ABC Celebrates Major Victory Against NLRB’s Joint Employer Rule

In a resounding triumph for the construction industry and for our members in Kansas and Missouri, the National Labor Relations Board (NLRB) has officially withdrawn its appeal of a court decision against the 2023 Joint Employer final rule. This marks a significant win for our industry, ensuring the more favorable 2020 Joint Employer Rule remains effective. 

Background on the Legal Battle 

Earlier this year, on March 8, the U.S. District Court for the Eastern District of Texas struck down the NLRB’s 2023 rule, which sought to expand the criteria for determining joint-employer status. This rule threatened established and efficient operational practices within the construction industry, especially burdening small businesses with potentially increased liabilities and operational complexities. 

ABC, along with the U.S. Chamber of Commerce and other business groups, challenged the 2023 rule for exceeding the NLRB’s authority and for being arbitrary and capricious, violating the National Labor Relations Act and the Administrative Procedure Act. 

Victory at the Court 

The withdrawal of the NLRB’s appeal cements the District Court’s decision, allowing the 2020 Joint Employer Rule to stand. This rule establishes clear, practical criteria for businesses to determine joint employer status. It focuses on essential employment terms such as wages, benefits, and work hours. To be considered a joint employer, a business must have substantial direct and immediate control over these terms. 

Ben Brubeck, ABC’s vice president of regulatory, labor, and state affairs, expressed satisfaction with the outcome, stating, “This decision prevents the imposition of a radical and overbroad joint employer standard that would have disrupted the construction industry significantly. Small businesses, in particular, will benefit as they can continue to work without the fear of being unfairly labeled as joint employers.” 

Key Aspects of the 2020 Rule: 

• Definition of Joint Employment: The rule specifies that a business can only be considered a joint employer of another employer’s employees if it shares or codetermines the essential terms and conditions of employment. This includes direct actions like setting wages, benefits, and work hours. 

• Essential Terms and Conditions: It clearly lists what constitutes essential terms and conditions of employment—wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. 

• Direct and Immediate Control: To qualify as a joint employer, a business must have substantial direct and immediate control over these essential terms. This means the business’s involvement must meaningfully affect employment relationships. 

• Evidence Considerations: The rule also guides what evidence is relevant. It states that evidence of indirect control or contractually reserved but never exercised control over essential terms can support, but not solely establish, joint employer status. This clarification ensures that mere potential or theoretical control without actual exercise doesn’t result in joint employer responsibilities. 

• Clarity on Control: The rule defines what “substantial direct and immediate control” entails, providing examples of actions that would and would not meet this threshold. It ensures businesses understand the extent of involvement required to be considered a joint employer. 

• Exclusion of Indirect Influence: Importantly, the rule clarifies that joint employer status cannot be based solely on indirect influence or a contractual reservation of control that is never actually exercised. This aspect is crucial for preventing unwarranted legal entanglements over joint employment statuses that could stifle collaborative efforts. 

View more information on the NLRB Fact Sheet. 

As we celebrate this legal victory, ABC Heart of America remains vigilant and prepared to respond to future challenges that may arise. We are committed to ensuring our members have a fair opportunity to compete and succeed in the construction industry without bias policies or undue regulatory burdens. 

Written by: Marcos Zelada-Rodas, ABC Heart of America, Director of Government Affairs 

This article is intended for informational purposes only and does not constitute legal advice or opinion.