Labor Board’s Joint Employer Rule Meets Skeptical Federal Judge

A federal judge in Texas criticized a National Labor Relations Board regulation broadening the legal test for determining when multiple companies jointly employ workers, which a coalition of business groups is challenging in his courtroom.

The NLRB’s new joint employer rule “seems to create a lot more uncertainty, or at least opportunity for disagreement in practice” than the narrower Trump-era measure that it’s replacing, Judge J. Campbell Barker said at a hearing Tuesday in the US District Court for the Eastern District of Texas.

“To me, it seems like by removing some bright lines in the 2020 rule, it’s only going to increase uncertainty and litigation over the basic parameters of joint employer status,” said Barker, a Trump appointee.

The US Chamber of Commerce and other business groups sued the NLRB over its joint employer regulation, which would expand the types of control that can trigger a finding that a company jointly employs another firm’s workers.

Business advocates warn that a broader standard could upend the franchise industry and disrupt business-to-business arrangements for outsourced labor, although joint employment disputes have been rare at the NLRB in recent years regardless of the standard the board has used.

The new rule is set to take effect Feb. 26.

Barker asked NLRB lawyer Christine Flack if she could speak about whether the board intends on postponing that effective date, but Flack said she’d have to take that question directly to the board.

The judge’s query echoed a Republican senator’s recent request for the NLRB to delay implementation of the rule because of ongoing legal and legislative challenges.

During Tuesday’s hearing, which ran for more than two hours, Barker probed the merits of the agency’s regulation as well as the proper venue for the business coalition’s lawsuit.

The NLRB has asked the judge to transfer the case to the US Court of Appeals for the District of Columbia Circuit, which is hearing a separate petition for review of the regulation filed by the Service Employees International Union.

Barker hinted that he’ll reject the NLRB’s transfer request, indicating that he doesn’t feel bound by a D.C. Circuit ruling that board regulations are considered “orders” under a National Labor Relations Act provision that requires federal appeals courts, not district courts, to review unfair labor practice orders.

The judge also said the ability to develop the evidentiary record is an advantage to having direct review start in district court.

The business coalition was represented by attorneys from Akin Gump Strauss Hauer & Feld LLP.

The case is Chamber of Commerce of the United States v. NLRB, E.D. Tex., No. 23-00553, hearing held 2/13/24.