NLRB Drops Appeal on Joint Employer Rule

The U.S. National Labor Relations Board (NLRB) has decided to drop its appeal against a judge's decision that struck down a rule which would have required many companies to be considered joint employers of certain contract and franchise workers, according to Reuters. This rule would have necessitated these companies to engage in collective bargaining with unions representing these workers. Despite still believing in the legality of its “joint employers” rule, the NLRB chose to withdraw its appeal to reconsider the issues identified by U.S. District Judge J. Campbell Barker.

The 2023 rule, which was invalidated, would have classified companies as joint employers if they had control over crucial working conditions such as pay, scheduling, and discipline, even if that control was indirect or not exercised. This rule replaced a 2020 regulation from the Trump administration, which required companies to have “direct and immediate” control to be considered joint employers — a standard that was more favorable to business groups. Judge Barker, a Trump appointee, ruled that the 2023 rule was overly broad and violated federal labor law, as it could designate companies as employers even without significant control over workers’ conditions.

The NLRB’s move to cease its defense of the rule represents a significant shift, especially following President Joe Biden's veto in May of a Republican-supported measure aimed at repealing the rule. While the NLRB and unions argue that the rule is essential for ensuring companies participate in collective bargaining and are accountable for labor law violations, business groups and many Republicans contend that it would cause confusion regarding employer status, disrupting franchise and contracting operations.