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Judge Invalidates Joint Employer Rule, and Independent Contractor Rule Takes Effect

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The National Labor Relations Board (NLRB) Joint Employer Regulation, which was set to take effect March 11, 2024, was invalidated by a Texas district court judge.  U.S. Chamber of Commerce v. NLRB, E.D. Tex. 3/8/24.  The rule affects liability and collective bargaining obligations, outsourcing of labor, and the entire franchise industry.  The Trump era Joint Employer Rule, enacted by the NLRB in 2020, considers just the direct and immediate control one company exercises over the essential terms and conditions of employment of workers directly employed by another firm.  The new standard under the Biden Administration would have taken into account indirect and unexercised control, significantly expanding the joint employer concept.  The Texas judge stated that the new standard:  " . . . would treat virtually every entity that contracts for labor as a joint employer because virtually every contract  for third-party labor has terms that impact, at least indirectly, at least one of the specified 'essential terms and conditions of employment.'"  

The NLRB must now decide whether to appeal the decision, refuse to accept the judge's ruling outside of his judicial district, the Eastern District of Texas, or start the rulemaking process over again.  The effect of the ruling is to reinstate the Trump era Joint Employer Regulation.

Meanwhile, the Department of Labor's (DOL) new Independent Contractor Rule went into effect March 11, 2024.  Several lawsuits contend that DOL violated the Administrative Procedure Act when issuing the rule because the agency failed to provide a reasonable explanation for changing its independent contractor standard, but at least currently the new rule has gone into effect.  The new rule would replace simpler classification tests issued during the Trump Administration, making it harder for companies to treat their workers as independent contractors.

This article is part of our April 2024 Newsletter. 

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