National Labor Relations Board’s 2023 Joint Employer Final Rule Recharged After Biden Vetoes Congressional Review Act Measure

After failing to make it to its effective date because a court decision vacated the Standard for Determining Joint Employer Status, the National Labor Relations Board's joint employer rule has been given new life — to a degree. On May 3, 2024, a little less than two months after the U.S. District Court for the Eastern District of Texas struck down the rule, President Biden vetoed a Republican-backed Congressional Review Act measure to repeal the rule in its entirety.

Currently, the 2020 joint employer rule will continue to be used to determine joint employer status. That rule provides that joint employer status exists only where both employers exercise substantial direct and immediate control over one or more of the essential terms and conditions of employment for an employee.

• Wages
• Benefits
• Hours of work
• Hiring
• Discharge
• Discipline
• Supervision
• Direction

The judge determined that the rule was overly broad in regard to common law and inconsistent with the National Labor Relations Act. The NLRB has filed notice that it will appeal the court's decision in Texas. With Congress needing a two-thirds majority to override the president's veto, it is unlikely that will happen based on the current political makeup.

What Does This Mean for Businesses?

All businesses are subject to the NLRB’s joint employer rule. The vacating of the 2023 rule was a win for the franchise and staffing agency industries, businesses using staffing agencies or contractors, and PEOs and their clients given the narrower definition of joint employment under the NLRA found in the current rule. The International Franchise Association already has spoken out against the veto.

How Did NLRB's 2023 Final Rule Define Joint Employer?

The NLRB's definition states that an employer could be considered a joint employer if the entity has or retains authority to control, directly or indirectly, at least one of seven essential terms and conditions of employment, regardless of whether they exercise that control. The list of essential terms under the vacated final rule had expanded to include, among others, compensation, as well as workplace health and safety conditions.

The U.S District Court judge determined that the “indirect” and “regardless of whether they exercised” control portions of the new final rule were outside the bounds of common law, and that under those conditions nearly every employer could be found to be a joint employer for purposes of collective bargaining and similar labor obligations under the NLRA.

Do Other Agencies Address Joint Employment?

Other agencies might rely on similar criteria when determining joint employer status under specific laws, but the NLRB’s rule on joint employment is specific to joint employer status under the National Labor Relations Act. The NLRB’s rule should not be confused with the U.S. Department of Labor’s (DOL) standard for joint employment under the Fair Labor Standards Act (FLSA).

The DOL issued its own final rule, which determined joint employment status for purposes of wage and hour issues under the FLSA. However, it has been rescinded following a court decision in New York and no plans have been announced for when a new rule might be considered.

Looking Ahead

Paychex will continue to monitor additional developments in Congress and the courts. It is likely that the administration will appeal the ruling that vacated the new NLRB rule. Businesses, meanwhile, should stay up to date and consult with their legal counsel to help prepare their business to address any potential challenges should the 2023 rule come back into play if the Court of Appeals overturns the district court.

Paychex can help you understand the complexities of the regulations that impact your business and offers HR solutions and services to help make it simpler for you to focus on running your business.