In October 2023, the National Labor Relations Board (“NLRB”) published a new rule relaxing the standard for determining whether two employers can be considered “joint employers” under the National Labor Relations Act (“NLRA”). That rule found that an entity could be considered a joint employer “if the employers share or codetermine those matters governing employees’ essential terms and conditions of employment” – i.e., that an employer “possess[ed] the authority to control (whether directly, indirectly, or both), or…exercis[ed] the power to control (whether directly, indirectly, or both), one or more of the employees’ essential terms and conditions of employment” (emphasis added).
This was a significant departure from the NLRB’s 2020 rule, which stated that an employer would be considered a joint employer “only if the two employers share or codetermine the employees’ essential terms and conditions of employment” (based on possessing and exercising substantial direct and immediate control over one or more essential terms or conditions of their employment) warranting a “finding that the entity meaningfully affects matters relating to the employment relationship with those employees”
The October 2023 rule was significant because joint employers under the NLRA may be obligated to participate in collective bargaining for the other entity’s employees and may be responsible for unfair labor practices committed by either employer, among other things. The October 2023 rule was scheduled to go into effect in early 2024.
In November 2023, the United States Chamber of Commerce and a coalition of business groups filed suit against the NLRB in the Eastern District Court of Texas, challenging the October 2023 rule as arbitrary and capricious, and therefore unlawful, under the Administrative Procedure Act (“APA”). The district court eventually ruled against implementation of the October 2023 rule – finding that it was overly broad and violated federal labor law – at which point the NLRB filed a notice of appeal with the United States Court of Appeals for the Fifth Circuit.
On July 19, 2024, the NLRB voluntarily dismissed that pending appeal before the Fifth Circuit. In its Notice of Voluntary Dismissal, the NLRB stated that it still believes that the October 2023 rule satisfies the requirements of the APA and the NLRA but that it wanted to further consider the issues raised by the district court in its decision blocking implementation of the October 2023 rule. Therefore, the October 2023 will not go into effect at this time.