Under Legal Pressure, NLRB Delays Joint Employer Rule

The NLRB delayed the effective date of its final rule that significantly expands joint employer liability to February 26, as it faces litigation from both organized labor and the business community, as well as strong opposition within Congress. 

Background: In October, the Board issued its final joint employer rule which established extremely broad joint employer liability for employers. While most of the attention surrounding the bill has focused on franchises, the rule could make companies liable for the labor law violations of any third parties with which they do business (including contractors, suppliers, etc.) and provide unions more avenues for organizing workers at large employers. 

Legal challenge from both sides: The final rule prompted immediate lawsuits from both the business community and, somewhat surprisingly, organized labor. A coalition of business groups sued the NLRB in a federal district court in Texas, arguing the rule is overly broad, beyond the scope of the National Labor Relations Act, unlawful under the Administrative Procedure Act, and contrary to common law principles. Meanwhile, the Service Employees International Union filed suit against the NLRB in the D.C. Circuit, arguing that the rule does not go far enough.

The dueling lawsuits create a jurisdictional mess for courts to sift through. Resolving such issues may complicate and slow down both challenges, meaning hopes of a quick stop to the rule may be in vain. Further, the courts could move both suits to a single jurisdiction, which could have a major influence on the fate of the rule. The D.C. Circuit, for example, has historically been supportive of NLRB policymaking and stricter joint employer rules specifically. 

Meanwhile, Congress will attempt to invalidate the rule on its own. A bipartisan group of Senators and Members of Congress, including Sen. Joe Manchin (D-WV) and Rep. Virgnia Foxx (R-NC), introduced a Congressional Review Act resolution in each House to rescind the rule. The resolution requires simple majorities in both chambers to pass, which is likely in this case given Republican control of the House and potential support from Democratic Senators Manchin and Kyrsten Sinema (D-AZ). However, should it pass, it will almost certainly be vetoed by President Biden. 

Outlook: It will take months, if not longer, to sort out the various challenges to the Board’s joint employer rule. However, the challenges themselves have already proven to be effective to the extent that the Board has delayed the rule’s effective date.