Labor
NLRB Withdraws Appeal of 2023 Joint Employer Rule Case, Will Revert to Trump-era Rule
End of litigation is a legal victory for the Associated Builders and Contractors, which challenged the rule in court
While all subcontractors might participate in calisthenics led by a general contractor, that doesn't mean they are employees of a joint employer on such a sight under the 2020 NLRB joint employer rule.
Photo courtesy of Clayco, Inc.
On July 19, the National Labor Relations Board moved to withdraw its appeal of the U.S. District Court for the Eastern District of Texas’ decision in March to vacate the 2023 Joint Employer final rule, effectively ending NLRB's challenge to reverting to the board's 2020 rule. The NLRB had appealed the decision on May 7 but has offered no explanation for the withdrawal.
The district court vacated the 2023 final rule after the Associated Builders and Contractors, the U.S. Chamber of Commerce and other business groups challenged the new rule's definition of what a joint employer is. The groups argued that the 2020 rule established clearer criteria for companies to consider when determining their joint-employer status.
"We are pleased the Board decided to withdraw its appeal of the court’s decision and that the court’s ruling to block the NLRB’s radical and overbroad joint employer standard is now final,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “The 2023 final rule would have disrupted long-established, efficient operational processes that are followed by construction service providers who work together to build America. And it clearly would have had a harmful effect on a significant segment of the construction industry: small businesses."
Brubeck also said contractors will be better able to work and coordinate with multiple employers without fear of being found to be joint employers, which ABC and the other groups argued could happen under the 2023 rule.
The legal battle over what makes a business such as a general contractor on a construction worksite responsible for anything from cost overruns to accidents resulting from the work of subcontractors and other workers on the site began in November 2023. ABC joined the U.S. Chamber of Commerce and a coalition of business groups in filing a lawsuit challenging the NLRB's final rule for violating the National Labor Relations Act and for allegedly acting arbitrarily and capriciously in violation of the Administrative Procedure Act.
The federal district court ruled in March that the 2023 joint-employer rule was not in line with the APA. The court concluded that the new rules would have expanded a 1960s-era ruling that said employers had to actually exercise control over an employee’s essential terms and conditions of employment to be considered an employer. Under the 2023 rule, set to take effect on March 11, 2024, an entity could be deemed a joint employer by merely possessing or reserving the authority to control one or more of the employees’ essential terms and conditions of employment, regardless of whether the control was actually exercised.
In a rulemaking petition filed June, the AFL-CIO and the Service Employees International Union supported the idea of returning the case to NLRB adjudication in order to better define the joint employer standard. The unions said the board should drop its appeal in the Fifth Circuit, revoke the 2020 rule that set a narrow standard for joint employment, and then shape a new test for what constitutes exercising control via NLRB decision making.
The NLRB referenced pending rulemaking petitions in its motion to withdraw before the Fifth Circuit.
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