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Texas Judge Strikes Down Controversial Joint Employer Rule

The NLRB’s controversial joint employer rule, originally set to take effect on March 11, was recently struck down by a federal court judge in Texas. Although controversial, the rule’s goal was to make it easier for workers to be considered employees of multiple entities. This would have increased union organization efforts and collective bargaining across the country.

Defining Joint Employment Status

Defining joint employment status has been a battle for the last decade. 

With the strikedown in Texas, the 2020 version of the joint employment remains the standard. Under this, an employer can only be considered a joint employer with another employer if both businesses share the employee’s conditions of employment. These conditions include hours, wages, supervision, and benefits.

Additionally, in order to be considered a joint employer, businesses have to exercise direct control over an employee’s terms and conditions of employment. This cannot be sporadic. 

Revision of 2020 Joint Employment Decision

A revision of the 2020 decision was first released back in October 2023. This would have broken down the standard and frequented the establishment of joint employment.

For instance, some edits made it so a business could be considered a joint employer when there was evidence of reserved, indirect, or exercised control over any working conditions. This is a huge contrast compared to the original standard of having the right based on both business conditions. 

Situations like wages, schedules, and benefits would have been included. As anyone can imagine, this would have probably led to new, bustling union activity amongst all industries and businesses. However, this is precisely why the court blocked it. Specifically, the judge made a point about how the new rule failed to address the possible destructive impact and implications across all industries. 

What to Expect Next

Although this ruling has been blocked, the NLRB does have a month to file an appeal. 

It seems likely that an appeal will be made, especially since the agency made it known that revising the joint employment standard was a priority for them. Once the appeal is filed, it will be heard by judges from the Fifth Circuit Court of Appeals, which is conservative and could result in the entire panel making a decision on the case.

However, there are some complications. In Washington, D.C., the SEIU has also filed a parallel lawsuit arguing that the rule is not enough. With this and the appeal, it could take months—maybe even a year—to see results. Thus, there is much uncertainty about the future of joining employer status. 

How You Can Navigate Going Forward

Many businesses and employers probably feel some relief from the ruling getting blocked; however, it’s still a possibility in the future. Therefore, evaluating your business now might be a good idea to prevent any possible issues.

For example, if this hasn’t already been done, take the time to evaluate service contracts or related documents that state direct or indirect control over workers. Additionally, if any host employers rely directly on third parties for employees, it’ll be good to examine those contracts for the procedures of those arrangements. Pay attention to the language and control rights.

On the flip side, staffing companies and similar entities should also consider making evaluations from their end. This is also the case for franchisor-franchisee arrangements. If you fall into these categories, make sure to discuss them in detail with your counsel.

And for all businesses, review or create some clear policies regarding third-party vendors—like their roles and authority in relation to your business practices.