On March 8, 2024, the United States District Court for the Eastern District of Texas invalidated the recently issued final rule for establishing joint employer status under the National Labor Relations Act (“NLRA”).

As we previously reported, on October 27, 2023, the National Labor Relations Board (“NLRB”) issued a final rule on the criteria for establishing joint employer status under the NLRA, rescinding the 2020 joint-employer rule of “direct and immediate control.”

The federal court criticized the new proposed joint-employer standard, which posited that an entity could be deemed a joint employer of a group of employees if each entity has an employment relationship with the employees and they share or codetermine matters governing the employees’ essential terms and conditions of employment. Agreeing with the United States Chamber of Commerce, the court found that the second test of the joint-employer standard is always met if the first test is met, making the standard a single step test in practice.

The court declared the new proposed joint-employer standard invalid, asserting that it would categorize nearly every entity contracting for labor as a joint employer, as practically all contracts for third-party labor impact, at least indirectly, essential terms and conditions of employment. Ultimately, the court held that the new proposed joint-employer standard’s reach exceeded the bounds of the common law. The court vacated the new proposed joint-employer standard, indicating that it will issue a final judgment declaring that the standard is unlawful.

Given the significance of the court’s decision to vacate the new proposed joint-employer standard, we expect the NLRB to appeal the decision to the United States Court of Appeals for the Fifth Circuit. Currently, the new proposed joint-employer standard is not in effect. If you have any questions regarding the issues raised in this client alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.