Joint Employment Quandary: Navigating NLRB's Expansive New Rule

Partner Matthew Fontana presented a CLE with two other attorneys that was focused on the National Labor Relations Board’s (NLRB’s) new and expansive final rule setting the standard for joint employment. After providing a history of the NLRB’s joint employer standard, Matthew discussed which employers the final rule applies to and how the new final rule modifies the 2022 proposed rule. Matthew detailed joint employment standards under other federal agencies, such as the Department of Justice and the Equal Employment Opportunity Commission, and then covered best practices to follow for employers to remain in compliance, including contractual considerations and how to best navigate joint employment standards under various federal statutes.

March 15, 2024 Update:

 Just days before the new NLRB joint employer rule was set to go into effect, a federal court sitting in the Eastern District of Texas invalidated the rule as contrary to law because it exceeded the bounds of common law.

The court criticized the rule for two key reasons. First, the rule — though designed to be a two-step test — was a single-step test in practice because the second test would always be satisfied if the first was met. Second, the rule would “treat virtually every entity that contracts for labor as joint employers” because practically all third-party labor contracts have terms that impact essential terms and conditions of employment.

Had the rule not been invalidated, it would have impacted both union and nonunion employers alike. Additionally, and as explained by the court, the rule likely would have resulted in increased findings of joint employment status for businesses using outside labor or that benefit from such labor — such as franchisors and franchisees.

Employers that made changes in anticipation of this rule should be careful not to revert to their past practices just yet as this decision is expected to be appealed to the Fifth Circuit. Even if that appeal is not successful, we expect that the NLRB will look to promulgate an amended version of the rule in the future.

Faegre Drinker’s labor management relations team will continue to monitor this and other NLRB-related news. If you have any questions or need advice, please contact your Faegre Drinker contact or Matt Fontana.