Joint Employer Rule’s Revival Options Include Ignoring Judge

A federal district court’s invalidation of a National Labor Relations Board regulation on joint employer liability under federal labor law presents the board with several potential responses—including treading into untested legal territory.

The NLRB’s possible paths include appealing the decision, initiating new notice-and-comment rulemaking to rescind the Trump-era joint employer rule that’s currently in effect, and refusing to acquiesce to the judge’s ruling outside of his judicial district, the Eastern District of Texas.

Those options don’t seem to be mutually exclusive.

“If I were on the board, I’d say ‘let’s start now with the rulemaking aspect, also pursue the appeal as aggressively as we can, and then we can think about what to do in terms of nonacquiescence,’” said Steven Swirsky, co-chair of Epstein Becker & Green PC’s labor-management relations practice.

The multiple options add further complexity for employers and unions attempting to navigate the NLRB’s efforts on joint employment, one of the most hotly contested areas of federal labor law for the past decade and the subject of extensive litigation.

The board’s legal test for joint employment is used to determine whether multiple companies share liability for unfair labor practices and union bargaining responsibilities for the same set of workers. Franchisers and companies that rely on outsourced labor have the most at stake.

The NLRB’s Democratic majority last fall rescinded a rule issued by an all-Republican board in 2020 setting a legal test that turns on whether a putative joint employer exerted direct and immediate control over the workers at issue.

That 2023 regulation, which was set to take effect March 11, also replaced that rescinded standard with an expanded framework accounting for indirect and unexercised control.

US District Judge J. Campbell Barker last Friday vacated the new regulation and rejected the board’s withdrawal of the 2020 rule as insufficiently justified. The ruling, which came in response to a lawsuit by a coalition of business groups led by the US Chamber of Commerce, effectively reinstated the 2020 joint employer regulation

NLRB Chair Lauren McFerran said the board is considering its next steps.

Multiple Standards

An NLRB appeal of that ruling would go to the US Court of Appeals for the Fifth Circuit, widely viewed as the most politically conservative of the thirteen federal circuits.

How that appeal fares could depend on the three-judge panel that hears the case. Twelve of the circuit’s 17 active status judges—and the overwhelming majority of its senior status judges—were appointed by Republican presidents.

If the board were to rescind the 2020 rule, that would return the NLRB to setting its joint employer standard through individual case adjudication, which the agency had done prior to the Trump administration.

Withdrawing that rule presumably would revive the test from the NLRB’s Obama-era decision in Browing-Ferris Industries, which the D.C. Circuit largely upheld. That standard also weighs indirect and unexercised control.

But getting rid of the Trump-era regulation—even without replacing it—requires another round of notice-and-comment rulemaking, though it would probably take the NLRB less time than it did to create the standard that Barker struck down.

Barker’s ruling didn’t appear to create any obstacles or provide any guidance for future NLRB efforts to rescind the 2020 rule, said Kristin Hickman, an administrative law professor at the University of Minnesota.

“The judge seemed to keep the door open for the NLRB to articulate a justification based on policy preference that would pass muster, without signaling what justifications might or might not be acceptable,” she said.

Declining to Abide

The NLRB also could try applying its 2023 joint employer regulation outside of Barker’s judicial district under what’s known as the doctrine of nonacquiescence.

The board uses this approach when it chooses to apply its labor law standards even after a federal court has nixed them. For example, prior to a Trump-era decision changing the standard, the NLRB used to insist on applying a test for when employers don’t have to bargain with unions despite the D.C. Circuit repeatedly disagreeing—to the point that the court called the doctrine of nonacquiescence an “instrument of oppression.”

That doctrine flows primarily from the idea that the board is responsible for setting national labor policy under the National Labor Relations Act except when the US Supreme Court says otherwise.

But refusing to acquiesce to Barker’s ruling would be a novel and risky move, said Anne Marie Lofaso, a labor law professor at West Virginia University.

“The board could be found in contempt of court,” she said. “Does the board really want to die on that hill?”

Complications Abound

Whatever the NLRB decides, there are other pending joint employer disputes that stand to feel the impact.

The Service Employees International Union, for instance, sued the NLRB over the 2020 rule, but that lawsuit’s been on hold in light of the current board developing a new joint employer regulation. The judge issued another stay in that case last week that’s effective until April 1.

The SEIU has been supportive of the 2023 rule, but it also challenged the scope of that measure in the D.C. Circuit.

The D.C. Circuit is taking briefing in that matter on a Chamber-led motion to dismiss the SEIU’s petition, part of a jurisdictional dispute over whether direct review of the rule should start in federal district or appeals court.

Barker rejected the NLRB’s argument that it belongs in federal appeals court.

“This is as complicated as any case I’ve heard of in the last few decades,” Sidney Shapiro, an administrative law scholar at Wake Forest University, said of the NLRB’s joint employment situation.

The case is US Chamber of Commerce v. NLRB, E.D. Tex., No. 6:23-cv-00553.