Joint Employment and the National Labor
March 4, 2024
Relations Act
Jon O. Shimabukuro
Relations Act
Updated September 10, 2024
(R47943)
Jump to Main Text of Report
Summary
The National Labor Relations Act (NLRA) recognizes the right of most private sector employees The National Labor Relations Act (NLRA) recognizes the right of most private sector employees
Legislative Attorney
to engage in collective bargaining through their chosen representatives. By to engage in collective bargaining through their chosen representatives. By
“"encouraging the encouraging the
practice and procedure of collective bargaining,practice and procedure of collective bargaining,
”" the act attempts to mitigate and eliminate the the act attempts to mitigate and eliminate the
causes of labor-related obstructions that impair the free flow of commerce. The NLRA prohibits causes of labor-related obstructions that impair the free flow of commerce. The NLRA prohibits
employers from interfering with, restraining, or coercing employees in the exercise of their employers from interfering with, restraining, or coercing employees in the exercise of their
collective bargaining rights. The act also restricts employers from refusing to bargain collectively with the unions that collective bargaining rights. The act also restricts employers from refusing to bargain collectively with the unions that
represent their employees. represent their employees.
When individuals work pursuant to an arrangement that involves more than one entity, such as a contract that provides that
When individuals work pursuant to an arrangement that involves more than one entity, such as a contract that provides that
one business supply workers to another business, questions may arise concerning which entity should be considered the one business supply workers to another business, questions may arise concerning which entity should be considered the
“employer”"employer" for purposes of the NLRA. Because both businesses may exercise some control over the individuals for purposes of the NLRA. Because both businesses may exercise some control over the individuals
’' terms and terms and
conditions of employment, one may contend that they should be considered joint employers of the individuals. On October conditions of employment, one may contend that they should be considered joint employers of the individuals. On October
27, 2023, the National Labor Relations Board (NLRB) issued a final rule that 27, 2023, the National Labor Relations Board (NLRB) issued a final rule that
establishesestablished a new standard for determining a new standard for determining
whether two or more entities may be considered joint employers of a particular group of employees for purposes of the whether two or more entities may be considered joint employers of a particular group of employees for purposes of the
NLRA. Under the rule, an entity NLRA. Under the rule, an entity
maywould be considered a joint employer of another entity be considered a joint employer of another entity
’'s employees if the two s employees if the two
“"share or share or
codetermine the employeescodetermine the employees
’' essential terms and conditions of employment. essential terms and conditions of employment.
”" The rule The rule
permitspermitted the NLRB to make a joint- the NLRB to make a joint-
employer determination if an entity employer determination if an entity
possessespossessed the authority to control, either directly or indirectly, the employees the authority to control, either directly or indirectly, the employees
’' essential essential
terms and conditions of employment, even if the entity terms and conditions of employment, even if the entity
doesdid not actually exercise that authority. not actually exercise that authority.
Several groups, including the U.S. Chamber of Commerce, have opposed the rule for being “vague and expansive.” Some Members of Congress have also criticized the rule, and legislation providing for the rule’s disapproval under the Congressional Review Act—S.J. Res. 49 and H.J. Res. 98—has been introduced. The House of Representatives passed H.J. Res. 98 on January 12, 2024. This report provides background on joint employment and the NLRA and examines the NLRB’s new joint-employer rule.
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link to page 4 link to page 6 link to page 8 link to page 9 link to page 10 Joint Employment and the National Labor Relations Act
Contents
Joint Employment and Browning-Ferris Industries ........................................................................ 1
NLRB’s 2020 Joint-Employer Standard .......................................................................................... 3
NLRB’s 2023 Joint-Employer Standard .......................................................................................... 5
Considerations for Congress............................................................................................................ 6
Contacts
Author Information .......................................................................................................................... 7
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Joint Employment and the National Labor Relations Act
The 2023 joint-employer rule prompted legislative and judicial action. Congressional critics of the rule introduced legislation—S.J. Res. 49 and H.J. Res. 98—providing for its disapproval under the Congressional Review Act. H.J. Res. 98 passed both chambers but was vetoed by the President on May 3, 2024. Business groups, including the U.S. Chamber of Commerce, and the Service Employees International Union (SEIU) separately challenged the rule on various grounds. In March 2024, the U.S. District Court for the Eastern District of Texas in Chamber of Commerce of the United States v. NLRB vacated the rule, holding in favor of the plaintiff business coalitions that the rule was contrary to law because it exceeded the common law standard for identifying a joint employer. The SEIU's lawsuit, filed in the U.S. Court of Appeals for the District of Columbia Circuit, was later dismissed after the NLRB indicated that it would not appeal the court's decision and the union conceded that there were no grounds to consider further challenges to the rule. As a result of the district court's decision in Chamber of Commerce, a prior joint-employer rule adopted by the Board remains in effect. Under that rule, an entity will be considered a joint employer of a separate entity's employees only if it possesses substantial direct and immediate control over one or more essential terms and conditions of their employment.
This report provides background on joint employment and the NLRA and examines the NLRB's 2023 joint-employer rule. The report also reviews the district court's decision in Chamber of Commerce of the United States v. NLRB.
On October 27, 2023, the National Labor Relations Board (NLRB or Board) issued a final n October 27, 2023, the National Labor Relations Board (NLRB or Board) issued a final
rule that rule that
establishesestablished a new standard for determining whether two or more entities may be a new standard for determining whether two or more entities may be
O considered joint employers of a particular group of employees under the National Labor considered joint employers of a particular group of employees under the National Labor
Relations Act (NLRA).Relations Act (NLRA).
11 The Board The Board
contendscontended that the rule that the rule
“will would "more explicitly ground the joint-more explicitly ground the joint-
employer standard in common-law agency principles.employer standard in common-law agency principles.
”2"2 Under the rule, an entity Under the rule, an entity
maywould be be
considered a joint employer of another entityconsidered a joint employer of another entity
’'s employees if the two s employees if the two
“"share or codetermine the share or codetermine the
employees’employees' essential terms and conditions of employment. essential terms and conditions of employment.
”3"3 The rule The rule
permitspermitted the Board to make the Board to make
a joint-employer determination if an entity a joint-employer determination if an entity
possessespossessed the authority to control, either directly or the authority to control, either directly or
indirectly, the employeesindirectly, the employees
’' essential terms and conditions of employment, even if the entity essential terms and conditions of employment, even if the entity
does did not actually exercise that authority.
The Board's final rule on joint-employer status prompted judicial and legislative action. Shortly after its publication, the U.S. Chamber of Commerce and other business groups sued the Board, seeking declaratory and injunctive relief.4 On March 18, 2024, the U.S. District Court for the Eastern District of Texas granted the plaintiffs' request and vacated the rule, holding that the rule was contrary to law because it exceeded the common law standard for identifying a joint employer.5 Members of Congress who were also critical of the rule introduced legislation—S.J. Res. 49 and H.J. Res. 98—expressing disapproval under the Congressional Review Act.6 H.J. Res. 98 passed both chambers but was vetoed by the President on May 3, 2024.not actually exercise that authority. Several groups, including the U.S. Chamber of Commerce, have opposed the rule for being “vague and expansive.”4 Some Members of Congress have also criticized the rule.5 On January 12, 2024, the House of Representatives passed H.J. Res. 98, which provides for the rule’s disapproval under the Congressional Review Act.6 This report This report
provides background on joint employment provides background on joint employment
andunder the NLRA and the NLRA and
prior NLRB rules on joint employment and examines the NLRBexamines the NLRB
’s new's 2023 joint- joint-
employer rule. employer rule. The report also reviews the district court's decision in Chamber of Commerce of the United States v. NLRB. The Board has declined to appeal the March 2024 decision, and a joint-employer rule adopted by the Board in 2020 remains in effect.
Joint Employment and Browning-Ferris Industries
The NLRA recognizes the right of most private sector employees to engage in collective The NLRA recognizes the right of most private sector employees to engage in collective
bargaining through their chosen representatives.bargaining through their chosen representatives.
77 By By
“"encouraging the practice and procedure of encouraging the practice and procedure of
collective bargaining,collective bargaining,
”" the act attempts to mitigate and eliminate the causes of labor-related the act attempts to mitigate and eliminate the causes of labor-related
obstructions that impair the free flow of commerce.obstructions that impair the free flow of commerce.
88 The NLRA prohibits employers from The NLRA prohibits employers from
interfering with, restraining, or coercing employees in the exercise of their collective bargaining interfering with, restraining, or coercing employees in the exercise of their collective bargaining
rights.rights.
99 The act also restricts employers from refusing to bargain collectively with the unions that The act also restricts employers from refusing to bargain collectively with the unions that
represent their employees.represent their employees.
10
10
When individuals work pursuant to an arrangement that involves more than one entity, such as When individuals work pursuant to an arrangement that involves more than one entity, such as
working under a contract that provides that one business supply workers to another business, working under a contract that provides that one business supply workers to another business,
questions may arise concerning which entity should be considered the questions may arise concerning which entity should be considered the
“employer”"employer" for purposes of for purposes of
the NLRA. Because both businesses may exercise some control over the individualsthe NLRA. Because both businesses may exercise some control over the individuals
’' terms and terms and
conditions of employment, one may contend that they should be considered joint employers of conditions of employment, one may contend that they should be considered joint employers of
the individuals.
1 Standard for Determining Joint Employer Status, 88 Fed. Reg. 73,946 (Oct. 27, 2023) (to be codified at 29 C.F.R. pt. 103); NLRA, 29 U.S.C. §§ 151–169.
2 Standard for Determining Joint Employer Status, 88 Fed. Reg. at 73,946. 3 Id. 4 U.S. Chamber Opposes New NLRB Rule That Creates Confusion for Employers and Workers, U.S. Chamber of Com. (Oct. 26, 2023), https://www.uschamber.com/employment-law/u-s-chamber-opposes-new-nlrb-rule-that-creates-confusion-for-employers-and-workers.
5 See, e.g., Press Release, Rep. John James, James Joins Bicameral Group of Legislators in Introducing Resolution to Overturn the Biden Administration’s Joint Employer Rule (Nov. 9, 2023), https://james.house.gov/media/press-releases/james-joins-bicameral-group-legislators-introducing-resolution-overturn-biden.
6 H.R.J. Res. 98, 118th Cong. (2023). For background on the Congressional Review Act, see CRS In Focus IF12386, Defining Final Agency Action for APA and CRS Review, by Valerie C. Brannon.
7 29 U.S.C. § 151. 8 Id. 9 Id. § 158. 10 Id. § 158(a)(5).
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the individuals.
The NLRA does not define the term The NLRA does not define the term
“"joint employer.joint employer.
”11"11 In the absence of a statutory definition, as In the absence of a statutory definition, as
early as 1984, both the NLRB and courts attempted to articulate a joint-employer standard.early as 1984, both the NLRB and courts attempted to articulate a joint-employer standard.
1212 In In
2015, a majority of the Board, in reviewing whether to adhere to its then-existing standard or to 2015, a majority of the Board, in reviewing whether to adhere to its then-existing standard or to
adopt a new one, determined that two or more entities would be considered joint employers of a adopt a new one, determined that two or more entities would be considered joint employers of a
single work force if they were both considered employers under the common law definition and single work force if they were both considered employers under the common law definition and
“"if they share or codetermine those matters governing the essential terms and conditions of if they share or codetermine those matters governing the essential terms and conditions of
employment.employment.
”13
"13
The dispute in the 2015 case, The dispute in the 2015 case,
Browning-Ferris Industries, arose after a union petitioned to , arose after a union petitioned to
represent a group of workers that had been placed in one of Browning-Ferrisrepresent a group of workers that had been placed in one of Browning-Ferris
’'s recycling facilities s recycling facilities
by a staffing company, Leadpoint Business Services, pursuant to a labor services agreement. by a staffing company, Leadpoint Business Services, pursuant to a labor services agreement.
Under the agreement, Leadpoint was responsible for hiring the workers, determining their wages, Under the agreement, Leadpoint was responsible for hiring the workers, determining their wages,
and evaluating their performance. Browning-Ferris established the facilityand evaluating their performance. Browning-Ferris established the facility
’'s schedule of working s schedule of working
hours, could reject or hours, could reject or
“"discontinue the usediscontinue the use
”" of a Leadpoint worker at the facility for any reason, of a Leadpoint worker at the facility for any reason,
and retained other rights pursuant to the agreement.and retained other rights pursuant to the agreement.
14
14
In 2013, an NLRB regional director concluded that Browning-Ferris and Leadpoint were not joint In 2013, an NLRB regional director concluded that Browning-Ferris and Leadpoint were not joint
employers of the relevant employees.employers of the relevant employees.
1515 Under the then-governing standard—which had evolved Under the then-governing standard—which had evolved
since 1984—the NLRB based joint-employer status on whether an entity shared the ability to since 1984—the NLRB based joint-employer status on whether an entity shared the ability to
control or codetermine essential terms and conditions of employment, as well as whether the control or codetermine essential terms and conditions of employment, as well as whether the
entity actually exercised direct and immediate control over these employment matters.entity actually exercised direct and immediate control over these employment matters.
1616 The The
regional director determined that Browning-Ferris was not a joint employer because it did not regional director determined that Browning-Ferris was not a joint employer because it did not
control the daily work performed by the Leadpoint workers and its control over their terms and control the daily work performed by the Leadpoint workers and its control over their terms and
conditions of employment was neither direct nor immediate.conditions of employment was neither direct nor immediate.
The union appealed the regional directorThe union appealed the regional director
’'s decision to the NLRB, and a majority of the Boards decision to the NLRB, and a majority of the Board
’s 's five members not only reversed the decision but adjusted the existing joint-employer standard.five members not only reversed the decision but adjusted the existing joint-employer standard.
17 17 The NLRB acknowledged the evolution of its joint-employer standard, from an early decision in The NLRB acknowledged the evolution of its joint-employer standard, from an early decision in
1965 to its 1984 precedential decisions, which had established a finding of a joint employer 1965 to its 1984 precedential decisions, which had established a finding of a joint employer
where entities where entities
“"share or codetermine those matters governing the essential terms and conditions share or codetermine those matters governing the essential terms and conditions
of employment.of employment.
”18"18 The Board further acknowledged that 1984 The Board further acknowledged that 1984
“"marked the beginning of a 30-marked the beginning of a 30-
year period during which the Board—without any explanation or even acknowledgment and year period during which the Board—without any explanation or even acknowledgment and
without overruling a single prior decision—imposed additional requirements that effectively without overruling a single prior decision—imposed additional requirements that effectively
narrowed the joint-employer standard.narrowed the joint-employer standard.
”19
"19
The majority, in revisiting the joint-employer standard, described both the policies of the NLRA The majority, in revisiting the joint-employer standard, described both the policies of the NLRA
and the diversity of modern workplace arrangements before and the diversity of modern workplace arrangements before
“restating”"restating" the joint-employer the joint-employer
standard and returning to the traditional test previously used by the Board.standard and returning to the traditional test previously used by the Board.
2020 The Board, The Board,
11 See id. § 152. 12 See Standard for Determining Joint Employer Status, 87 Fed. Reg. 54,641 (Sept. 7, 2022) (to be codified at 29 C.F.R. pt. 103) (citing Browning-Ferris Industries of Pennsylvania, Inc., 259 NLRB 148 (1981), enforced, 691 F.2d 1117 (3d Cir. 1982)).
13 Browning-Ferris Industries of California, Inc., 362 NLRB 1599 (2015), aff’d in part, 911 F.3d 1195 (D.C. Cir. 2018). 14 Id. at 1600–04. 15 Browning-Ferris Industries of California, Inc., No. 32-RC-109684, 2013 WL 8480748 (N.L.R.B. Aug. 16, 2013). 16 See TLI, Inc., 271 NLRB 798 (1984); Laerco Transportation, 269 NLRB 324 (1984). 17 Browning-Ferris Industries of California, Inc., 362 NLRB at 1613. 18 Id. at 1608. 19 Id. 20 Id. at 1613.
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Joint Employment and the National Labor Relations Act
acknowledging the increased use of staffing arrangements and contingent workers in the modern acknowledging the increased use of staffing arrangements and contingent workers in the modern
workplace, observed:workplace, observed:
This development is reason enough to revisit the Board’s current
This development is reason enough to revisit the Board's current joint-employer joint-employer
standard.... If the current joint-employer standard is narrower than statutorily necessary, standard.... If the current joint-employer standard is narrower than statutorily necessary,
and if joint-employer arrangements are increasing, the risk is increased that the Board is and if joint-employer arrangements are increasing, the risk is increased that the Board is
failing in what the Supreme Court has described as the Boardfailing in what the Supreme Court has described as the Board
’s “'s "responsibility to adapt the responsibility to adapt the
Act to the changing patterns of industrial life.Act to the changing patterns of industrial life.
”21
"21
The majority concluded that the prior standard (i.e., that two or more entities would be considered The majority concluded that the prior standard (i.e., that two or more entities would be considered
joint employers of a single workforce if they are employers under common law and if they share joint employers of a single workforce if they are employers under common law and if they share
or codetermine matters governing the employeesor codetermine matters governing the employees
’' essential terms and conditions of employment) essential terms and conditions of employment)
would be the standard going forward.would be the standard going forward.
2222 The majority indicated that the Board would consider the The majority indicated that the Board would consider the
various ways in which joint employers may share control or codetermine the terms and conditions various ways in which joint employers may share control or codetermine the terms and conditions
of employment in its evaluation of the allocation and exercise of each employerof employment in its evaluation of the allocation and exercise of each employer
’'s control in the s control in the
workplace.workplace.
2323 The Board would no longer require that employers exercise direct control over these The Board would no longer require that employers exercise direct control over these
matters. Instead, joint-employer status could be established even if an employermatters. Instead, joint-employer status could be established even if an employer
’'s control over s control over
employment matters was indirect or reserved by contract.employment matters was indirect or reserved by contract.
2424 The majority explained that The majority explained that
consideration of an entityconsideration of an entity
’'s indirect or reserved control over workers was consistent with s indirect or reserved control over workers was consistent with
common law principles and that these principles recognize an individual as being employed by an common law principles and that these principles recognize an individual as being employed by an
entity if he or she is subject to its control or right to control. According to the majority, the entity if he or she is subject to its control or right to control. According to the majority, the
Board’Board's prior standard disregarded consideration of an entitys prior standard disregarded consideration of an entity
’'s right to control workers, s right to control workers,
particularly when that right is not exercised: particularly when that right is not exercised:
“"Just as the common law does not require that Just as the common law does not require that
control must be exercised in order to establish an employment relationship, neither does it require control must be exercised in order to establish an employment relationship, neither does it require
that control (when it is exercised) must be exercised directly and immediately.... that control (when it is exercised) must be exercised directly and immediately....
”25
"25
Applying the Applying the
“restated”"restated" joint-employer standard to the case at hand, the majority concluded that joint-employer standard to the case at hand, the majority concluded that
Browning-Ferris and Leadpoint were joint employers of the relevant workers.Browning-Ferris and Leadpoint were joint employers of the relevant workers.
2626 The majority The majority
identified examples of direct, indirect, and reserved control over the Leadpoint workers shared by identified examples of direct, indirect, and reserved control over the Leadpoint workers shared by
both Browning-Ferris and Leadpoint, including Browning-Ferrisboth Browning-Ferris and Leadpoint, including Browning-Ferris
’'s unilateral control over certain s unilateral control over certain
facility functions that had a direct connection to work performance, Browning-Ferrisfacility functions that had a direct connection to work performance, Browning-Ferris
’s 's requirement that all applicants pass drug tests, and Browning-Ferrisrequirement that all applicants pass drug tests, and Browning-Ferris
’'s retained right to reject any s retained right to reject any
worker referred by Leadpoint.worker referred by Leadpoint.
2727
NLRB’'s 2020 Joint-Employer Standard
In 2018, the U.S. Court of Appeals for the District of Columbia Circuit upheld the restated joint-In 2018, the U.S. Court of Appeals for the District of Columbia Circuit upheld the restated joint-
employer standard established in employer standard established in
Browning-Ferris Industries, indicating , indicating
“"that both reserved that both reserved
authority to control and indirect control can be relevant factors in the joint-employer analysis.authority to control and indirect control can be relevant factors in the joint-employer analysis.
”28 "28 The court remanded the case, however, contending that the NLRBThe court remanded the case, however, contending that the NLRB
’'s consideration of Browning-s consideration of Browning-
Ferris’Ferris's indirect control over the Leadpoint workers failed to distinguish between control over s indirect control over the Leadpoint workers failed to distinguish between control over
essential terms and conditions of employment and control that is part of essential terms and conditions of employment and control that is part of
“"ordinary third-party contracting relationships."29ordinary third-party
21 Id. at 1609. 22 Id. at 1613. 23 Id. 24 Id. at 1614. 25 Id. at 1612. 26 Id. at 1616. 27 Id. at 1616–17. 28 Browning-Ferris Industries of California, Inc., v. NLRB, 911 F.3d 1195, 1222 (D.C. Cir. 2018).
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Joint Employment and the National Labor Relations Act
contracting relationships.”29 Explaining the difference between these two forms of indirect Explaining the difference between these two forms of indirect
control, the court observed:control, the court observed:
To inform the joint-employer analysis, the relevant forms of indirect control must be those To inform the joint-employer analysis, the relevant forms of indirect control must be those
that “share or co-determine those matters governing essential terms and conditions of employment.”that "share or co-determine those matters governing essential terms and conditions of employment." By contrast, those types of employer decisions that set the objectives, basic By contrast, those types of employer decisions that set the objectives, basic
ground rules, and expectations for a third-party contractor cast no meaningful light on joint-ground rules, and expectations for a third-party contractor cast no meaningful light on joint-
employer status.employer status.
30
30
Remanding the case to the NLRB, the D.C. Circuit also indicated that the Board Remanding the case to the NLRB, the D.C. Circuit also indicated that the Board
“"should keep in should keep in
mind”mind" whether the retroactive application of a new joint-employer standard to Browning-Ferris whether the retroactive application of a new joint-employer standard to Browning-Ferris
and Leadpoint was appropriate.and Leadpoint was appropriate.
31
31
In 2020, following a change in the NLRBIn 2020, following a change in the NLRB
’'s composition, the Board concluded that a retroactive s composition, the Board concluded that a retroactive
application would be application would be
“"manifestly unjustmanifestly unjust
”" and indicated that there was and indicated that there was
“"no need to clarify and no need to clarify and
refine the joint-employer standardrefine the joint-employer standard
”" that had been applied by the NLRB regional director in that had been applied by the NLRB regional director in
2013.2013.
3232 The Board The Board
’'s decision effectively endorsed the use of a standard that emphasized direct s decision effectively endorsed the use of a standard that emphasized direct
and immediate control over conditions of employment.and immediate control over conditions of employment.
The NLRBThe NLRB
’'s 2020 decision came after the Board issued a new joints 2020 decision came after the Board issued a new joint
-employer rule in February employer rule in February
2020 that actually required a showing of direct and immediate control over individuals2020 that actually required a showing of direct and immediate control over individuals
’' terms or terms or
conditions of employment to be deemed a joint employer.conditions of employment to be deemed a joint employer.
3333 Under the Board Under the Board
’'s 2020 rule, an s 2020 rule, an
entity would be found to be a joint employer of a separate employersentity would be found to be a joint employer of a separate employers
’' employees employees
“"only if the two only if the two
employers share or codetermine the employeesemployers share or codetermine the employees
’' essential terms or conditions of employment. essential terms or conditions of employment.
”34 "34 The Board explained, however, that it had modified the definition of The Board explained, however, that it had modified the definition of
“"share or codetermineshare or codetermine
”" and and
that, under the revised joint-employer standard, an entity would be considered a joint employer of that, under the revised joint-employer standard, an entity would be considered a joint employer of
another entityanother entity
’'s employees (e.g., share or codetermine the employeess employees (e.g., share or codetermine the employees
’' essential terms or essential terms or
conditions of employment) if it possessed and exercised conditions of employment) if it possessed and exercised
“"substantial direct and immediate substantial direct and immediate
control”control" over one or more essential terms or conditions of their employment. over one or more essential terms or conditions of their employment.
3535 The rule further The rule further
defined defined
“"substantial direct and immediate controlsubstantial direct and immediate control
”" to mean to mean
“"direct and immediate control that has direct and immediate control that has
a regular or continuous effect on an essential term or condition of employment of another a regular or continuous effect on an essential term or condition of employment of another
employer’employer's employees.s employees.
”36"36 Control was not Control was not
“substantial”"substantial" if it was if it was
“"only exercised on a sporadic, only exercised on a sporadic,
isolated, or de minimis basis.isolated, or de minimis basis.
”37
"37
Unlike the Unlike the
Browning-Ferris Industries standard, which permitted a joint standard, which permitted a joint
-employer determination employer determination
even if an entity did not exercise direct control over employeeseven if an entity did not exercise direct control over employees
’' essential terms and conditions of essential terms and conditions of
employment, the 2020 rule required that an entity possess and exercise substantial direct and employment, the 2020 rule required that an entity possess and exercise substantial direct and
immediate control over these matters in order to be deemed a joint employer. Under the rule, only immediate control over these matters in order to be deemed a joint employer. Under the rule, only
this level of control this level of control
“"would warrant finding that the employer meaningfully affects matters would warrant finding that the employer meaningfully affects matters
relating to the employment relationship with those employees.”38
29 Id. 30 Id. at 1219-20. 31 Id. at 1222. 32 Browning-Ferris Industries of California, Inc., 369 NLRB No. 139 (N.L.R.B.) (2020). 33 Joint Employer Status Under the National Labor Relations Act, 85 Fed. Reg. 11,184 (Feb. 26, 2020) (to be codified at 29 C.F.R. pt. 103).
34 Id. at 11,235. 35 Id. 36 Id. at 11,236. 37 Id. 38 Id. at 11,235.
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Joint Employment and the National Labor Relations Act
relating to the employment relationship with those employees."38
Several businesses and trade associations generally expressed support for the 2020 rule, praising Several businesses and trade associations generally expressed support for the 2020 rule, praising
the adoption of clear criteria for determining joint-employer status.the adoption of clear criteria for determining joint-employer status.
3939 Some labor organizations, Some labor organizations,
however, criticized the rule. The American Federation of Labor and Congress of Industrial however, criticized the rule. The American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO), for example, described the rule as a Organizations (AFL-CIO), for example, described the rule as a
“"step backward in modernizing step backward in modernizing
our outdated labor laws.our outdated labor laws.
”40 "40
NLRB’'s 2023 Joint-Employer Standard
In 2022, a newly composed NLRB proposed the rescission of the 2020 joint-employer rule and In 2022, a newly composed NLRB proposed the rescission of the 2020 joint-employer rule and
the adoption of a new standard that was more consistent with the adoption of a new standard that was more consistent with
Browning-Ferris Industries..
4141 The The
Board contended that the 2020 rule inappropriately constrained the joint-employer standard by Board contended that the 2020 rule inappropriately constrained the joint-employer standard by
emphasizing an entityemphasizing an entity
’'s direct and immediate control over individualss direct and immediate control over individuals
’' terms or conditions of terms or conditions of
employment. The Board explained that a new standard was needed because employment. The Board explained that a new standard was needed because
“"the 2020 final rule the 2020 final rule
. . . repeats the errors that the Board corrected. . . repeats the errors that the Board corrected
”" in in
Browning-Ferris Industries..
4242 The Board also The Board also
observed that the NLRAobserved that the NLRA
’'s purposes of promoting collective bargaining and stabilizing labor s purposes of promoting collective bargaining and stabilizing labor
relations are best served when two or more entities that each relations are best served when two or more entities that each
“"possess some authority to control or possess some authority to control or
exercise the power to control employeesexercise the power to control employees
’' essential terms and conditions of employment are essential terms and conditions of employment are
parties to bargaining over those employeesparties to bargaining over those employees
’' working conditions. working conditions.
”43
"43
The NLRB finalized a new joint-employer standard on October 27, 2023.The NLRB finalized a new joint-employer standard on October 27, 2023.
4444 Under the new Under the new
standard, two or more employers of the same particular employees standard, two or more employers of the same particular employees
arewould be considered joint employers considered joint employers
of those employees if they of those employees if they
share or codetermineshared or codetermined those matters governing employees those matters governing employees
’' essential essential
terms and conditions of employment. The Board terms and conditions of employment. The Board
has defined the phrase defined the phrase
“"share or codetermine share or codetermine
those matters governing employeesthose matters governing employees
’' essential terms and conditions of employment essential terms and conditions of employment
”" to mean that to mean that
an employer an employer
“"possess[es] the authority to control (whether directly, indirectly, or both), or ... possess[es] the authority to control (whether directly, indirectly, or both), or ...
exercise[s] the power to control (whether directly, indirectly, or both), one or more of the exercise[s] the power to control (whether directly, indirectly, or both), one or more of the
employees’employees' essential terms and conditions of employment. essential terms and conditions of employment.
”45"45 The Board The Board
has also defined the also defined the
phrase phrase
“"essential terms and conditions of employmentessential terms and conditions of employment
”" to mean the following employment to mean the following employment
matters:matters:
(1) Wages, benefits, and other compensation;(1) Wages, benefits, and other compensation;
(2) Hours of work and scheduling;(2) Hours of work and scheduling;
(3) The assignment of duties to be performed;(3) The assignment of duties to be performed;
(4) The supervision of the performance of duties;(4) The supervision of the performance of duties;
(5) Work rules and directions governing the manner, means, and methods of the
(5) Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
(6) The tenure of employment, including hiring and discharge; and
performance of duties and the grounds for discipline;
39 See, e.g., News Release, Associated Builders and Contractors, ABC Applauds the NLRB Joint Employer Final Rule (Feb. 25, 2020), https://www.abc.org/News-Media/News-Releases/abc-applauds-the-nlrb-joint-employer-final-rule.
40 Press Release, AFL-CIO, Trump Administration’s Politicized NLRB Rule is an Attack on Working People’s Freedom (Feb. 25, 2020), https://aflcio.org/press/releases/trump-administrations-politicized-nlrb-rule-attack-working-peoples-freedom.
41 Standard for Determining Joint-Employer Status, 87 Fed. Reg. 54,641 (Sept. 7, 2022) (to be codified at 29 C.F.R. pt. 103).
42 Id. at 54,642. 43 Id. at 54,645. 44 Standard for Determining Joint Employer Status, 88 Fed. Reg. 73,946 (Oct. 27, 2023) (to be codified at 29 C.F.R. pt. 103
45 Id. at 73,956.
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Joint Employment and the National Labor Relations Act
(6) The tenure of employment, including hiring and discharge; and
(7) Working conditions related to the safety and health of employees.(7) Working conditions related to the safety and health of employees.
46
46
The BoardThe Board
’'s focus on these seven employment matters s focus on these seven employment matters
iswas different from the proposed rule, which different from the proposed rule, which
did not limit what could be considered essential terms and conditions employment. Under the did not limit what could be considered essential terms and conditions employment. Under the
proposed rule, the phrase would have proposed rule, the phrase would have
“"generally include[d], but [was] not limited togenerally include[d], but [was] not limited to
” " employment matters such as hours of work and scheduling.employment matters such as hours of work and scheduling.
4747 The Board indicated that the change The Board indicated that the change
that that
appearsappeared in the final rule was in response to commenters who advocated for greater clarity and in the final rule was in response to commenters who advocated for greater clarity and
predictability.predictability.
4848 By limiting the relevant essential terms and conditions of employment to seven By limiting the relevant essential terms and conditions of employment to seven
specified employment matters, the Board also addressed, in part, concerns from the franchise specified employment matters, the Board also addressed, in part, concerns from the franchise
industry. Some franchisors had argued that their efforts to maintain brand-recognition standards industry. Some franchisors had argued that their efforts to maintain brand-recognition standards
could possibly be viewed as having a connection to employeescould possibly be viewed as having a connection to employees
’' essential terms and conditions of essential terms and conditions of
employment.employment.
4949 According to the Board, the exhaustive list of employment matters According to the Board, the exhaustive list of employment matters
shouldwould provide provide
“"clearer guidance to franchisors about the forms of control that the Board will find relevant to a clearer guidance to franchisors about the forms of control that the Board will find relevant to a
joint-employer inquiry.joint-employer inquiry.
”50
"50
Despite the clarification, the franchise industry Despite the clarification, the franchise industry
remainsremained a critic of the new joint-employer a critic of the new joint-employer
standard.standard.
51 It contends51 It contended that the rule that the rule
will createcreated uncertainty in the relationship between franchisors uncertainty in the relationship between franchisors
and franchisees.and franchisees.
52 In November 2023, the International Franchise Association joined the U.S. In November 2023, the International Franchise Association joined the U.S.
Chamber of Commerce and others to challenge the new rule.Chamber of Commerce and others to challenge the new rule.
5253 The lawsuit, filed in the U.S. The lawsuit, filed in the U.S.
District Court for the Eastern District of Texas, District Court for the Eastern District of Texas,
allegesalleged that the rule that the rule
iswas contrary to law and contrary to law and
violates violated the Administrative Procedure Act.the Administrative Procedure Act.
53 On February 22, 2024, the court delayed the rule’s effective date from February 26, 2024, to March 11, 2024.54
Considerations for Congress
54
Chamber of Commerce of the United States v. NLRB
On March 18, 2024, the U.S. District Court for the Eastern District of Texas vacated the 2023 joint-employer rule, holding that the rule was contrary to law because it exceeded the common law standard for identifying a joint employer.55 In Chamber of Commerce of the United States v. NLRB, the court focused on provisions in the rule that addressed whether an employer "possesses the authority to control or exercises the power to control one or more of the employees' essential terms and conditions of employment."56 These provisions stated, in relevant part, that "possessing the authority to control one or more essential terms and conditions of employment is sufficient to establish status as a joint employer, regardless of whether control is exercised" and "[e]xercising the power to control indirectly (including through an intermediary) one or more essential terms and conditions of employment is sufficient to establish status as a joint employer, regardless of whether the power is exercised directly."57 The court observed that these provisions allowed an entity to be deemed a joint employer without any need to demonstrate an employment relationship under the common law of agency, which is characterized generally by an entity's "power to control 'the material details of how the work is to be performed.'"58 According to the court, an entity could be considered a joint employer under the provisions by simply retaining the power to exercise control over a single term and condition of employment.59 The court contended that this "reach" exceeds "the bounds of the common law and is thus contrary to law."60
Although the Board indicated initially that it would appeal the court's decision, it later decided against such an appeal.61 The Board explained that it would like "the opportunity to further consider the issues identified in the district court's opinion in the first instance" and that it would review its options for addressing joint employer matters.62 The case was dismissed on July 19, 2024.63 As a result of the district court's decision in Chamber of Commerce of the United States, the joint-employer rule adopted by the Board in 2020 remains in effect.
Considerations for Congress
On November 9, 2023, Senator Bill Cassidy and Representative John James introduced joint On November 9, 2023, Senator Bill Cassidy and Representative John James introduced joint
resolutions—S.J. Res. 49 and H.J. Res. 98—providing for congressional disapproval of the 2023 resolutions—S.J. Res. 49 and H.J. Res. 98—providing for congressional disapproval of the 2023
joint-employer rule under the Congressional Review Actjoint-employer rule under the Congressional Review Act
(CRA).55.64 The sponsors The sponsors
contendmaintained that the that the
rule rule
burdensburdened small businesses and small businesses and
harmsharmed the franchise model.65 The House of Representatives passed H.J. Res. 98 on January 12, 2024, and the Senate passed the resolution on April 10, 2024. On May 3, 2024, the President vetoed the resolution, stating that the rule "would prevent companies from evading their bargaining obligations or liability when they control a worker's working condition ... If multiple companies control the terms and conditions of employment, then the right to organize is rendered futile whenever the workers cannot bargain collectively with each of those employers."66 A House vote to override the President's veto was conducted on May 7, 2024, but failed to achieve the two-thirds majority needed to succeed.
While the 2020 joint-employer rule remains in effect as a result of the Texas district court's decision, supporters of the rule may still be interested in codifying the rule's standards in the NLRA. Legislation that would amend the act to statutorily require evidence of direct and immediate control over individuals' terms or conditions of employment to establish employer status has been introduced in the 118th Congress. The Save Local Business Act (SLBA) would amend the NLRA's definition of "employer" to state:
An employer may be considered a joint employer of the employees of another employer only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer, such as hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.67
The House of Representatives passed a substantially similar version of the SLBA during the 115th Congress, but the bill has never been considered by the Senate.68
Opponents of the 2020 joint-employer rule could also work to amend the NLRA to establish a joint-employer standard that resembles the 2023 rule. The Richard L. Trumka Protecting the Right to Organize Act of 2023 (PRO Act), for example, would amend the act to allow for consideration of indirect control and reserved authority to control employees' terms and conditions of employment when determining whether two or more entities should be considered joint employers.69 The House of Representatives passed versions of the PRO Act with similar language during the 116th and 117th Congresses, but the bill has never been considered by the Senate.70
Footnotes
1.
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Standard for Determining Joint Employer Status, 88 Fed. Reg. 73,946 (Oct. 27, 2023) (to be codified at 29 C.F.R. pt. 103); NLRA, 29 U.S.C. §§ 151–169.
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2.
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Standard for Determining Joint Employer Status, 88 Fed. Reg. at 73,946.
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3.
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Id.
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4.
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Complaint for Declaratory and Injunctive Relief at 20-21, Chamber of Commerce of the United States the franchise model.56 On January 12, 2024, the House of Representatives passed H.J. Res. 98 by a vote of 206-177. The measure was received in the Senate on January 16, 2024. If both chambers were to pass the joint resolution and the President signed it or Congress overrode the President’s veto, the rule would not be permitted to take
46 Id. 47 Id. at 73,963. 48 Id. 49 Id. at 73,971. 50 Id. 51 Issue: Joint Employer, International Franchise Association, https://www.franchise.org/advocacy/brand-standards/joint-employer (last visited Dec. 29th, 2023).
52 Complaint for Declaratory and Injunctive Relief, Chamber of Commerce v. NLRB, No. 6:23-cv-00553 (E.D. Tex. v. NLRB, No. 6:23-cv-00553 (E.D. Tex.
Nov. 9, 2023).
53 Id. at 3. For background on the Administrative Review Act, see CRS Legal Sidebar LSB10558, Judicial Review
Under the Administrative Procedure Act (APA), by Jonathan M. Gaffney.
54 Order, Chamber of Commerce v. NLRB, No. 6:23-cv-00553 (E.D. Tex. Feb. 22, 2024), https://www.law360.com/ articles/1805968/attachments/0.
55 S.J. Res 49, 118th Cong. (2023); H.R.J. Res. 98Nov. 9, 2023). The Service Employees International Union (SEIU) also challenged the 2023 joint-employer rule in the U.S. Court of Appeals for the District of Columbia, but its case was dismissed after the rule was vacated by the U.S. District Court for the Eastern District of Texas and the NLRB indicated that it would not appeal the court's decision. The SEIU conceded that there were no grounds to consider further challenges to the rule. See Order, Service Employees International Union v. NLRB, No 23-1309 (D.C. Cir. Aug. 26, 2024).
5.
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Chamber of Commerce of the United States v. NLRB, No. 6:23-cv-00553, 2024 WL 1203056, at *17 (E.D. Tex. Mar. 18, 2024).
|
6.
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H.J. Res. 98, 118th Cong. (2023); S.J. Res. 49, 118th Cong. (2023). For background on the Congressional Review Act, see CRS In Focus IF12386, Defining Final Agency Action for APA and CRA Review, by Valerie C. Brannon.
|
7.
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29 U.S.C. § 151.
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8.
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Id.
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9.
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Id. § 158.
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10.
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Id. § 158(a)(5).
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11.
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See id. § 152.
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12.
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See Standard for Determining Joint Employer Status, 87 Fed. Reg. 54,641 (Sept. 7, 2022) (to be codified at 29 C.F.R. pt. 103) (citing Browning-Ferris Industries of Pennsylvania, Inc., 259 NLRB 148 (1981), enforced, 691 F.2d 1117 (3d Cir. 1982)).
|
13.
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Browning-Ferris Industries of California, Inc., 362 NLRB 1599 (2015), aff'd in part, 911 F.3d 1195 (D.C. Cir. 2018). Prior to Browning-Ferris Industries, the NLRB maintained that an employer must meaningfully affect matters relating to the employment relationship to be considered a joint employer. See Laerco Transportation, 269 N.L.R.B. 324, 325 (1984) ("To establish joint employer status there must be a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.").
|
14.
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Id. at 1600–04.
|
15.
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Browning-Ferris Industries of California, Inc., No. 32-RC-109684, 2013 WL 8480748 (N.L.R.B. Aug. 16, 2013).
|
16.
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See TLI, Inc., 271 NLRB 798 (1984); Laerco Transportation, 269 NLRB 324 (1984).
|
17.
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Browning-Ferris Industries of California, Inc., 362 NLRB at 1613.
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18.
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Id. at 1608.
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19.
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Id.
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20.
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Id. at 1613.
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21.
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Id. at 1609.
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22.
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Id. at 1613.
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23.
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Id.
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24.
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Id. at 1614.
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25.
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Id. at 1612.
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26.
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Id. at 1616.
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27.
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Id. at 1616–17.
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28.
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Browning-Ferris Industries of California, Inc., v. NLRB, 911 F.3d 1195, 1222 (D.C. Cir. 2018).
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29.
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Id.
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30.
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Id. at 1219-20.
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31.
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Id. at 1222.
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32.
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Browning-Ferris Industries of California, Inc., 369 NLRB No. 139 (N.L.R.B.) (2020).
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33.
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Joint Employer Status Under the National Labor Relations Act, 85 Fed. Reg. 11,184 (Feb. 26, 2020) (to be codified at 29 C.F.R. pt. 103).
|
34.
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Id. at 11,235.
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35.
|
Id.
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36.
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Id. at 11,236.
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37.
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Id.
|
38.
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Id. at 11,235.
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39.
|
See, e.g., News Release, Associated Builders and Contractors, ABC Applauds the NLRB Joint Employer Final Rule (Feb. 25, 2020), https://www.abc.org/News-Media/News-Releases/abc-applauds-the-nlrb-joint-employer-final-rule.
|
40.
|
Press Release, AFL-CIO, Trump Administration's Politicized NLRB Rule is an Attack on Working People's Freedom (Feb. 25, 2020), https://aflcio.org/press/releases/trump-administrations-politicized-nlrb-rule-attack-working-peoples-freedom. The Service Employees International Union (SEIU) also challenged the 2020 rule, arguing that it violated the Administrative Procedure Act. The lawsuit, filed in the U.S. District Court for the District of Columbia, was stayed until the U.S. Court of Appeals for the District of Columbia Circuit resolved the union's subsequent challenge to the 2023 joint-employer rule. The D.C. Circuit dismissed the SEIU's case on August 26, 2024, and the parties are expected to file a status report with the district court within two weeks of that decision. See Order Granting the Parties' Joint Motion for Further Extension of Litigation Stay, Service Employees International Union v. NLRB, No. 21-2443 (D.D.C. Apr. 30, 2024).
|
41.
|
Standard for Determining Joint-Employer Status, 87 Fed. Reg. 54,641 (Sept. 7, 2022) (to be codified at 29 C.F.R. pt. 103).
|
42.
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Id. at 54,642.
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43.
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Id. at 54,645.
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44.
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Standard for Determining Joint Employer Status, 88 Fed. Reg. 73,946 (Oct. 27, 2023) (to be codified at 29 C.F.R. pt. 103).
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45.
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Id. at 73,956.
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46.
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Id.
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47.
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Id. at 73,963.
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48.
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Id.
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49.
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Id. at 73,971.
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50.
|
Id.
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51.
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Issue: Joint Employer, International Franchise Association, https://www.franchise.org/advocacy/brand-standards/joint-employer (last visited Dec. 29, 2023).
|
52.
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Id.
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53.
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Complaint for Declaratory and Injunctive Relief, Chamber of Commerce of the United States v. NLRB, No. 6:23-cv-00553 (E.D. Tex. Nov. 9, 2023).
|
54.
|
Id. at 3. The Service Employees International Union also filed a lawsuit challenging the 2023 joint-employer rule, but the case was held in abeyance and the parties later moved to dismiss the case after Chamber of Commerce of the United States v. NLRB was decided. See Joint Motion to Dismiss Petition for Review at 4, Service Employees International Union v. NLRB, No. 23-1309 (D.C. Cir. Aug. 13, 2024) ("Due to the Board's withdrawal of its appeal in the Fifth Circuit, the Eastern District of Texas's order vacating the 2023 Rule represents a final judgment in that matter. Therefore, the 2023 Rule being challenged in this case has been set aside, and there are no grounds to consider further challenges to this now-vacated Rule."). The U.S. Court of Appeals for the District of Columbia Circuit dismissed the case on August 26, 2024. See Order, Service Employees. International Union v. NLRB, No. 23-1309 (D.C. Cir. Aug. 26, 2024).
|
55.
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Chamber of Commerce of the United States v. NLRB, No. 6:23-cv-00553, 2024 WL 1203056, at *17 (E.D. Tex. Mar. 18, 2024).
|
56.
|
Id. at *13-14.
|
57.
|
See 29 C.F.R. § 103.40(e).
|
58.
|
Chamber of Commerce of the United States v. NLRB, 2024 WL at *12-13 (quoting NLRB v. Town & Country Elec., Inc., 516 U.S. 85, 90 (1995)).
|
59.
|
Id. at *14.
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60.
|
Id.
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61.
|
Unopposed Motion for Voluntary Dismissal, Chamber of Commerce of the United States v. NLRB, No. 24-40331 (5th Cir. July 19, 2024).
|
62.
|
Id.
|
63.
|
Order, Chamber of Commerce of the United States v. NLRB, No. 24-40331 (5th Cir. July 19, 2024).
|
64.
|
S.J. Res. 49, 118th Cong. (2023); H.J. Res. 98, 118th Cong. (2023).
|
65.
|
See Press Release, Rep. John James, James Joins Bicameral Group of Legislators in Introducing Resolution to Overturn the Biden Administration's Joint Employer Rule (Nov. 9, 2023), https://james.house.gov/news/documentsingle.aspx?DocumentID=96.
66.
|
Message to the House of Representatives—President's Veto of H.J. Res. 98 (May 3, 2024), https://www.whitehouse.gov/briefing-room/presidential-actions/2024/05/03/message-to-the-house-of-representatives-presidents-veto-of-h-j-res-98/.
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67.
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H.R. 2826, 118th Cong. § 2(a)(2) (2023); S. 1261, 118th Cong. § 2(a)(2) (2023).
|
68.
|
H.R. 3441, 115th Cong. (2017).
|
69.
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H.R. 20, 118th Cong. § 101(a) (2023); S. 567, 118th Cong. § 101(a) (2023).
|
70.
|
H.R. 842, 117th Cong. (2021); H.R. 2474, 116th Cong. (2019).
|
, 118th Cong. (2023). 56 See Press Release, supra note 5.
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Joint Employment and the National Labor Relations Act
effect.57 A rule that does not take effect “may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”58
If efforts to invalidate the joint-employer rule under the CRA were unsuccessful, it seems possible that opponents of the rule could work to amend the NLRA to statutorily require evidence of direct and immediate control over individuals’ terms or conditions of employment. The Save Local Business Act (SLBA), for example, would amend the NLRA’s definition of “employer” to state:
An employer may be considered a joint employer of the employees of another employer only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer, such as hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.59
The House of Representatives passed a substantially similar version of the SLBA during the 115th Congress, but the bill has never been considered by the Senate.60
Author Information
Jon O. Shimabukuro
Legislative Attorney
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material.
57 See 5 U.S.C. § 801(b)(1). 58 Id. § 801(b)(2). 59 H.R. 2826, 118th Cong. § 2(a)(2) (2023); S. 1261, 118th Cong. § 2(a)(2) (2023). 60 H.R. 3441, 115th Cong. (2017).
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