Legal Victory

On March 8^th, Judge Campbell Barker, a federal judge for the Eastern District of Texas blocked the National Labor Relations Board’s (NLRB) expanded joint-employer rule that would have made it more likely for employers to be deemed joint employers.  This important legal victory helps maintain the franchise business model in the United States.

Background:

In October of 2023, the federal NLRB issued a new rule that broadened how two different entities could be considered “joint employers” under the National Labor Relations Act (NLRA).  Up until this rule change, two entities could be considered joint employers only if both employers exercised “actual and direct control” over essential terms and conditions of employment. 

Under the 2023 rule change by the NLRB, employers could be considered joint employers if: (1) they shared “an employment relationship with those employees under common-law agency principles” and (2) they “shared or codetermined those matters governing employees’ essential terms and conditions of employment.”  The rule defined as having “control (whether directly, indirectly, or both)” over “one or more of the employees’ essential terms and conditions” whether or not the entity actually exercised such control.

The 2023 rule would have made it substantially easier for unions and government agencies to establish the employees of a franchise were also the employers of a franchisor company, setting up battles over collective bargaining and making the franchise business model considerably more cumbersome.

The March 8, 2024, Legal Decision:

In response to the 2023 rule, the American Hotel & Lodging Association (AHLA) and other business groups joined with the U.S. Chamber of Commerce in a lawsuit against the NLRB to block the rule from taking effect.

Judge Barker agreed with the business groups, holding the NLRB’s rule failed to establish a clear standard for employers and ignored the practical implications for employers. Judge Barker noted that the rule would “likely promote labor strife rather than peace by forcing an underdefined category of entities to take a seat at a bargaining table and negotiate over a multitude of influences that may otherwise be presented (and resolved) only through the invisible hand of the marketplace.”

As a result, the 2023 NLRB rule has been blocked, and the older joint employer standard remains in place. The NLRB is likely determining whether and how to appeal the ruling, but it faces an uphill battle in reviving the 2023 rule.

We are Still Waiting for the Release of the Final Overtime Rule

Separately from the victory on the joint employer rule, we note for our members that we are still waiting for the U.S. Department of Labor (DOL) to release its final rule regarding increasing the minimum salary threshold for overtime exemptions. 

As proposed in August, the DOL intends to significantly raise the exempt salary threshold for the so-called “white-collar” exemptions from about $35 thousand to over $55 thousand, meaning your workers will need to earn at least the new threshold to even be considered exempt from overtime pay. 

The White House recently announced that it is reviewing the rule, which is the final step before it is shared with the public.  We expect the final overtime rule to be published in April.