are primarily employed by individual franchises.

The proposed expansion of the definition would stipulate that companies could be considered joint employers only if they hold the ability to exert direct or indirect control over at least one aspect of employment, such as employee wages and benefits, hours of operation, duty assignments, work rules, or hiring processes.

The NLRB, in favor of the change, contended that the present rule presented a loophole for corporations to evade their legal obligations to negotiate with workers.

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Business Community Revolt

A coalition of business organizations, including the U.S. Chamber of Commerce, the American Hotel and Lodging Association, the International Franchise Association, and the National Retail Federation, fought back against the rule. 

They lodged a case in the Eastern District of Texas in November, arguing that the new rule would disrupt years of legal precedent and potentially hold companies accountable for workers they did not directly employ in workplaces they did not own.

Judgment Day

Federal Court
Credits: DepositPhotos

The recent ruling by U.S. District Court Judge J. Campbell Barker granted a summary judgment to the plaintiffs, deeming the controversial NLRB rule “contrary to law” and labeling it “arbitrary and capricious.” 

Barker took exception to the broad scope of the new conditions proposed by the NLRB rule, highlighting in particular that they exceeded the confines of common law.

Reacting to the court’s decision, the NLRB responded by saying that while they were reviewing the decision, they were already contemplating their next move. 

NLRB’s Chairman, Lauren McFerran, called the court’s decision a “disappointing setback” but clarified that it’s “not the last word on our efforts to return our joint-employer standard to the common-law principles that have been endorsed by other courts.”

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What Comes Next

This case serves as an important notice for large corporations, as it signals that their status and obligations in labor disputes could potentially change with the successful passage of the rule. 

The NLRB, despite this setback, has made it clear that it will continue to push for its proposed changes.

This fluid situation will require continued monitoring as the NLRB mulls its next actions. The implications of this development will reverberate broadly, affecting corporate employer responsibilities, worker empowerment, and the dynamic of labor negotiations. 

As efforts to reshape the joint-employer standard continue, businesses and workers alike will need to stay tuned for the potentially transformative changes ahead.

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