Federal judge rules against joint NLRB employer regulation

A federal judge in Texas struck down the National Labor Relation Board’s (NLRB) new regulation for determining joint employer status under the National Labor Relations Act (NLRA). 

The judge ruled on March 8 that NLRB’s proposed joint employer status was invalid because it treated some companies as the employers of contract for franchise workers even when they lacked any meaningful control over their working conditions, impacting companies that use subcontractors, franchise arrangements, or other forms of third-party relationships such as staffing agencies. 

The NLRB is expected to appeal the decision to the New Orleans-based 5th U.S. Circuit Court of Appeals, the National Lumber and Building Material Dealers Association (NLBMDA) said.

The NLRB’s proposed regulation, which was set to take effect today on March 11, increases the liability of private businesses for violating labor laws and considers two or more companies to be joint employers if either can indirectly control essential terms and conditions of employment such as wages, benefits, other compensation, and work schedules.

If two companies are considered joint employers under the NLRA, both must bargain with the union that represents the jointly employed workers and both are potentially liable for unfair labor practices committed by the other.

NLBMDA previously submitted comments to the NLRB urging the agency to withdraw its proposed regulation. 

The court’s ruling means that the NLRB’s new regulation is blocked for the meantime and the 2020 NLRB joint employer standard, which relied on showing that another employer had direct and immediate control over another employer’s employees, is restored.