Texas Judge Blocks Labor Board's Joint-Employer Rule

Monday, March 11, 2024 - In the fall of 2023, the National Labor Relations Board (NLRB) promulgated a rule that would have made it significantly easier for the agency to find the existence of “joint-employment” between two or more entities. The rule was challenged in federal court and the effective date was delayed by the NLRB to February 2024 and then by a judge to March 2024. It now appears the rule will be on hold for longer – if not permanently. U.S. District Judge J. Campbell Barker in Tyler agreed with the challengers to the ‘joint employers’ rule, including the U.S. Chamber of Commerce, that it is too broad and violates federal labor law. The rule, issued in October, had been set to take effect today, March 11th. 

The judge found the rule to be improper because “it would treat some companies as the employers of contract or franchise workers even when they lacked any meaningful control over their working conditions. The joint-employment doctrine often is used by federal agencies to impose liability on two or more companies with respect to a group of employees, such as a staffing company and its client or a franchisor and franchisee. For example, the NLRB can use the doctrine to impose liability for violations of the National Labor Relations Act (NLRA) on multiple companies, and the agency has been at the forefront of changes to how joint employment is evaluated. 

A finding of joint employment can have significant consequences for companies under the NLRA. From a practical perspective, each company found to be a joint employer by the NLRB may be held liable for the unfair labor practices of their co-employers. For example, many energy marketers operate convenience stores where the employees of vendors of beverages, snacks, and other items come into the store and stock the coolers and shelves as part of the deliveries. Energy marketers, as convenience store operators, have agreements with their vendors that commonly set forth prudent, reasonable service expectations and requirements that have an impact on the vendor’s employees. One such contractual provision allows the energy marketer to retain the right to reject the vendor’s delivery driver if the driver berates the convenience store staff, threatens violence, or behaves in an inappropriate manner while at the energy marketer’s facility. Under the final rule, the Board can find that the energy marketer’s contractual retention of the right to reject a driver as retaining a right to control the vendor’s employment practices. The final rule, therefore, does not adequately take into consideration the reasonable and prudent needs for customers, such as the energy marketers represented by EMA, to require their vendors to meet certain standards and requirements, especially those relating to health, safety, and security. 

Another example, as part of their retail motor fuel operations, energy marketers often dictate the time of day when transport deliveries of gasoline or diesel fuel can be made into the underground storage tanks at a particular location, largely because of the store’s smaller “footprint.” It is difficult, and it increases safety hazards, to have a large transport truck blocking driveway access during the store’s rush hours. Merely limiting the “window” for fuel deliveries conceivably could subject the energy marketer to joint employer liability.

Bottom line… to the extent this court ruling staying the NLRB's new joint-employer rule remains intact – appeals are likely – it may offer some reprieve on the labor law front for companies using contingent labor and/or franchise models. Stay tuned.

EMA Today is published by The Energy Marketers of America