On July 19, the National Labor Relations Board decided to withdraw its appeal to the U.S. District Court of the Eastern District of Texas’ March decision to strike down the joint employer final rule of 2023, effectively ending the NLRB’s challenge to revert to the board’s 2020 rule. The NLRB had appealed the decision on May 7, but has not offered an explanation for the withdrawal.
The district court struck down the 2023 final rule after builders and associated contractors, the US Chamber of Commerce and other business groups challenged the new rule’s definition of what constitutes a joint employer. The groups argued that the 2020 rule established clearer criteria that companies must consider when determining their joint venture status.
“We are pleased that the Board has decided to withdraw its appeal of the court’s decision and that the court’s decision to block the NLRB’s radical and overbroad joint employer standard is now final,” said Ben Brubeck , ABC’s vice president of regulatory, labor and state affairs. “The 2023 final rule would have disrupted the long-established efficient operating processes followed by construction service providers working together to build America, and would clearly have had a detrimental effect on a significant segment of the construction industry: small businesses.”
Brubeck also said contractors will be better able to work and coordinate with multiple employers without fear of being found as joint employers, which ABC and the other groups argued could happen under the 2023 rule.
The legal battle over what makes a company, such as a general contractor on a construction site, liable for anything from cost overruns to accidents stemming from the work of subcontractors and other workers on the site began in November 2023 .ABC joined the US Chamber of Commerce and a coalition of business groups in filing a lawsuit challenging the NLRB’s final rule for violating the National Labor Relations Act and for allegedly acting in an arbitrary and capricious in violation of the Administrative Procedure Law.
The federal district court ruled in March that the 2023 joint venture rule did not comply with the APA. The court concluded that the new rules would have expanded a ruling from the 1960s that said employers must actually exercise control over the essential terms and conditions of an employee’s employment to be considered employers. Under the 2023 rule, which will take effect on March 11, 2024, an entity could be considered a joint venture only by having or reserving the authority to control one or more of the essential terms and conditions of employment of employees, regardless of whether control was actually exercised.
In a rulemaking petition filed in June, the AFL-CIO and the Service Employees International Union supported the idea of returning the case to the NLRB for adjudication in order to better define the standard of the joint employer. The unions said the board should drop its appeal to the Fifth Circuit, reverse the 2020 rule that sets a narrow standard for joint employment, and then shape a new test for what constitutes the exercise of control through NLRB decision-making.
The NLRB referenced the pending rulemaking petitions in its motion to withdraw before the Fifth Circuit.
