AGC: Court Agrees with AGC and Vacates NLRB’s Overly Expansive Joint-Employer Rule

AGC and co-plaintiffs challenging the National Labor Relations Board’s (“NLRB” or “Board”) joint-employer rule in U.S. District Court in the Eastern District of Texas were handed a big win Friday evening. The judge in Chamber of Commerce v. NLRB vacated the rule – which was finalized in 2023 and scheduled to take effect today – in its entirety. The judge also vacated the Board’s recission of a rule issued by the previous Board in 2020.

The vacated rule would have made it easier for one company to be deemed the joint-employer of another company’s employees under the National Labor Relations Act. It would have allowed a finding of joint-employer status when the putative joint employer exercised control over the other “essential terms and conditions of employment” over the other company’s employees only indirectly or when it merely reserved the right to control but never exercised any control.

Such a finding is significant and has considerable implications in construction contracting. If a general contractor is deemed to be the joint employer of a subcontractor’s employees, it could be: forced to respond to the union-organizing campaigns of the subcontractor’s employees; pulled into disputes between the subcontractor and a union, without protections from secondary boycotts—like reserved gates—normally accorded to neutral third parties; and held jointly responsible for unfair labor practices conducted by the subcontractor.

The court agreed with our claim that the rule was arbitrary and capricious. The judge assessed the nuances and impact of the rule, finding that the rule “would treat virtually every entity that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly, at least one of the specified ‘essential terms and conditions of employment.’” In illustrating this point, the judge specifically referenced construction contractor-subcontractor relationships and a 1951 Supreme Court decision relied upon by AGC in the case and regulatory comments in which the Court held that “the fact that the contractor and subcontractor were engaged on the same construction project, and that the contractor had some supervision over the subcontractor’s work, did not eliminate the status of each as an independent contractor or make the employees of one the employees of the other.”