As we discussed in a recent blog post, last year the National Labor Relations Board (NLRB) issued a rule revising the standard for determining a joint employer. The rule was due to go into effect on Dec. 26, 2023, but was delayed when business groups led by the U.S. Chamber of Commerce brought a lawsuit in Texas against the NLRB alleging the rule exceeds the NLRB’s authority. Recently, a Texas federal judge delayed the rule implementation until Mar. 11, 2024 to give the Court additional time to issue a decision. 

New rule expands joint employer definition

If enacted, the rule expands which entities may be considered a joint employer. The rule specifies that entities may be a joint employer if each entity has an employment relationship with employees, and the entities have the right to direct or indirect control over employees’ essential terms and conditions of employment, regardless of whether the entities exercise the right to use that control. The new rule will change the rights and obligations of businesses when dealing with other companies’ employees.

Delayed rule implementation

In their lawsuit, the business groups allege the rule would dismantle the franchise business model and that the rule is unclear. The lawsuit seeks to permanently block enactment of the rule. However, for now, the Texas Court has only delayed the implementation of the rule. Regardless of the final ruling from the Texas Court, it is likely this matter will ultimately be decided by the U.S. Supreme Court. We will continue to monitor this litigation and the status of the rule. 

In the meantime, employers should review all relationships with other entities exercising any type of control over employees and consider whether to revise agreements with third parties such as vendors, contractors or franchisees.