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Contingent Workforce Newsletter Series - August 2024

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The laws and tests related to independent contractors and joint employment are constantly changing. It’s hard to keep track, let alone stay compliant! In each edition of this newsletter, we’ll pick a new topic that’s undergoing change and let you know where things stand. This week we examine the NLRB’s new joint employer rule.

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NLRB's New Joint Employer Rule: What’s the Status?

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What rule are we addressing today? The 2023 National Labor Relations Board’s (NLRB) joint employer rule. In October 2023, the NLRB <a href="https://e.bakerlaw.com/collect/click.aspx?u=Z3hrU0xrUm01L1ZZNHpCcjBRenNZNk93Y1JUdU1RVzAzK0hXUVFKVTBPa1NrUkFaY1Z5L2c1d0FzK1dUampzcGhmUUZQUWUycXpsaHZUTVRPMXBZdEl6VGgvRzZRdU5Kc3pvOTJIOTFNQnpiUzdNV29FWnpJcTVTZkFDWnFtbFZ4U3ovdGdtRXBDRERPNkpzUDdNTEFnPT0=&amp;rh=ff00d20e066d6d66dfe5681eb14880896e822790">issued a final rule</a> that adopted a new test for determining who is a joint employer under the National Labor Relations Act (NLRA). What did this rule do? The new rule revoked the <a href="https://e.bakerlaw.com/collect/click.aspx?u=Z3hrU0xrUm01L1ZZNHpCcjBRenNZNk93Y1JUdU1RVzAzK0hXUVFKVTBPa1NrUkFaY1Z5L2c5NTMvclpKNlFSTFVaUnpPdW5uUXUrTzNyZWVhdk1BUzNiQ3JnckM3RTVBOExPZWxFQ3dRanZlR0tjb3l6b05hQTlHN2NSSGxnSk1zYTJyL3Fzd1c0TWs3eWc3NmFONE0yck5zaDhtam1qcTBmYnFoYlJWb01nODE2RkprWm85Umh6WW4vSlM5d05mRWZGY1AxeVdHWks0RG41M2pxUGpRQT09&amp;rh=ff00d20e066d6d66dfe5681eb14880896e822790">2020 joint employer test</a> adopted during the Trump administration. The joint employer test in the 2023 rule is expansive and would create many new joint employment relationships, compared to the 2020 test.   What’s the status of the rule? The 2023 joint employer rule is dead. A federal court enjoined the rule, and the NLRB has abandoned its efforts to preserve the new rule.   How did we get here? In March 2024, a federal district court in Texas issued an injunction to prevent the new rule from taking effect. The NLRB appealed the case to the Fifth Circuit Court of Appeals. Meanwhile, in a separate action, the Service Employees International Union (SEIU) filed a direct action with the D.C. Circuit, asking that the rule be upheld. Two appellate courts, therefore, were reviewing the rule. In July 2024, the NLRB withdrew its appeal before the Fifth Circuit, essentially conceding defeat and accepting the injunction. But the D.C. case remained – until last week. On August 13, the NLRB and all other parties jointly moved to dismiss the D.C. case. In their joint motion, the parties agreed that the D.C. petition was now moot, since the 2023 rule had been <a href="https://e.bakerlaw.com/collect/click.aspx?u=Z3hrU0xrUm01L1ZZNHpCcjBRenNZNk93Y1JUdU1RVzAzK0hXUVFKVTBPa1NrUkFaY1Z5L2c1d0FzK1dUampzcGhmUUZQUWUycXptcmxJSEphd3lNSkJ5RnVJS0hSZUFXZTc0TktGVW0velhXTVQzUEFyS1VMQnZZcVVibTc0M3h6MWd1Y2tyaElUbStYTjY4WFFwZFJ3PT0=&amp;rh=ff00d20e066d6d66dfe5681eb14880896e822790">vacated</a> by the Eastern District of Texas. By agreeing to voluntarily dismiss both appeals, the NLRB has abandoned its efforts to preserve the 2023 rule.   Now that the 2023 rule is dead, what is the applicable joint employer test? The 2020 joint employer rule provides the applicable test. Under the <a href="https://e.bakerlaw.com/collect/click.aspx?u=Z3hrU0xrUm01L1ZZNHpCcjBRenNZNk93Y1JUdU1RVzAzK0hXUVFKVTBPa1NrUkFaY1Z5L2c5NTMvclpKNlFSTFVaUnpPdW5uUXUrTzNyZWVhdk1BUzNiQ3JnckM3RTVBOExPZWxFQ3dRanZlR0tjb3l6b05hQTlHN2NSSGxnSk1zYTJyL3Fzd1c0TWs3eWc3NmFONE0yck5zaDhtam1qcTBmYnFoYlJWb01nODE2RkprWm85Umh6WW4vSlM5d05mRWZGY1AxeVdHWks0RG41M2pxUGpRQT09&amp;rh=ff00d20e066d6d66dfe5681eb14880896e822790" target="_blank" rel="noreferrer noopener">2020 rule</a>, a business can only be a joint employer of another employer’s employees if it exercises “substantial direct and immediate control” over the “essential terms and conditions” of the workers’ employment. “Essential terms and conditions” include wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction. With the 2020 rule reinstated, will the NLRB follow its own rule? Unknown. The Democratic majority that now controls the NLRB loathes the 2020 rule. The General Counsel of the NLRB, Jennifer Abruzzo, also considers the 2020 rule to be too narrow. But that’s the rule, and the rule was enacted by the NLRB, albeit under a prior administration. It remains to be seen how the Democrat-controlled NLRB will apply its own 2020 rule when addressing joint employment disputes.   What’s the scope of the test? The 2020 joint employer test applies only to determining joint employer status under the NLRA. The NLRB’s rules, whether 2020 or 2023, do not affect the joint employer test under other laws, such as the Fair Labor Standards Act (FLSA).

The State of Employee Status

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