Justice Scales and books and wooden gavel
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The US Chamber of Commerce is celebrating, and the National Labor Relations Board is “considering next steps,” after a federal judge on Friday evening vacated the NLRB’s “joint employer” rule that was to go into effect today. The rule would have changed the standard used to determine joint-employer status and rescinded a 2020 version of the rule, promulgated under the previous board, that some viewed as being more favorable to employers.

US District Judge J. Campbell Barker of the Eastern District of Texas said in his final judgment that the new rule “would be contrary to law” and that the rescission of the 2020 standard would be “arbitrary and capricious.”

The US Chamber of Commerce, which had led the lawsuit against the rule that resulted in the decision, on Friday called the ruling “a major legal victory for American businesses of all sizes, including franchises and contractors, employers and workers.”

“This ruling is a major win for employers and workers who don’t want their business decisions micromanaged by the NLRB,” US Chamber of Commerce President and CEO Suzanne P. Clark said in a statement. “It will prevent businesses from facing new liabilities related to workplaces they don’t control and workers they don’t actually employ.”

Meanwhile, NLRB Chairman Lauren McFerran said Friday in a statement that the District Court’s decision was “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. The Agency is reviewing the decision and actively considering next steps in this case.”

The US Chamber, Clark said, “will continue to fight back against the NLRB and its campaign to promote unionization at all costs.”

‘Much broader and more vague’

The NLRB had issued the final rule in October after proposing a rule in September 2022 and receiving more than 13,000 comments. The rule originally was supposed to go into effect Dec. 26, but in November, the NLRB extended the effective date to Feb. 26 before Barker issued a stay on Feb. 22 that was to last until today.

Senior living and care industry representatives previously told McKnight’s Senior Living that the new rule was “much broader and more vague” than the previous rule and would present greater risk for employers that contract with services providers, “creating greater liability for the actions of others.” Operators that are part of franchises, and others, also could have been affected.

“Under the new standard, an entity may be considered a joint employer of a group of employees if each entity has an employment relationship with the employees and they share or co-determine one or more of the employees’ essential terms and conditions of employment,” the NLRB said in October. Those terms and conditions, according to the board, included:

  • wages, benefits and other compensation;
  • hours of work and scheduling;
  • the assignment of duties to be performed;
  • the supervision of the performance of duties;
  • work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
  • the tenure of employment, including hiring and discharge; and
  • working conditions related to the safety and health of employees.

“In particular, the 2023 rule considers the alleged joint employers’ authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect,” the NLRB said in a fact sheet. “By contrast, the 2020 rule made it easier for actual joint employers to avoid a finding of joint-employer status because it set a higher threshold of ‘substantial direct and immediate control’ over essential terms of conditions of employment, which has no foundation in common law.”

Much opposition and some support

The rule faced opposition from some senior living and other business-related groups.

Sixty-two associations, including the American Health Care Association/National Center for Assisted Living, the American Seniors Housing Association and Argentum, sent a letter to Congress in November urging legislators to support a Congressional Review Act resolution to nullify the rule. The bipartisan resolution had been introduced by Sens. Bill Cassidy (R-LA) and Joe Manchin (D-WV).

Also in November, the top Republican member of the Senate Special Committee on Aging and three other Republicans on the committee told McFerran that the rule will have a “particularly negative impact on senior living arrangements.”

Sen. Mike Braun of Indiana, the ranking member, along with Sens. Pete Ricketts of Nebraska, Marco Rubio of Florida and Tim Scott of South Carolina, wrote in a Nov. 17 letter to McFerran that they had “significant concerns” about the rule’s potential effects on older Americans.

“Long-term care organizations frequently depend on stable contracts with a broad set of partners for effective operations. These contracts cover vital residential supports, from nutrition services and maintenance to staffing arrangements,” the senators wrote, citing an Oct. 27 McKnight’s Senior Living article that detailed senior living industry concerns about the rule.

The new rule, according to the four Republican senators, would “disrupt long-term care organizations’ stable relationships and longstanding practices that have provided many older adults with high levels of support and satisfaction.” Senior living operators, they said, would face increased liability for contracts with other service providers as well as “onerous” collective bargaining standards.

“We urge the Board to reconsider the impact of its rule, reengage with aging services stakeholders, and return to the 2020 rule’s fairness and flexibility,” they wrote.

Braun and Manchin also wrote a letter to McFerran last month to request an additional delay in implementation.

“This rule will have a significant impact on small businesses, contractors and franchisees, and continued confusion regarding the NLRB’s publishing of this rule, as well as continued congressional and legal concerns warrant a further delay,” they wrote, noting the resolution that had been introduced by Manchin and Cassidy in November to nullify the rule.

Twenty-two Democratic senators, including Senate Aging Committee Chair Bob Casey of Pennsylvania and three other current members of the committee — Sens. Richard Blumenthal of Connecticut, Kirsten Gillibrand of New York and Elizabeth Warren of Massachusetts — had expressed support for the rule after it was proposed in September 2022 and as the NLRB considered comments before finalizing it in October 2023.

The rule, they said in a Dec. 7, 2022, letter to the NLRB, is “both good policy and furthers congressional intent motivating the passage of the National Labor Relations Act (NLRA) itself.”

See the full decision here.