NLRB Should Let Stand District Court Ruling On Joint Employer Rulemaking

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Just days before the National Labor Relations Board’s new joint employer rule was set to go into effect, a federal judge in Texas struck down the rule, classifying it as unlawfully broad and unconstitutional. CEI Research Fellow and labor policy expert Sean Higgins provides his analysis on the ruling:

“The U.S. District Court for the Eastern District of Texas made the right call last week in tossing out the National Labor Relations Board’s (NLRB) latest joint employer rulemaking. The court found that the NLRB’s legal rationale for the rule “exceeds the bounds of the common law and is thus contrary to law.”

“In layman’s terms, the court found that the board could not explain why the rule was needed and that the rule itself was so vague that it would create more confusion than it would solve.

“Joint employer refers to when one business can be held legally responsible for violations of the National Labor Relations Act (NLRA) at another business. Traditionally, this has required one business to have direct control over the other businesses’ workplace policies. A contractor hiring a subcontractor and giving the latter strict rules regarding how to do the job, for example, would be a potential joint-employer situation.

“The new rule would have expanded that to cases of indirect control, a term of art with no clear meaning. The new rule would have also included cases of reserved control, instances where a business merely had the hypothetical ability to influence another business’s policies, even if it hadn’t actually done so.

“The court concluded that the rulemaking failed to establish a definite standard to guide businesses and that this would increase frivolous litigation over joint-employer status. The court said, “the Board largely backhanded and thus failed to reasonably address the disruptive impact of the new rule on various industries.”

“NLRB chairwoman Lauren McFadden has said that the board is examining the rulemaking and mulling over its options for response. The best thing the board could do is accept the court’s ruling and let the direct control standard for joint employer cases remain in place. It’s clear and addresses potential joint employer situations in a just and fair manner.

“This was the third re-write of the rule within a period of four years. Going back to the Obama administration, every time the board has had a Democratic majority, it has pushed to expand the rule to include indirect control. This has itself been highly disruptive to employers and workers. No one can be sure that the current version of the rule will remain in effect a few years from now. This pattern should stop.”