LegiStorm

Summary:

The National Labor Relations Act (NLRA) recognizes the right of most private sector employees to engage in collective bargaining through their chosen representatives. By “encouraging the practice and procedure of collective bargaining,” the act attempts to mitigate and eliminate the causes of labor-related obstructions that impair the free flow of commerce. The NLRA prohibits employers from interfering with, restraining, or coercing employees in the exercise of their collective bargaining rights. The act also restricts employers from refusing to bargain collectively with the unions that represent their employees. When individuals work pursuant to an arrangement that involves more than one entity, such as a contract that provides that one business supply workers to another business, questions may arise concerning which entity should be considered the “employer” for purposes of the NLRA. Because both businesses may exercise some control over the individuals’ terms and conditions of employment, one may contend that they should be considered joint employers of the individuals. On October 27, 2023, the National Labor Relations Board (NLRB) issued a final rule that established a new standard for determining whether two or more entities may be considered joint employers of a particular group of employees for purposes of the NLRA. Under the rule, an entity would be considered a joint employer of another entity’s employees if the two “share or codetermine the employees’ essential terms and conditions of employment.” The rule permitted the NLRB to make a jointemployer determination if an entity possessed the authority to control, either directly or indirectly, the employees’ essential terms and conditions of employment, even if the entity did not actually exercise that authority. The 2023 joint-employer rule prompted legislative and judicial action. Congressional critics of the rule introduced legislation—S.J. Res. 49 and H.J. Res. 98—providing for its disapproval under the Congressional Review Act. H.J. Res. 98 passed both chambers but was vetoed by the President on May 3, 2024. Business groups, including the U.S. Chamber of Commerce, and the Service Employees International Union (SEIU) separately challenged the rule on various grounds. In March 2024, the U.S. District Court for the Eastern District of Texas in Chamber of Commerce of the United States v. NLRB vacated the rule, holding in favor of the plaintiff business coalitions that the rule was contrary to law because it exceeded the common law standard for identifying a joint employer. The SEIU’s lawsuit, filed in the U.S. Court of Appeals for the District of Columbia Circuit, was later dismissed after the NLRB indicated that it would not appeal the court’s decision and the union conceded that there were no grounds to consider further challenges to the rule. As a result of the district court’s decision in Chamber of Commerce, a prior joint-employer rule adopted by the Board remains in effect. Under that rule, an entity will be considered a joint employer of a separate entity’s employees only if it possesses substantial direct and immediate control over one or more essential terms and conditions of their employment. This report provides background on joint employment and the NLRA and examines the NLRB’s 2023 joint-employer rule. The report also reviews the district court’s decision in Chamber of Commerce of the United States v. NLRB.