On March 8, 2024, the Federal District Court for the Eastern District of Texas vacated a new rule promulgated by the National Labor Relations Board on joint employment status (“New Rule”). This same Court previously issued a temporary pause on the New Rule’s effective date. In short, the Court’s March 8 decision invalidated the New Rule and held the NLRB’s current joint employment rule, which has been on the books since 2020 (29 CFR § 103.40), should remain in effect.
The U.S. Chamber of Commerce, among other industry groups, challenged the New Rule. They claimed the NLRB exceeded its authority when it created the New Rule because it was contrary to settled law on joint employment status and because the NLRB’s actions were allegedly “arbitrary and capricious.” Although the Court spent considerable time tracing the history of joint employment law, the NLRB’s current rule, and the New Rule, the Court’s analysis focused on specific components of New Rule. Namely, the provisions which relate to an alleged joint employer’s potential ability to control certain terms of the employment relationship — regardless of whether the control is actually exercised. The Court held the NLRB placed too much emphasis on these “potential control” factors. In striking down the New Rule, the Court’s order also has the effect of reinstating the NLRB’s current rule (which the NLRB attempted to invalidate vis-à-vis the New Rule).
Bottom Line
At this point, it is unclear whether the NLRB will appeal the Federal District Court’s ruling. What we do know is that the NLRB’s current rule will remain in effect, for now.
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