A new rule on what defines an employee who has joint employers, due to go into effect Monday, has been put on ice by a federal judge in Texas. The ruling could relieve fears in the trucking business.
J. Campbell Barker, a judge in the U.S. District Court for the Eastern District of Texas, handed down the ruling late Friday. In a lawsuit brought by numerous industry trade groups — but no trucking organizations — the judge granted summary judgment that vacated a National Labor Relations Board rule approved in October.
“The NLRB had aimed to make it far easier for workers to be considered employees of more than one entity for labor relations purposes — a move that would have resulted in increased union organizing and collective bargaining efforts across the country — but Friday’s decision halted it in its tracks,” the law firm of Fisher Phillips said in an online commentary about the decision.
That same law firm in October, when the NLRB first approved the rule, said that the mandate had defined joint employment as “not only when one company has the right [italics in original] to exert control over terms and conditions of another company’s employees, but also when evidence exists of reserved, unexercised, or indirect control over any working conditions. This includes not only obvious situations like hiring and firing but also such other conditions as wages, benefits, scheduling, supervising, directing, and disciplining.”
The lead plaintiff in the lawsuit was the U.S. Chamber of Commerce. When it filed suit in October, it provided a summary of the rule and its potential impact.
“The rule makes it easier for the agency to declare joint employment status exists in business relationships where it traditionally doesn’t, like franchising, contracting, and supply chains,” the chamber said. “It upends a longstanding precedent by broadening liability for employers and enabling unions to organize across companies rather than store by store. Many companies could find themselves facing liability for workers they don’t employ and workplaces they don’t actually control.”
Figuring out who is an employer is not a new issue; as the judge’s decision notes, “it has been the subject of litigation since the early days of the [1935 National Labor Relations] Act.” In a review of past litigation, Barker says the body of law has established that an employee can have multiple employers.
Prasad Sharma, a partner at the trucking-focused Scopelitis law firm, said the NLRB rule broke with precedent on the issue of control, leading to the judge’s decision.
Common law rule was “fairly well settled,” Sharma said. “Joint employment required direct and immediate control.” But the more indirect definition of control in the NLRB rule “is what the court found to be nebulous and potentially leading to all kinds of arrangements beyond what the common law would have afforded as joint control.”
Potential impact on trucking
At the time of the NLRB approval of the new standards, the PrePass alliance, in its blog, gave an example of how joint employment could impact trucking. It cited an instance in which a motor carrier and a staffing agency both provided a driver, or in which one carrier contracts with a second carrier to move freight. (Although the blog did not mention double brokering, that could be an instance of legitimate, rather than fraudulent, double brokering.)
Sharma said the NLRB rule had the potential to impact fleets that employ other fleets as contractors.
Similar to the back and forth on independent contractor status between the Trump administration’s Wage and Hour Division and the Biden administration rule that replaced it (and coincidentally went into effect Monday), the NLRB rule that the court in Texas jettisoned replaced a Trump administration rule that had altered a 2015 rule approved under the Obama administration.
Back and forth between Biden and Trump
Like some of the issues in the Trump/Biden differences in the independent contractor law, the question of control is at the heart of the new NLRB rule on joint employer status.
When the NLRB rule was approved, the law firm of Saxton & Stump, in an online analysis, summed up the Trump administration rule that went into effect in 2020 as saying an employer could be considered joint with another if it exercised “substantial direct and immediate control,” quoting from the regulation, over what the firm said were “essential terms and conditions of employment.”
“Under the new rule, an entity may be considered a joint employer of a group of employees if it has an employment relationship with them and shares or codetermines one or more of the employees’ essential terms and conditions of employment,” the law firm said. “Unlike the 2020 rule that considered whether the entity actually possessed and exercised such control, this new standard merely considers whether an entity has the authority to control, either directly or indirectly, essential terms and conditions of employment.”
Barker, in his decision, gave an example of a landscaping company hired to mow the grass at an ice cream company where both businesses could be seen as joint employers. The wording of the Biden administration’s NLRB rule on joint employers could be interpreted to mean that the worker from the lawn-mowing company was controlled not only by the landscaper but by the ice cream company as well. “That reach exceeds the bounds of the common law and is thus contrary to law,” Barker wrote.
The fear among employers, manifested in the lawsuit, is that a wider definition of what constitutes an employer could mean that, for example, a nonunion employer might find itself needing to meet the requirements that a unionized shop has for its employees, if it is found that its workers are considered “joint” with the union shop.
The Fisher Phillips blog posted at the time of the NLRB approval laid out the potential burdens regarding union representation. “The rule will have implications obligating both businesses to potentially bargain with a duly certified union as exclusive bargaining representative — at least with respect to those working conditions over which they share control, while exposing both companies to joint unfair labor practice liability,” Fisher Phillips said.
The NLRB can appeal. In a prepared statement issued by the agency after the ruling, Chairman Lauren McFerran said the agency is reviewing its next steps.
“The District Court’s decision to vacate the Board’s rule is a disappointing setback, but is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts,” she said.
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