{"id":1301,"date":"2024-03-18T09:12:05","date_gmt":"2024-03-18T13:12:05","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1301"},"modified":"2024-03-18T09:12:05","modified_gmt":"2024-03-18T13:12:05","slug":"texas-federal-court-strikes-down-nlrbs-2023-joint-employer-rule","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/03\/18\/texas-federal-court-strikes-down-nlrbs-2023-joint-employer-rule\/","title":{"rendered":"Texas Federal Court Strikes Down NLRB\u2019s 2023 Joint Employer Rule"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther<\/b><\/p>\n

Duane Morris Takeaways<\/i><\/b>: In Chamber of Commerce of the U.S.A. et al. v. NLRB et al.<\/i>, No. 6:23-CV-00553, 2024 WL 1045231 (E.D. Tex. Mar. 8, 2024), Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas granted the Plaintiffs motion for summary judgment and denied the Defendants cross-motion for summary judgment<\/a>. Under the NLRB\u2019s 2023 joint employer rule, even companies who exercise just \u201cindirect control\u201d over the employees of another entity could be considered a joint employer under federal labor laws. The Court held that the NLRB\u2019s 2023 joint employer rule did not provide a meaningful two-part test to determine joint employer status, and that the NLRB\u2019s reason for rescinding the 2020 Rule was arbitrary and capricious.\u00a0 Accordingly, the Court vacated the 2023 Rule and reinstated the 2020 Rule.\u00a0 <\/i><\/p>\n

This ruling is a huge win for businesses, as it reinstates the 2020 Rule\u2019s heightened \u201csubstantial direct and immediate control\u201d standard for determining joint-employer status.<\/i><\/p>\n

Case Background<\/b><\/p>\n

In 2020, the NLRB issued a joint-employer final rule, providing that an entity \u201cis a joint employer of a separate employer\u2019s employees only if the two employers share or codetermine the employees\u2019 essential terms and conditions of employment\u201d (the \u201c2020 Rule\u201d).\u00a0 Id<\/i>. at 12 (quoting 29 C.F.R. \u00a7 103.40(a) (2020)).\u00a0 Under the 2020 Rule, a company is a joint employer when it exercises \u201csubstantial direct and immediate control\u201d over one or more of the following \u201cessential terms or conditions of employment\u201d – \u201cwages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.\u201d\u00a0 Id<\/i>. at 12-13 (quoting 29 C.F.R. \u00a7 103.40(a), (c)(1) (2020)).<\/p>\n

In 2023, the NLRB rescinded the 2020 Rule and enacted a new joint-employer final rule (the \u201c2023 Rule\u201d).\u00a0 Id<\/i>. at 14.\u00a0 The 2023 Rule defined a joint employer as an entity that exercised \u201creserved control\u201d or \u201cindirect control\u201d over one of seven terms and conditions of employment, including: \u201c(1) work rules and directions governing the manner, means, and methods of the performance, and (2) working conditions related to the safety and health of employees.\u201d\u00a0 Id<\/i>. (29 C.F.R. \u00a7 103.40(d)-(e)).<\/p>\n

In 2023, Plaintiffs sued the Defendants, challenging the 2023 Rule on two grounds: (i) that it is inconsistent with the common law; and (ii) that it is arbitrary and capricious.\u00a0 Id<\/i>. at 14-15.<\/p>\n

In response, the Defendants cross-moved for summary judgment on the Plaintiffs claims, alleging that the 2023 Rule was based on, and is governed by, common law principles, that it is not arbitrary and capricious, and that the Board acted lawfully in rescinding the 2020 Rule.\u00a0 Id<\/i>. at 20.<\/p>\n

The Court\u2019s Decision<\/b><\/p>\n

The Court granted the Plaintiffs motion for summary judgment, and denied Defendants cross-motion for summary judgment, thereby \u201cvacating the 2023 Rule, both insofar as [the 2023 Rule] rescind[ed] the [2020 Rule] and insofar as it promulgate[d] a new version of [the 2020 Rule].\u201d\u00a0 Id<\/i>. at 30.<\/p>\n

First, the Court focused on the main dispute between the parties, i.e<\/i>., whether the 2023 Rule had a meaningful two-step test to determine an entity\u2019s joint employer status, or the 2023 Rule only had one step for all practical purposes.\u00a0 Id<\/i>. at 20-21.\u00a0 The Defendants argued that the 2023 Rule\u2019s joint-employer injury had the following steps: (i) \u201can entity must qualify as a common-law employer of the disputed employees\u201d; and (ii) \u201conly if the entity is a common-law employer, then it must also have control over one or more essential terms and conditions of employment.\u201d\u00a0 Id<\/i>.\u00a0 The Court disagreed, finding that \u201can entity satisfying step one, along with some other entity doing so, will always satisfy step two,\u201d since \u201can employer of a worker under the common law of agency must have the power to control \u2018the material details of how the work is to be performed,\u201d and the Defendants proposed step two included \u201cwork rules and directions governing the manner, means and methods of the performance of duties.\u201d\u00a0 Id<\/i>. at 22-23 (internal citations omitted).<\/p>\n

The Court then analyzed whether the Board lawfully rescinded the 2020 Rule.\u00a0 It opined that \u201cto survive arbitrary-and-capricious review, agency action must be \u2018reasonable and reasonably explained.\u201d\u00a0 Id<\/i>. at 28-29.\u00a0 The Court held that the Board did not provide a \u201creasonable or reasonably explained\u201d purpose for rescinding the 2020 Rule, and therefore, its recension was arbitrary and capricious.\u00a0 Id<\/i>. at 29.\u00a0 Since \u201cvacatur of an agency action is the default rule\u201d in the Fifth Circuit when such rule \u201cis found to be discordant with the law or arbitrary and capricious\u201d, the Court vacated the 2023 Rule.\u00a0 Id<\/i>. at 30.<\/p>\n

Implications For Employers<\/b><\/p>\n

The Court\u2019s vacatur of the 2023 Rule in Chamber of Commerce of USA et al. v. NLRB et al.<\/i> is an important victory for employers. The 2023 Rule would have made \u201cvirtually every entity that contracts for labor . . . a joint employer.\u201d Id<\/i>. at 25. Moreover, the 2020 Rule, in addition to imposing the heightened \u201csubstantial direct and immediate control standard,\u201d provides integral guidance for what actions are considered joint, and what actions are not.\u00a0 The Court\u2019s decision to reinstate the 2020 Rule, therefore, is also a significant win for employers.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther Duane Morris Takeaways: In Chamber of Commerce of the U.S.A. et al. v. NLRB et al., No. 6:23-CV-00553, 2024 WL 1045231 (E.D. Tex. Mar. 8, 2024), Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas granted the … <\/p>\n

Continue reading “Texas Federal Court Strikes Down NLRB\u2019s 2023 Joint Employer Rule”<\/span><\/a><\/p>\n","protected":false},"author":575,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[42],"tags":[],"ppma_author":[7,9],"class_list":["post-1301","post","type-post","status-publish","format-standard","hentry","category-wage-hour-litigation"],"authors":[{"term_id":7,"user_id":575,"is_guest":0,"slug":"gmaatman","display_name":"Gerald L. Maatman, Jr.","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2022\/09\/maatmangerald-100x100.jpg","author_category":"","last_name":"Maatman Jr.","first_name":"Gerald L.","job_title":"","user_url":"https:\/\/www.duanemorris.com\/attorneys\/geraldmaatman.html","description":"Read Gerald's bio.<\/a>"},{"term_id":9,"user_id":576,"is_guest":0,"slug":"jariley","display_name":"Jennifer A. Riley","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2023\/08\/rileyjennifer-100x100.jpg","author_category":"","last_name":"Riley","first_name":"Jennifer A.","job_title":"","user_url":"https:\/\/www.duanemorris.com\/attorneys\/jenniferriley.html","description":"Read Jennifer's bio.<\/a>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1301","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/575"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1301"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1301\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1301"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}